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A Great Vision Isn't Enough

Author(s):

Elizabeth Zucker
Elizabeth Zucker is vice president, international sourcing and supply chain for Krispy Kreme Doughnuts Inc. in Winston-Salem, North Carolina.

October 2011, Inside Supply Management^® Vol. 22, No. 8, page 10

Out In Front: Leading People, Leading Organizations
Create and refine your strategic sourcing roadmaps to assure you can obtain the vision.

The goals for sourcing organizations are well-defined: Get the lowest cost, meet quality standards and/or assure services or products are available where, when and in the quantity needed. As sourcing leaders, we position our teams to deliver on these goals by affecting improvements that lead to a desired future state. But, getting to that future state without a plan is like trying to drive to a distant locale without a GPS system.

Create a Great Vision

Sourcing leaders create visions for their teams that answer the question: Where should we be in X number of years? These visions articulate the general idea of a desired future state that is easily understood by team members and customers.

A great vision is the first step in outlining the future direction of the organization, creating a common target around which even the most disparate teams can unite. In my career, one of the best procurement team visions was established by the CPO of an international restaurant company: "In our low-margin industry, restaurants don't compete — their supply chains do. So, we must build the most competitive supply chain system in our industry."

Draft the Strategic Sourcing Roadmap

A great vision, however, is not enough to ensure success. Now, the difficult work begins. As with any journey, the destination is just a point on the map; the journey itself will make the difference in how successfully and quickly you arrive at that destination. Thus, the strategic sourcing roadmap (SSR) is crucial to moving your team from where it is today to where it wants and needs to be.

The SSR outlines the strategies to achieve your future state, and includes tactics that will be employed to get there, collectively providing milestones on the journey to your vision. The strategies you choose are dictated by the desired future state. For example, if your vision includes reducing costs, then one of your strategies could be to optimize competition for your business to drive down supplier prices. The outcome of creating the SSR is identifying and communicating all the strategies used to achieve the vision, including a comprehensive plan for how (and on what) the team will focus over the next 12 to 24 months. It will justify resource allocation, as well.

During my time at a global consumer electronics company, the sourcing team's vision was to drive improved profitability. Thus, our strategy was to lower assembly costs by introducing more competition for this segment of our spend. In one business unit, the company had only one approved supplier for assembly service, due to overengineering of requirements. As a result, we awarded business to the supplier without benchmarking its costed bills of material or service charges.

With the help of a cross-functional team of six members, we set up a process over seven months to approve new suppliers. The next competitive bidding process included three suppliers, and resulted in a 10 percent cost reduction against the incumbent. The investment of the team over those seven months was significant, but it paid off in the end. Because our SSR included the strategy of creating additional competition, we were able to justify garnering resources to take on this project.

It's the Journey That Counts

For sourcing teams, small steps in the right direction are better than large leaps into the unknown. In the race of the tortoise and the hare, we must be the tortoise: plodding along to assure that our supply is never at risk, while basing decisions on information and considering long-term effects of our actions.

As such, our SSRs should include realistic time lines for achieving key milestones on the path to the future state. We must be satisfied with making improvements in the short term and adopt the mind-set that the journey is a long road.

Adjust With the Times or Get Left Behind

We are working in a time of unprecedented magnitude and speed of change. From historically high commodity pricing to the advent of technology to drive decision-making, the environment in which we operate is in a constant state of flux. Accordingly, our SSRs must — and will — change along the way to our destination. Strategies and tactics that were effective two years ago might not be applicable now.

This was the case when I worked for a hotel chain that bid out our food and beverage purchases to a portfolio of suppliers on a weekly basis. We chose the supplier with the lowest price, but only until the next bidding cycle. As commodity prices rose, supplier prices were increasing more. We had little leverage with key suppliers, as they only had our business for seven days.

With a vision to better manage costs, our hotel chain initiated a strategy to lengthen the bidding cycle for higher spend categories — in some cases, up to 12 months. Given the increase in value this longer commitment represented, suppliers were willing to reduce overall pricing even in the face of higher input costs.

Anticipate having to revise your SSRs. Plan to back up, take unplanned detours and change course to navigate around roadblocks or take advantage of opportunities. Many roads can help you reach the destination, so be flexible enough to shift direction as needed.

Sourcing leaders must provide their organizations with a desired future state. Beginning with this end in mind is critical to achieving the sourcing goals of quality, supply reliability and low cost.

Additionally, achieving these goals requires a comprehensive plan that plots the course for achieving your future state. This plan is guided by an SSR that assures a clear course of action for the organization to take.

For more information, send an e-mail to author@ism.ws.

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