Executive Briefings

Could Sourcing 'Take Over' Supply Chain in the Next Decade?

Procurement and supply chain have always been strange bedfellows in manufacturing organizations. There's a rather arbitrary dividing line between activities, which, academically speaking, should not exist in the first place, such as balancing inventory/order size with cost and risk.

Could Sourcing 'Take Over' Supply Chain in the Next Decade?

In its paper, Charting the course: Why procurement must transform itself by 2020, Deloitte makes the case that an even greater coming together of the two functions most occur when it comes to a variety of supply base and operations activities.

Consider Deloitte's argument that increasing expectations are leading to "procurement stewardship with suppliers and internal finance, legal and operations teams [to create] implemented compliance strategies with zero tolerance for non-compliance (e.g., conflict minerals, FCPA, anti-bribery act, etc.)" Moreover, sourcing is expanding into the supply chain realm in advanced organizations, with "decisions (incorporating price and non-price variables) and scenario-based optimization that quantifies the cost of business constraints (e.g., split of business to reduce risk, higher up-front capital investment to improve the overall [net resent value] of a multi-year contract, etc.)" leading to supply chain inclusive outcomes.

But by 2020, this coordination will have evolved further. Deloitte offers the following glimpses as to what might happen:

"¢ Market leaders across all industries (not just retail/high-tech) set up supply chain standards for industries beyond regulatory bodies.

"¢ Sourcing and commodity management enter the "program trading" world of Wall Street.

"¢ Weekly sales and operations planning processes feed what we might call an automated "sourcing bot" with information based on market demand, specifications, geographies, locations, and working capital. Humans approve and systems act.

 

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In its paper, Charting the course: Why procurement must transform itself by 2020, Deloitte makes the case that an even greater coming together of the two functions most occur when it comes to a variety of supply base and operations activities.

Consider Deloitte's argument that increasing expectations are leading to "procurement stewardship with suppliers and internal finance, legal and operations teams [to create] implemented compliance strategies with zero tolerance for non-compliance (e.g., conflict minerals, FCPA, anti-bribery act, etc.)" Moreover, sourcing is expanding into the supply chain realm in advanced organizations, with "decisions (incorporating price and non-price variables) and scenario-based optimization that quantifies the cost of business constraints (e.g., split of business to reduce risk, higher up-front capital investment to improve the overall [net resent value] of a multi-year contract, etc.)" leading to supply chain inclusive outcomes.

But by 2020, this coordination will have evolved further. Deloitte offers the following glimpses as to what might happen:

"¢ Market leaders across all industries (not just retail/high-tech) set up supply chain standards for industries beyond regulatory bodies.

"¢ Sourcing and commodity management enter the "program trading" world of Wall Street.

"¢ Weekly sales and operations planning processes feed what we might call an automated "sourcing bot" with information based on market demand, specifications, geographies, locations, and working capital. Humans approve and systems act.

 

Read Full Article

Could Sourcing 'Take Over' Supply Chain in the Next Decade?