Beyond Benchmarks: Building Supply Capabilities for Business Strengths

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Women Executive Supply Management Summit (WESMS)

San Antonio, TX
February 2009


Joseph L. Cavinato, Ph.D., C.P.M., Director, the A.T. Kearney Center for Strategic Leadership (CSSL) at ISM / ISM Professor of Supply Chain Management, Thunderbird School of Global Management

Joseph L. Cavinato began his session by sharing his career path. After spending more than 20 years in the department of logistics at Penn State University, Cavinato served as a senior vice president for the National Association for Purchasing Management (NAPM) — now ISM — between 2000 to 2002. After that, he took on a professorship of supply chain management at Thunderbird School of Global Management and became director of the A.T. Kearney Center for Strategic Leadership at ISM. In this lattermost capacity, he has conducted more than 5,500 personal interviews with high-level executives in nearly 900 organizations across the world since 1990.

One thing I would add: in the first paragraph — between Penn State University and Thunderbird I was SVP at NAPM then ISM from 2000 to 2002.

Cavinato also mapped supply management's emergence as a profession. Although the tenets of supply management had been practiced for more than 100 years prior, it began to emerge as a professional field in the 1980s. Then, in the 1990s, supply management really started to be strategic — internally — in organizations. Today, its practitioners are subject to specific performance expectations, and the supply management function fuels business growth and transformation in all kinds of organizations.

"This is the best time ever to be in this field," Cavinato told attendees. "However, capabilities are highly contextual, and 2009 is vastly different than a year ago. Supply management isn't just about doing things well — it's about seeing what needs to be done next."

This shift is evident, he said, in the emergence of six field trends between 2007 and the first half of 2008.

6 New Trends, Defined

1. Accelerating new roles in the field. "What started out as a stable function is now an accelerating contributor," Cavinato said of supply management's role in today's organizations.

For example, whereas supply management professionals in the 1970s focused mainly on securing supply, by the 1990s, they were expected to practice supply market management, hone marketplace intelligence and drive cost and price.

Since then, strategic sourcing, electronic procurement, supply integration and category management have all become imperative to their professional success. And, on top of all these expectations, supply management professionals today shoulder product/service accountability and are expected to drive top-line growth, as well as demonstrate innovation.

In short, the supply management function has undergone five eras of growth since the 1970s, according to Cavinato: respectively, the era of consolidation, the era of strategies, the era of integration, the era of business growth and, finally, the era of business transformation. In the mid-1990s, he added, supply management's focus shifted notably from capturing value to creating it, where it remains today.

2. Rethinking global supply chains. According to Cavinato, the crux of this rethinking movement is low-cost-country sourcing. "What was a mad chase to the lowest-cost country is being rethought in some industries," he told attendees. "The starting point has been, 'What's the need to go global?'"

3. Driving innovation for top-line growth. Whereas innovation used to get mapped out within each organization's four walls, Cavinato said almost a dozen innovation business models exist today.

4. A movement from strategic sourcing to category management. He noted a significant shift with regard to strategic sourcing. "It's evolved from cutting our teeth to being one of our tools," he said. "Category management is our first step to taking financial accountability over products and services from the consumer back through the value chain."

5. Rising corporate social responsibility and other externalities. Corporate social responsibility, sustainability and business risks have all emerged as a recent field trend, according to Cavinato. Although sustainability has become a bit of a back-burner initiative in some organizations due to a struggling economy, he asserted that "it's not going away."

6. From project management to transformation. "We cut our teeth on cross-functional teams," Cavinato told attendees. "Today, we're edging into identifying and driving transformation in our business, suppliers and customers."

A Stormy Economic Sea

Although the aforementioned trends affect supply management professionals today, and will continue to do so for the foreseeable future, Cavinato asserted that "the heat and storm in the top office" has become a top-of-mind concern in recent months.

"There have been 58 recessions in the world from 1920 to 2009," he explained. "All were supply-and-demand imbalance ones, except the early 1930s, 1973 to 1975, 1981 to 1983 and the current economic crisis."

Right now, consumers, companies and countries have excessive debt, and in the last five months or so have begun to hoard cash and savings, Cavinato added. This has led to an excess of world manufacturing and services capacities, the compression of organizational balance sheets (shrinking assets and increased liabilities), and the shortening of both long and short terms.

For supply management leaders, these outcomes have posed significant challenges in staff management. Employees are worried and anxious in general, but also about strategic direction. Additionally, they are confused about their job priorities, apprehensive about their job security and extremely focused on the short term. In many cases, this has led to a lack of productivity and a misdirected focus. "As management, we've got to smile, even when we're feeling these things, too," Cavinato advised attendees.

All these recessions have, however, generated positive outcomes, he added. For example, the Darwinian approach of purging of what should go has accelerated. Additionally, new paradigms, technologies, markets, products and services have evolved.

Given the state of the economy, Cavinato has been asking CEOs he interviews one key question: What do you need for your company today? Their responses vary, but break down into several key initiatives: cut spend; increase new revenues; conserve cash; innovate without having to invest; "own" suppliers without having to invest in them; reduce working capital; lower corporate breakeven; reduce risk exposure; continuously streamline innovation, products/services and overhead; and drive transformation.

Based on these goals, Cavinato contends that opportunities for supply management professionals — who are in a unique position to drive them all — have never been greater. "Supply today has the tools to do what's needed," he told attendees. "The pull from on top is as never before, and the opportunities are greater than ever before.

"It's ours to lose," he added.

What It All Means

For supply management professionals, Cavinato predicted next-generation capabilities will range from learning to "lead upward" to innovation. These professionals will also be expected to lead and manage across the business and chains; turn managers into supply leaders; understand business models; become financially savvy in many dimensions; hone marketplace intelligence in the intermediate term; negotiate beyond just price; and establish collaborative relationships, internally and externally, he said.

Yet, as he reminded attendees, even these currently sought-after capabilities will probably be completely different three years from now. "What was yesterday's neat, new, strategic thing is today's normal, expected practice and tomorrow's commodity," he concluded.

Reporting by RaeAnn Slaybaugh

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