Category Archives: Sourcing Future

Supply Management in the Decade Ahead XIII: Challenges & Recommendations

This series has been examining the joint study by the ISM, A.T. Kearney, and The Center for Advanced Purchasing Studies released late last year that addressed how a company might go about “Succeeding in a Dynamic World”. To date, it has reviewed the eight major forces identified by the report (part I and part II), the impacts to business models and strategies, some of the missions, goals, and performance expectations, and the seven critical strategies (category, supplier development, supply networks, technology, collaboration, talent, organizational enablement). In this final post, we’re going to review some of the challenges and recommendations brought to light in the final chapters of the study.

First, I’d like to encourage you to seriously consider downloading and reading this excellent report, which gets the doctor‘s stamp of approval. (And if you’re a regular reader of this blog, you’ve probably figured out by now that there’s not a lot of literature out there that would get the doctor‘s stamp, or at least not without some serious improvements and edits.) Clocking in at over 100 pages of solid content (as opposed to the fluff that fills many of the longer reports that you’ll stumble across), it’s definitely worth it – especially since it’s Free (with registration, if you haven’t already registered). Although I have done my best to summarize the key points, my posts collectively are less than 20 pages in length – which says that, at most, I’ve covered one fifth of the material – and all of it is worth reading – some of it more than once. And once you’ve read it, you’ll be able to use these posts, which will always be indexed in the Sourcing Future category archive, to remind yourself of the key points.

The pace of change in supply management is more likely to increase rather than the decrease in the future, as evidenced by changing market factors, globalization and the ongoing march of technology. (After all, Shift Happens.)

These forces of change will include:

  • Market Demand
  • Rapid Advances in Information and Materials Technologies
  • Global Growth (in Developing Economies)
  • New Supply Market Dynamics (More Aggressive and Powerful Supplier)
  • Consolidation of Traditional Suppliers
  • Downstream Movement of Suppliers

Each of these forces will present challenges for tomorrow’s supply management organization. But we are moving into a new era of great expectations, which will present additional challenges, as it is also the :

  • Era of Dynamic Value Acquisition Strategies
    Agile, dynamic, category strategies that are easily reconfigurable as conditions changes will be “must haves” for all key purposes.
  • Era of Customer-Centric Supply Base Strategies
    Suppliers will be expected to be innovators and collaborative value-based sourcing that leverages suppliers’ innovative capabilities will be required to meet the increasingly demanding customers.
  • Era of Complex & Dynamic Supply Networks
    Physical assets will need to be reconfigured for mobility, flexibility, and resiliency and positioned or repositioned in response to business dynamics. Different chains will be needed for “innovation push” versus “demand pull” products and services.
  • Era of Collaboration without Boundaries
    Technology that allows suppliers, stakeholders, and customers to “sit together” at a virtual table on an ad-hoc basis will be the price of entry.
  • Era of Networked Analytics
    Knowledge management and decision support tools will be a basic need of supply management.
  • Era of Killer Talent
    The demand for experienced supply talent in developed countries is certain to outstrip supply. Global talent acquisition, management, and succession strategies will be required to survive in the supply chain centric world of tomorrow.
  • Era of Empowerment and Adaptation
    A tipping point where the average enterprise rethinks supply management processes and structures is fast approaching. Will you be ready?

And now you know why the strategies discussed in parts VI through XII are the seven critical strategies for succeeding in a dynamic world.

So what are the key takeaways, as summarized in the report?

  • The CEO Will Ask More of Supply Management : Broader Scope, Higher Performance and Increased Value
  • Supply Chain Complexity Will Increase : Driven by Globalization, Market Dynamics, Customer Demands, & Regulation
  • Collaboration Will be a Major Source of Value Creation : Internal and External Collaboration Alike
  • Technology : Will Transform Supply Management Strategies and Processes
  • The Supply Management Organization Structure Will Continually Change : To Fit Business Models and Strategic Needs
  • Global Talent Management : Will Continue to be a Major Challenge

So what are some of the main recommendations?

  • For Supply Executives :
    You’ll need to interrelate successfully with other members of the senior management team, experience living and working in international locations, master collaborative and competitive spend categories, and succeed in building a global program for talent management – so be ready.
  • For Supply Practitioners :
    You’ll need to improve working relationships with strategic suppliers and functional stake-holders, develop international and leadership capabilities, and master the fine art of collaboration.
  • For Business Unit Leadership :
    You’ll need to be equally familiar with key customers and suppliers, supply channels and sales channels, and understand the opportunities as well as risks.
  • For Suppliers :
    You’ll need to know exactly where you fit in each customer’s supply strategy, become a “supplier of choice”, and improve relationships with the senior executives in your customers.
  • For Service and Outsourcing Providers :
    Outsourcers will have to learn how to serve their customers and add value in addition to just landing the contract.

Supply Management in the Decade Ahead XII: Managing & Enabling the Supply Management Organization

This post continues our coverage of “Succeeding in a Dynamic World: Supply Management in the Decade Ahead” (a detailed report based on research jointly undertaken by the ISM, A.T. Kearney and CAPS Research), and concludes our review of the seven critical supply strategies for succeeding in a dynamic world in particular, tackling the sixth critical supply strategy identified by the report – enabling the supply management organization.

Over the past decade, companies have responded to strong competitive pressures by increasing the centralization of supply management. However, these strong competitive pressures have resulted in the need for an organization to implement best practices across the organization. To achieve this goal, companies are moving away from classic centralized organizations toward more center-led, hybrid, shared services organizations to allow them to take the best of the centralized and decentralized structures. Companies that have implemented these center-led organizations have, generally speaking, reduced costs, increased control over spend, and increased the value gained from the supply base.

Even though the research found that the top two strategies companies intend to use to enable the supply management over the next decade will be to (continue to) use a center-led model for supply strategy development (with decentralized execution) while centralizing strategic responsibilities, the authors note that the research data suggests that in some organizations, the supply organization, or part of it, will need to be tailored to respond to the external forces impacting the business the most and to align with the business model. This may mean that some categories need to be fully centralized while others need to be fully decentralized. The role of the center-led organization in these cases will be to fully manage the categories and transfer the knowledge required by the necessary (remote) personnel to order off of the enterprise contract in the first case and to provide the remote units the guidance they need to fully manage their categories in the second, while also insuring that all spend transactions are recorded in the central data store.

The report also notes that the following forces, strategies, and operational requirements will be quite significant in the decade ahead:

  • Need for Local Leadership
  • Cost Savings from Aggregation and Standardization
  • A Decline in Upward Pressures on (Some) Commodity Prices
  • Embedding Best Practices and Processes in Technology
  • Increased Mobility and “Instant” Productivity through Common Processes
  • Cross Unit Collaboration through Technology
  • Increased Control for Business Units
  • Appropriate Location of Supply Management Expertise

The study also found that continued pressure on supply management will drive more companies toward greater automation or outsourcing of select parts of supply management. Companies will centralize and automate transactions and free up resources or higher value supply management work, such as strategic sourcing or spend analysis.

Companies will also take a more holistic view of measuring supply management performance, using a balanced scorecard that balances cost savings, total cost of ownership, contribution to the business units and corporate, value achieved beyond cost, and predictive metrics that cover the financial, customer, operational, and innovation aspects of the supply chain.

Supply Management in the Decade Ahead XI: Attracting & Retaining Supply Management Talent

This post continues our coverage of “Succeeding in a Dynamic World: Supply Management in the Decade Ahead” (a detailed report based on research jointly undertaken by the ISM, A.T. Kearney and CAPS Research), and our review of the seven critical supply strategies for succeeding in a dynamic world in particular, with the sixth critical supply strategy identified by the report – the attraction and retention of supply management talent.

As far as the doctor is concerned, this is the most important strategy of them all. Without talent, there’ll be no one to implement your category management strategies, no one to develop your suppliers, no one to optimize your supply networks, no one to help you benefit from technology enablers, no one to collaborate with your partners, and no one to enable the supply management organization. (That’s why the doctor has an ongoing series on this blog about talent. You won’t succeed without it.)

The authors outlined three main areas that they believe companies need to focus on in the decade ahead:

  • identifying needed skills and capabilities
  • attracting, developing, and retaining talent
  • managing a diverse, dispersed workforce

This is a great start, but I’d also add, at the very least:

  • succession planning

As the study notes, a great deal will be expected of tomorrow’s supply management professionals, and this will be considerably more than what is expected of them today, even though some organizations already expect a lot. Tomorrow’s supply management professionals will have to find and leverage sources of innovation, contribute to revenue as well as savings, expand efforts to manage supply, address risk, and ensure business continuity and sustainability in a broad sense (and possibly before they even get their morning coffee).

As the report notes, to meet all of these requirements, supply management professionals will need the skills and capabilities to understand and interpret supply market dynamics, analyze complex supply options and risks, and develop value acquisition strategies that integrate with – while supporting – business and functional strategies. They’ll also need the skills required to properly implement the six other strategies being covered in detail in this series – category strategy development, supply base development, technology leverage, supply network optimization, collaboration, and supply management organization enablement.

The foundational skills will continue to center upon a combination of supply market knowledge and supply process expertise. Professionals will also be required to possess broad business knowledge and multi-disciplinary experience – the cross-functional skills, as well as international experience and foreign language skills – the cross-cultural skills. Finally, they’ll also need a collaborative style, innovative spirit, and leadership ability – the “soft-side” skills.

The top three talent management strategies identified by the respondents were:

  • Establish a knowledge and skill competency model for supply management
  • Recruit and/or develop talent with broad general management expertise for supply management roles
  • Recruit and/or develop talent with specific technical or foundational domain expertise for supply management roles

However, there will be no one-size-fits-all strategy. As the authors note, companies will need a thoughtful, multi-pronged strategy to acquire, develop, and retain individuals with the skills and competencies that they require. Companies will also need to cast a wider net and be far more aggressive and creative in identifying and attracting supply management talent.

Talent succession planning will also be important, as supply organizations face the loss of knowledge not just to retirement and recruitment efforts by other companies, but recruitment efforts from other organizations within the company who will increasingly realize that the most qualified people in the company are those in the supply management organization, where complexity is a way of life.

In addition, the ways in which companies adapt their training programs over the next decade will also be important to success. Training curricula will also need to be expanded and constantly refreshed to support the broader skill sets and deeper expertise required of individuals in the processes and supporting technologies required to deliver value from supply markets. In addition, training programs will need to support cross-functional teams and not just the individual. These training programs will also have to integrate tightly with knowledge management to capture what the organization collectively knows and make that information available to new staff anywhere in the company, regardless of where they are physically located in the world, to more quickly overcome the learning curve that will continue to creep up steeply over the decade ahead.

Also, companies will have to compensate their top supply management talent accordingly – and move beyond the so-called “one-percent” dilemma (where top performers receive 4% raises while poor performers receive 3%) because if you won’t compensate your top performers, you can be damn sure your competition will. To keep your top talent, superior individual performance will need to be reflect in both base pay and incentives. Remember, it takes somewhere between five and twenty dollars of sales to have the same impact to the bottom line as every dollar of savings achieved by a supply management professional. Given this fact, who should be compensated more in your organization? The sales person that reached his million dollar quota, the marketing executive that made it easy for him to do so, or your category manager who trimmed a million dollars off of the top? If you answered the sales person or the marketing executive, then I wish you good luck when you find yourself in the unemployment line in three years because because you didn’t have the supply talent to foresee and mitigate that major supply chain disruption that put your company into bankruptcy. (On average, a company has a major supply disruption every twelve months these days … and that number is shrinking fast among those without the talent to develop and implement the appropriate visibility and mitigation strategies.)

Talent management will be the deciding factor between success and failure in tomorrow’s supply management organization, so the doctor sincerely hopes that, for your sake, you get it right. (And just remember, if you need help, the doctor is an experienced academic and professional lecturer and trainer, has a lot of strength in knowledge management, and is also quite good at process development – which is key in succession planning. the doctor is also quite good at working with third parties and can help you in your selection, and management, of partners should you decide to outsource some or all of your recruitment efforts. For more information on what the doctor does, see What Does the doctor Do? For Executives.)

Supply Management in the Decade Ahead X: Collaboration

This post continues our coverage of “Succeeding in a Dynamic World: Supply Management in the Decade Ahead” (a detailed report based on research jointly undertaken by the ISM, A.T. Kearney and CAPS Research), and our review of the seven critical supply strategies for succeeding in a dynamic world in particular, with the fifth critical supply strategy identified by the report – collaboration.

Unlike the days of old where a company could extract gains by creating competition in their supplier markets in order to use the “invisible hand of the marketplace” to maximize value from competitively sourced suppliers, the new marketplace requires collaboration to achieve value above and beyond what you are realizing today.

Respondents to the study identified the following three strategies as the top three internal collaboration strategies for an enterprise:

  • Use cross-functional teams for category and supplier strategy development and implementation
  • Establish shared goals and objectives between the supply management organization and other internal organizations
  • Integrate business planning and supply management processes

Respondents to the study identified the following three strategies as the top three external collaboration strategies for an enterprise:

  • Collaborate with suppliers and customers to reduce supply chain costs
  • Provide transparency of cost and financial information throughout the supply chain
  • Collaborate among supply chain companies to root out waste

The study itself highlighted the following four generic key success strategies:

  • Internal collaboration and integration must advance further if companies are to capitalize on their future needs
  • External collaboration will require a shift from competition to partnership for some segments of a company’s supply base
  • Technology will be necessary to enable an increase in collaboration
  • Companies must be willing to jointly work through their concerns with risk and IP protection

The study then went on to highlight some keys to external collaboration:

  1. Manage Strategic Suppliers
  2. Collaboratively Obtain Innovation
  3. Block Competition through technological exclusivity and tying up supplier capacity
  4. Increase Transparency

I’d like to focus on the first and third recommendations. Managing suppliers might be good, but enabling suppliers is much better. Give them the tools and information they need to help you be a better supplier to your customers, and your gains will be greater. Blocking is also good, but blocks have shorter and shorter life-spans as time goes on. Considering that your supplier probably obtained at least some of it’s new technological capabilities from a vendor itself, it won’t be long before it’s competitors have the same capabilities and your competitors line up partnerships with them. the doctor thinks that a better strategy would be to become the strategic customer to your strategic supplier and work with them to continually outpace your competition.

Supply Management in the Decade Ahead [2008] (Collected Links)