The “Future” of Procurement: Like New Remanufactured Shoes, Part II

It only took ten (10) days*, but we’re finally in the midst of counting down the seven (7) “future” trends that are actually new enough, with the right interpretation, to fall into the “future trend” category. Today we continue with a discussion of the final two trends that fall into the like new remanufactured shoes category.

5. Return to Regional and Local Sourcing

This is another “future trend” that’s not really new, as outsourcing and insourcing continually rises and ebbs in a cyclic sine and cosine wave, but this time around, in leading companies, it’s taking on a new form and providing Supply Management with better opportunities than it has had in a long time. The justification for going out is usually lower labour costs, and the justification for coming back is usually lower transportation costs. And the switch usually occurs when one cost or the other cost rises or falls sufficiently to change the total cost of ownership equation. But now, thanks to continual advances in automation, there are more reasons to come back than to stay away.

With significantly less manpower required to produce significantly more automation, and the ability to take communication and complexity cost out of the equation by centralizing R&D and development, not only is regional becoming lower cost than overseas, but with the right creativity, you can often keep costs low and value generation high while sourcing in your own country, often from your own backyard. (For example, if you look at the difference between median household income across the United States, the top state in 2011, Maryland, was almost twice that of the bottom state, Mississippi, and the differentials between big cities and small towns can be even more disparate.) Sourcing at home does not have to be expensive if you pick the right locale, install the right automation, and knock the creativity up a notch. If Foxconn China is outsourcing to Brazil to serve North American customers, that should tell you something. (If it doesn’t, you better go see a medical doctor to have your hearing checked. If you pass that test, then you better go see a neurologist.)

4. Control Tower Model / Omni-Channel Approach

One could argue that the omni-channel approach is an ongoing blues as leading retailers started integrating mail-order, storefront, and web-based channels into a single distribution channel about a decade ago, but the phenomena wherein many of these same retailers are planning their advertising and sales as a unified omni-channel strategy on the front-end vs. simply unifying distribution efforts on the back-end is much more recent. So this is really re-manufactured shoes. But more importantly, the leading organizations have realized that it’s not de-centralized vs. centralized vs. center-led, it’s picking the right strategy for each category and each business unit and effectively managing that through a control tower that monitors, predicts, adapts, and responds to the market as necessary to make sure the supply chain from source (raw material provider) to sink (final end user) flows smoothly and optimally at all times.

In other words, as we pointed out in “future” trend 24 when we were covering old news, you only have three choices for governance — centralized, decentralized, vs. center-led, but there is nothing to stop your organization from deploying multiple models across multiple categories, and the right application of the right model can give your organization a boost in its supply management capabilities. This is the logical next step in a Supply Management organization that integrates governance, risk monitoring, collaboration, systems, business process convergence, supplier management, and supply management strategy under one umbrella. It’s the process of taking everything you’re doing right to the next level. It’s really renovation, not innovation, but a necessary renovation as most organizations have not yet even thought about the potential of a control tower. As a result, fewer still have taken any steps to making this a reality.

Ten days later and we’ve made it to the final three at last! The final countdown! The three “future trends” that are real, not imaginary. The three trends actually worth talking about. The three trends that we are going to dive into … tomorrow!