Supply Management: How are You Really Doing?
How you answer the 10 questions outlined here tells whether your supply management organization is a strategic resource or just a drain on corporate competitiveness
By Robert A. Rudzki, Douglas A. Smock, Michael Katzorke, and Shelley Stewart Jr. -- Supply Chain Management Review, 12/1/2005
If you still think of your process as purchasing, you are living in the 1960s. Competition today is no longer company to company, but rather supply chain to supply chain. Since many of us in the same industries use many of the same suppliers, a good procurement process must evolve into fully integrated supply management. The company that does the best job of integrating its supply network—in terms of objectives, strategies, processes, and data linkage—creates optimal competitive advantage for the entire supply network and optimal value for its shareholders and customers. Exhibit 1 provides a snapshot of what organizations look like before and after transformation.
Take a quick pulse to determine if your supply organization is alive and well or a significant drag on your corporate competitiveness. Ask the following 10 questions. You should have a good sense of the answers yourself. Following the list, we present what we feel are the right and wrong answers.1. Are supply chain goals integrated into the strategic plan of your business?
2. Do you know who your chief purchasing professional is?
3. What is the reporting relationship of the chief procurement officer to you? Does he or she have consistent access to you and other senior-level executives? Does he or she make presentations to the board of directors?
4. Does your procurement team have top- and bottom-line objectives? How do you set stretch objectives? Are procurement's objectives shared by other functions in the company?
5. What percentage of the external spend at your company is supervised by purchasing and covered by a written strategic-sourcing plan?
6. What percentage of spend is leveraged through internal spend pools?
7. Do you have the right leadership in your procurement function? Is your procurement head a leader, a follower, or roadkill?
8. What is the working relationship between purchasing professionals and those in other disciplines (manufacturing, engineering, R&D, finance, etc.)? Do they operate in silos?
9. What are the opportunities for training and improvement for the purchasing professionals in your company? 10. And most important: What is your level of personal commitment to achieving improved corporate performance through a best-in-class purchasing organization? The answers:
1. Are supply chain goals integrated into the strategic plan of your business?
We feel this is a critical indicator that separates failing organizations from those that at least have a fighting chance to succeed. A “yes” answer to this question indicates that you at the very least understand the potential promise of supply-side benefits. A best-in-class example is Procter & Gamble, which has worked in recent years to properly position purchasing within the company. Leaders of such business units as Baby and Family Care or Health Care increasingly recognize the importance of good sourcing work. The influence of purchasing at P&G has been rising and spreading. CEO A.G. Lafley includes purchasing breakthroughs as one of six core capability areas that are monitored on a regular basis and on a formal basis twice a year. “If we are going to improve margins, we are going to have to do it largely through cost control,” comments Keith Harrison, P&G’s global supply manager, who oversees purchasing, manufacturing, engineering, and other operational functions. Breakthroughs are significant improvements, such as capturing core spend in the services area or implementing technology that dramatically improves cost performance. If your strategic plan is to become more global, then purchasing needs to be included in that plan. If your strategy is to develop more proprietary products, then purchasing can play a role by tapping technology in the supply base. If your plan is to dramatically increase marketing, then make sure you have a sourcing plan for marketing. If you plan to grow through acquisitions, purchasing can play a crucial role not only in the due-diligence phase, but also in leading the post-acquisition achievement of synergies. Almost whatever you do, purchasing—working the right way with well-chosen suppliers—can help you do it better. Continued...
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