Features

Supply Is Where It's At

Author(s):

Joseph L. Cavinato, Ph.D., C.P.M.
Joseph L. Cavinato, Ph.D., C.P.M., is CSSL Professor of Supply Management at ISM and Thunderbird, The Garvin School of International Management in Phoenix, Arizona.

October 2006, Inside Supply Management^® Vol. 17, No. 10, page 24

For the first time, supply professionals are taking the initiative of identifying projects and laying business plans that extend across the entire organization or supply chain.

Supply is the place to be in this decade. After extensive research and ongoing interviews conducted by the A. T. Kearney Center for Strategic Supply Leadership at ISM and Thunderbird, the Garvin School of International Management, we find supply playing wider and deeper roles than ever before. We also see a dawning awareness by many CEOs that new forms of supply contribution are some of the last strategic forms of competitiveness left to exploit for overall organizational performance.

It is a field emerging from a long past into new and varied forms. In 2001, the ISM Board of Directors adopted the definition of supply management, and in August 2006 it was modified to read as follows: the identification, acquisition, access, positioning, management of resources and related capabilities the organization needs or potentially needs in the attainment of its strategic objectives. This was as a result of observing an increased use of the term supply in place of buying, purchasing or procurement, as well as visits and interviews with hundreds of CPOs and others in the field at the time. Supply professionals were going beyond the traditional field boundaries and discovering and applying tools to attain accomplishments of greater impact than in the past. One example: In the past, we saw positive purchase price variances touted as big accomplishments; today we see them resulting in longer-term budget shifts for increased product or service margin, lowered costs of business and/or reduced assets and overhead footprints.

Our global visits reveal three key points for this field's growth.

1. Increasingly supply professionals see their roles today as enhancing the organization's overall performance (financial, competitive, service and so on) rather than narrowly performing administrative buying services.
   
   
2. The contributions are measured along a spectrum starting with price, naturally, and continuing in the forms of wider margins, lower overhead, increased cycle times, faster time to market, reduced asset base and value through working with the supply base.
   
   
3. There has been a shift from reacting to stakeholder demands and needs to taking the initiative to identify and seek mutual product or service enhancements and organizational performance improvement. Those within the field know, see and understand the nature of supply, suppliers, markets, and opportunities and threats to greater degrees than those within many other groups in the organization. And, this position of supply manager offers a significant organizational strength.

Why Is This Important Now?

Several outside forces have led to the emergence of supply as an organizational imperative today. Because of increased speed in competition, globalization, market shifts, product and service life cycles, and other factors standing still today leads to slipping behind tomorrow. Supply and supplier markets are more complex and involve more players than ever before. Thirty years of buyers' markets are no longer. This may mean going back to the drawing boards, with supplier quality training, meetings of the mind, and "new" old approaches that require the price inflation fighting and supply reliability tactics that we last used in the 1970s.

This complexity also gives rise to increased business risk from supply chains that are more difficult to design for sudden disruption recovery. Social responsibility is a mantra that most developed-country organizations use as a way of doing business and gaining a competitive advantage, and much of this theory falls upon supply professionals to apply throughout the world.

Inside the supply organization, there is a heightened expectation from senior management for higher business performance from supply. This opens the door for showing how supply can be a lever for competitive business and organizational performance.

The New Ingredients

The field is ever-expanding. In the June 2006 issue of Inside Supply Management®, the article "Grow the Onion!" showed how the new values needed by organizations go beyond price toward broader and broader levels of financial gain. These can be in the forms of price, but may also include cost reductions, process improvements, faster speeds, use of fewer assets, lower overheads, and fewer people and hand-offs. The latter include business and organizational improvements that reduce budgets and costs of the organization in coming periods. They truly shift the costs of doing business.

The larger "onion" represents a larger starting point and basis for proving the results of these changed ways of acquiring, accessing and positioning needed resources. By viewing them first in terms of an improved way of doing business and then later applying specific supply methods toward attaining them, supply professionals can then use the mind-set and language of senior managers and those from other disciplines.

What Does It Entail?

The 2006 definition of supply still applies. What is different is that it was stated at the time as a vision based upon a small number of observations of what was thought to be possible. Today, it is an imperative, and its adaptation is accelerating. Three points stand out:

1. The supply professional of today and tomorrow requires extended negotiation skills that go beyond the across-the-desk type so common with a supplier. Some of the real value-add comes internally, by working with people in other departments and senior managers to educate them as to the value of some of the new initiatives, how they can be accomplished and how their success can be measured. This means thinking in terms of influence and gaining buy-in.
   
   
2. All of this means becoming more adept at both internal and external relationship management. This requires using the many languages of other departments and understanding how the initiatives will be sustained beyond immediate successes.
   
   
3. The power of these skills lie in their application to accounting and financial tools, insights and business cases. Making the business case starts with the impact on the rest of the organization, translating it into financial terms and measures, and accomplishing the goal back at the desk in purchasing and supply strategies and tactics.

The Rest of the Decade

For the first time, we're seeing supply professionals take the initiatives of identifying projects and laying out business plans that extend across the entire organization or supply chain that came from within supply rather than coming from above or from other departments. There has never been a time where there has been such a pull for supply managers to come to the table with ways of improving the overall organization with new and different management methods.

Evidence of this new way of working can be found among the best and brightest in today's undergraduate and graduate programs who seek stints in leading supply organizations as a means of developing skills and experiences for their own further career growth. Too, we are finding an increasing number of CPOs and their direct reports who admit that they are gaining skills and experiences in the supply field as a means of proving their capabilities in general management. This might just be how the field of supply management proves its case and gets to the leadership table.

To contact the author or sources mentioned in this article, please send an e-mail to author@ism.ws.

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