Executive Briefings

Hot-Button Issues in Sourcing & Procurement

Ray Barger, research director with Gartner, describes the firm's five-stage "maturity model" for supply-chain management and procurement. He also grades companies' progress toward ultimate maturity.

Today's "hot-button" issues include the need to achieve greater flexibility through supplier segmentation, Barger said. Companies are also making a more concerted effort to deploy supplier scorecards and other methods of assessing vendor quality. More than just focusing on cost savings, businesses need to "align performance management with what you value," he said.

Finally, there's a pressing need to engage in supplier risk management, as brand owners increasingly go "asset-light." Barger said companies are experiencing a greater concentration of risk in their supply chains. A recent spate of natural disasters has brought heightened attention to the vulnerability that accompanies many sourcing decisions.

Through the segmentation of suppliers, companies can assess the criticality of each partner, regardless of the level of spend. They can differentiate among transactional, catalog and "bottleneck" suppliers. The last occur when engineering develops an item that is single-sourced. Volumes might be low, but the consequences of an interruption in supply could be devastating. In such cases, Barger said, companies should think about whether it's feasible to develop a second supplier.

Barger sees companies becoming more enlightened about the way in which they deal with suppliers, beyond the issue of cost savings. The most mature organizations are practicing segmentation, which might involve trade-offs among cost efficiency, service and speed. Where they end up placing the emphasis depends on the nature of the markets they are serving. "They need to understand that different platforms sell on different value propositions," he said.

Many businesses are increasing risk by reducing the number of suppliers with which they work. But others are boosting their supplier base. Starbucks, for example, is working with a large number of local coffee-bean growers to ensure product quality and adherence with fair-trade guidelines.

To view the video in its entirety, click here

Keywords: supply chain, supply chain management, inventory management, inventory control, supply chain risk management, sourcing solutions, supplier relationship management, SRM

Today's "hot-button" issues include the need to achieve greater flexibility through supplier segmentation, Barger said. Companies are also making a more concerted effort to deploy supplier scorecards and other methods of assessing vendor quality. More than just focusing on cost savings, businesses need to "align performance management with what you value," he said.

Finally, there's a pressing need to engage in supplier risk management, as brand owners increasingly go "asset-light." Barger said companies are experiencing a greater concentration of risk in their supply chains. A recent spate of natural disasters has brought heightened attention to the vulnerability that accompanies many sourcing decisions.

Through the segmentation of suppliers, companies can assess the criticality of each partner, regardless of the level of spend. They can differentiate among transactional, catalog and "bottleneck" suppliers. The last occur when engineering develops an item that is single-sourced. Volumes might be low, but the consequences of an interruption in supply could be devastating. In such cases, Barger said, companies should think about whether it's feasible to develop a second supplier.

Barger sees companies becoming more enlightened about the way in which they deal with suppliers, beyond the issue of cost savings. The most mature organizations are practicing segmentation, which might involve trade-offs among cost efficiency, service and speed. Where they end up placing the emphasis depends on the nature of the markets they are serving. "They need to understand that different platforms sell on different value propositions," he said.

Many businesses are increasing risk by reducing the number of suppliers with which they work. But others are boosting their supplier base. Starbucks, for example, is working with a large number of local coffee-bean growers to ensure product quality and adherence with fair-trade guidelines.

To view the video in its entirety, click here

Keywords: supply chain, supply chain management, inventory management, inventory control, supply chain risk management, sourcing solutions, supplier relationship management, SRM