Executive Briefings

Procurement, Business Leaders Spar Over Who Knows Supply Management Better

Few supply management leaders think that their businesses' management teams appreciate the potential of modern supply management. Business leaders disagree. They are adamant that they understand the strategic potential of modern supply management, but that doesn't mean that their businesses are reaping the benefits.

Nearly three-quarters of CEOs and division presidents report that their supply management organizations still rely heavily on block-and-tackle practices such as short-term decision making, cost reduction at the expense of total cost of ownership, and failing to revisit make-versus-buy decisions after they’ve been made. Given this statistic, no wonder the two groups don’t see eye to eye.

The core issue is about capability, not understanding. Only a minority of supply management organizations are collaborative, agile and proactive (although most have mastered at least one of these capabilities). While the supply management organization is uniquely positioned to help the company improve all four drivers of return on invested capital — revenue, costs, working capital, and capital expenditures — few are living up to this ambition.

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Nearly three-quarters of CEOs and division presidents report that their supply management organizations still rely heavily on block-and-tackle practices such as short-term decision making, cost reduction at the expense of total cost of ownership, and failing to revisit make-versus-buy decisions after they’ve been made. Given this statistic, no wonder the two groups don’t see eye to eye.

The core issue is about capability, not understanding. Only a minority of supply management organizations are collaborative, agile and proactive (although most have mastered at least one of these capabilities). While the supply management organization is uniquely positioned to help the company improve all four drivers of return on invested capital — revenue, costs, working capital, and capital expenditures — few are living up to this ambition.

Read Full Article