It’s conference season, and you know what that means. Thousands of people flocking to ISM next week to hear about the “state-of-the-art” practices and technologies that will revolutionize your supply chain, take you into the modern age, and prepare you for what comes next. Except they won’t.
For the average organization that still hasn’t adopted a modern e-Sourcing or e-Procurement system, the technologies being presented by even the vendors who haven’t updated their core platforms since last decade will still be revolutionary and for the average organization that is just dipping their toes into the waters of modern supply management processes, the talks will be inspirational and progressive and, for all practical purposes, look like a transition from the industrial revolution to the information age. (And, for some organizations, it will be. But it won’t prepare you for what comes next.) It will be like seeing the world through rose coloured glasses for four days straight. By the end of the conference, the average attendee will be in awe of the possible and leave in a state of hippie bliss (until he gets back to the office and crushing reality cracks his lenses and he’s forced to again see the cold and depressing blue sky, the blood red losses, and the blackness of the bottomless pit that new ideas get tossed into).
But for a leading organization, the majority of technologies will be outdated, the practices insufficient, and the talks sleep inducing. That’s because, for the most part*, it will be the same vendors as last year, the same practices that were being presented as revolutionary five, if not ten years ago, and different speakers giving the same scripted success talk that you have heard from the leaders who have used these technologies and processes for the last five years.
the doctor downloaded the thirty-four (yes, 34) page “brochure” for ISM and didn’t see one new idea in the entire publication. Not one. Moreover, while a few of the topics only became trendy in the last few years, there appear to be only two talks focussed on TCO (Total Cost of Ownership), one on integrated supply chains, and zero on supply chain modelling.
This is a serious problem. We’ve reached the point where supply chain success for the average organization is becoming dependent on preventing supply chain disruptions and failures. Supply chains span the globe, lean is the name of the game, JiT is widespread, disasters (natural and man-made) are on the rise, margins are thin, and customer loyalty and patience is thinner. It doesn’t matter how well you source if you can’t execute. It doesn’t matter how well you procure if you can’t control your costs. The best laid risk avoidance and mitigation plans are worthless if you can’t monitor for risks and implement mitigation plans at appropriate times. The best spend analysis system in the world is useless if the data is incomplete or too dirty. You can’t optimize what you can’t model. And so on.
Moveover, every savings opportunity you identify at one stage of the supply chain or management process can result in a larger loss at a different stage if the opportunity is not analyzed appropriately. Sure you can save money by consolidating supply, but if a single source is unable to deliver and the organization has to buy on the spot market at the last minute, the 5% savings could be a 10% loss. Reducing inventory can significantly reduce the 25% inventory overhead cost, but could result in stock-outs that lead to million dollar revenue losses if the organization runs too lean and a transportation strike cuts off the just-in-time supply. Better supplier oversight and management can certainly increase quality and reliability, but is the additional cost of the SRM systems and staff to manage the relationship less than the additional value generated?
True value comes from looking at an integrated supply management process, which might take the form of a full category management lifecycle or a complete strategic sourcing execution lifecycle, modelling the physical supply chain and associated costs, and computing the full total cost of ownership of the current scenario and an expected improvement.
But good luck finding anyone who looks at the supply chain as a whole from this perspective, especially when few people will even address the subject.
And this is why the doctor does NOT attend ISM. When you’re trying to identify the next evolution of supply management, or even if you are a true leader, unless you enjoy preaching from the pulpit, it’s a little depressing.
* There will be some exceptions.