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A vast array of forces--including globalization, changing demographics, shifts in consumer demand, resource scarcity, environmental pressures, technology advances, governmental regulation and activism are reshaping markets, industries and products. Companies must pay special attention to how these forces will affect their supply.
These forces and changes will cause CEOs to ask supply management leaders to take on a broader, more strategic mission, to be evaluated on a more comprehensive set of goals and to deliver a higher level of performance. Supply management will be expected to deliver more innovation from suppliers, contribute more broadly to revenue generation, anticipate and monitor supply risk to ensure business continuity, and expand the breadth and impact of cost management efforts.
These are among the key findings of the global research study titled "Succeeding in a Dynamic World: Supply Management in the Decade Ahead" conducted by CAPS Research, A.T. Kearney and ISM. Paul Laudicina, Managing Officer and Chairman of the Board of A.T. Kearney, presented the results of the study in his keynote presentation today at the ISM International Supply Management Conference being held in Las Vegas.
In his comments, Laudicina pointed out that in the years ahead the success of supply management executives will be based on how well planning and execution is undertaken in seven critical areas:
1. Developing forward-looking category strategies
2. Engaging, developing and managing key suppliers
3. Designing and operating multiple supply networks
4. Leveraging technology enablers
5. Collaborating internally and externally
6. Attracting and retaining supply management talent
7. Managing and enabling the future supply organization globally
The study results clearly show that category strategies will strongly impact geographic sources of supply. Survey respondents noted that China, India, Eastern Europe and Brazil will continue to gain in importance as sources of supply over the next five years, while sourcing from the U.S., Canadian and Western European markets will decline. North American companies will continue to look across the Pacific for supply from China and India, and European Union respondents will buy more from Eastern European sources. While North American companies expect to decrease local sourcing by 20 percent, European companies will be making a far more drastic move away from Western European countries.
The study findings also demonstrated that a decade-long run that saw the advantage in most supply markets take a pronounced tilt toward the buyers is coming to a close. While this cost-focused approach made significant contributions to the corporate bottom line, the new challenge will be to identify suppliers that offer goods, services and/or expertise that can contribute to the top line. When evaluating the portfolio of current or potential suppliers in advance of a sourcing effort, consideration will have to be given to the value-added assets, capabilites and benefits that a supplier offers above and beyond price and specifications.
Taking on such relationships will require a shift in mindset away from traditional sourcing, which seeks to exploit buying power, toward a relationship management focus that seeks to create competitive advantage. The former fixation on unit price and cost savings will give way to a value focus that considers innovation, value chain optimization, strategic cost management, business continuity and operational excellence.
Achieving major gains from supply management in the future will also require a much higher level of collaboration both internally and externally.
To ensure a steady stream of innovation, companies will need to improve their integrated product and service development processes. Supply management will play a make-or-break role by overcoming internal and external behavioral barriers and helping to integrate suppliers into the process. Finding the right suppliers will prove to be just the start: other keys will include strengthening relationships with the company's own research & development, engineering and marketing organizations; applying technology to enable process integration; and ensuring mutual protection of one another's intellectual property.
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