Research & Surveys
Key Supply Management Strategies for the Coming Decade
Author(s):
RaeAnn Slaybaugh
May/June 2008, eSide Supply Management
Vol. 1, No. 3
The Next 10 Years: Key Supply Management Strategies
Ten years ago, CAPS Research, ISM and A.T. Kearney joined forces to explore the future of supply management, publishing their findings in a joint research study. Last year, they collaborated again to update and expand their research for the coming decade. eSide breaks down some of their key conclusions.
In 1998, CAPS Research, ISM and A.T. Kearney joined forces to explore the future of supply management for a joint research report, The Future of Purchasing and Supply: A Five- and Ten-Year Forecast. Last year, these entities came together again to focus their efforts on the coming decade. Their expanded, updated report — Key Supply Strategies for Tomorrow: Perspectives on the Future of Purchasing and Supply — examines anticipated challenges and poses strategies for overcoming them.
Increased Global Competition
In the next 10 years, supply management professionals will need to embrace China as —both a market and a supply base, without being myopic to emerging opportunities elsewhere,— the report states. Other economies also noted are India, Latin America and Eastern Europe, which CAPS, ISM and A.T. Kearney predict will gain importance as they spawn "potential global giants."
Additionally, continued mergers and acquisitions are expected to be fueled by increased global competition. "Prior to entering into deals, corporate boards will require supply management to evaluate opportunities and risks," the report states, offering up potential cost savings, untapped value and disruptions to existing supplier relationships as examples.
Growing Environmental Concerns
Supply management professionals can expect increased internal and external pressure to respond to environmental concerns, according to the report. Endangered plants and animals, land use (and abuse), pollution controls and climate change are all areas of growing concern.
Continued Emphasis on Government Regulations
CAPS, ISM and A.T. Kearney predict government regulations related to corporate governance, product safety, homeland security, privacy rights and intellectual property rights will continue to rise. As noncompliance poses increasing risk to organizations, the report adds, organizations will be forced to devote significant resources to managing compliance issues — "and to extend these checks into the supply base, which often follows a different set of customs and regulations from those of the company that puts its name on or sells the goods." Child-labor laws and working conditions in foreign factories are two prime examples.
Corporate Strategy's Effect
New considerations regarding corporate strategy will force changes to the supply management function internally, according to the report. As organizations develop and employ new business models in an effort to improve the income statement and balance statement in response to external forces and new market opportunities, CAPS, ISM and A.T. Kearney say this will have major implications for supply management.
In an effort to increase revenue, several strategic possibilities emerge. "For example, those engaged in heavy manufacturing might look to bring in new business through maintenance, repair and other services," the report states, citing Caterpillar — whose remanufacturing business breathes new life into old diesel engines — as an example.
Missions, Goals and Performance Expectations
In the next 10 years, supply management's mission and goals will be broader and more tightly linked to strategic business objectives, agree CAPS, ISM and A.T. Kearney. Additionally, organizations are expected to seek out suppliers in industries that are adaptable in their ideas and capabilities to a new setting. "Nontraditional sources of innovation ... will become a key component of the value chain," the report states. Design houses and university researchers are two examples.
A few more predictions: Supply risk mitigation will become increasingly important in the decade ahead, and supply management's influence — and even control — will extend deeper into nontraditional areas to improve cost management across the organization. Facilities management, legal, advertising and contract manufacturing are all potential areas of emphasis.
Critical Success Factors for the Future
After conducting in-depth discussions with supply management executives and analyzing survey data on more than 100 future supply management strategies, seven areas critical to future success in supply management emerged.
- Developing category strategies. The right mix of leading-edge innovation, value and cost performance for each specific spend area will be imperative to organizations with category strategies.
- Developing and managing suppliers. Improving the overall supply base and increasing the value achieved from it will be key. Competitive advantage in cost, quality, delivery and responsiveness, technology and innovation are possible payoffs.
- Designing and operating multiple supply networks. Organizations will need to establish and maintain more diverse supply chains to support their full range of competitive priorities. For example, many will contract with local partners capable of executing order fulfillment to meet the needs of customers in developing economies.
- Leveraging technology enablers. The processes for spend management, sourcing, contracting, procurement and supplier management have benefited from the technology tools created in recent years. Organizations will use these technology enablers to resolve issues surrounding data sharing, confidentiality, legal security and misuse by suppliers or customers.
- Collaborating internally and externally. To achieve major gains from supply management in the decade ahead requires a much higher level of internal and external collaboration.
Internally, supply management will develop or deepen relationships with other functions, especially indirect areas such as IT, legal, marketing and advertising. Externally, organizations will develop networks of suppliers required to work well not only with the organization itself, but also with one another.
- Attracting and retaining supply management talent. Those working in supply management in the decade ahead will need deep supply market knowledge, extensive process knowledge, broad-based business knowledge, foreign language skills and international experience. Organizations will likewise be challenged to attract, develop and retain these sought-after individuals.
- Managing and enabling the future supply management organization. Organizations must balance the advantages afforded by centralized coordination with the need for local responsiveness. Some will grant supply management authority and leadership to local business units to build leadership and develop the talent needed in offshore locations; others will shift authority and responsibility back to the strategic business units if the pressures on the commodity prices lessen.
Looking Ahead
Wrapping up the report, CAPS, ISM and A.T. Kearney spotlight a handful of strategies and practices critical for success in the coming decade.
First, execution and relationship management will continue to grow in importance. "It will become necessary to handle certain strategic suppliers as carefully as an organization's key accounts," the report cautions.
Next, technology will further transform supply management strategies and processes, and supply management organizations will evolve to fit business models and strategic needs.
Finally, global talent management will be essential as the current generation of supply management professionals prepares to retire and a new set of skills is required to succeed.
The full report is available online.
RaeAnn Slaybaugh is a senior writer for the Institute for Supply Management™. She can be reached by e-mail.
For more research and survey results, visit the ISM articles database.
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