Long-term veterans of supply chain management likely recall the days 30 years ago when they were called “purchasing agents” or “traffic managers” and did nothing but “buy stuff.” Today, of course, that has all changed. In fact, there is very little that takes place in organizations today that supply management professionals aren't involved in.

The future holds even more changes and advances for people involved in the sourcing and procurement functions, especially in the areas of globalization, supply chain technology, and supplier relationships. This article examines each of those trends—and their potential implications for the supply management community.

Globalization. A survey conducted by CAPS Research titled “Global Sourcing and Supply: Achieving Results” reported that, in 2000, most firms had less than 20 percent of their annual spend allocated to global sourcing. By 2010, CAPS says, half of firms will have a global spend of over 40 percent—with nearly one-fifth spending over 80 percent of their annual spend globally.

The most obvious reason for the increase in global sourcing is cost. Executives in the firms surveyed reported an average of 19 percent reduction in unit purchase price, and total cost of ownership has decreased by 12 percent. According to the report, quality and service are not suffering despite the cost reductions. CAPS reports that overall performance (product quality, on-time delivery, etc.) to customers by respondents increased by 10 percent.

“Global trade has been growing and will continue to grow,” offers Robert A. Kemp, president of Kemp Enterprises. “According to U.S. government statistics, U.S. trade with the world increased 241 percent between 1990 and 2006.”

What are the overseas hotspots? Certainly, the most popular locations for global sourcing in recent years have been China (primarily for goods) and India (primarily for services).

Other regions and countries are also making their presence known as sources to consider for supply. These include Eastern Europe, South America (especially Brazil), Africa (especially South Africa), and other locations in Asia (such as Vietnam and Bangladesh). But as was the case a few years ago with China and India, most of these countries suffer from underdeveloped infrastructures and lack of experience as supplier nations to the industrialized world. As such, one challenge with global sourcing will continue to be the creation of adequate infrastructures to support sourcing efforts. Success with global sourcing in new nations never has, and probably never will, be easy or occur overnight.

Supply Chain Risk. A daily reality of supply chain management, particularly on the global scale, is supply chain risk. A report titled “Managing Business Risk Through 2009 and Beyond” published by FM Global, a commercial and industrial property insurer, surveyed more than 500 financial executives in North America and Europe. Their top three risk concerns? Competition was first, followed closely by supply chain disruption, then property-related risks. About 25 percent of respondents expect supply chain disruption to increase through 2009, while only 8 percent expect it to decrease.

A 2006 AMR Research report probes the concerns even further. According to AMR, the top five areas of concern among supply chain executives regarding risk are supplier disruption (49 percent); logistics failure, such as a port strike (17 percent); natural disaster (14 percent); strategic failure, such as selling the wrong product in the wrong market (13 percent); and geopolitical event, such as regional instability (8 percent).

Gary L. Stading, associate professor of supply chain management at the University of Houston, confirms that supply chain disruptions are a growing concern for supply chain executives. “The topic of supply chain disruption hit the national radar screen after 9/11 and increased even more around the time of the hurricanes in New Orleans,” he reports. However, when Stading has talked with supply chain executives, more often than not their primary interest is not these major catastrophic events, but rather daily supply chain disruptions. Examples include political issues in the countries, transportation and logistics issues, dealing with customs, and so on.

Advances. A survey conducted by the Aberdeen Group in 2006 sought to determine how executives viewed supply chain technology. The survey included respondents from more than 200 companies, about 44 percent of which had annual revenues exceeding $1 billion. One overall finding was that supply chain executives are becoming increasingly interested in managing the “outside-in” supply chain process. That is, rather than focusing exclusively on technologies that monitor internal activity, they are becoming more interested in technologies that help to manage the activities of suppliers, logistics partners, and contract manufacturers.

The survey identified four technologies that are gaining more attention among supply chain professionals. One is multi-tier inventory management solutions, which provides inventory optimization that determines how much and where to hold inventory across multiple supply chain tiers. Another is supply chain visibility technology, which allows users to quickly respond to changes (or anticipated changes) by taking actions such as reshaping demand and/or redirecting supply. A third is precision demand management technology, which supports specific product, customer, and channel forecasts. This is often based on point of sale or point of use data. The fourth is supplier/contract manufacturer collaboration technology--platforms that allow customers to collaborate with overseas suppliers and contract manufacturers on forecasts, inventory planning, replenishment, and shipping activity.

Aberdeen revisited the topic in early 2007, in a report titled, “The Supply Chain Innovator's Technology Footprint 2007.” This survey of executives in 210 companies produced roughly similar findings. “For two continuous years, the number one interest has been inventory optimization, reflecting the focus companies have on trying to be more responsive to customers and also on cost,” reports Nari Viswanathan, supply chain and logistics research director at Aberdeen. “Supply chain visibility was Number 2 again in 2007.”

Challenges and Vulnerabilities. With the expanding use of technology to enhance supply chain activities and improve supply chain responsiveness come the increasing threats and realities of cyber attacks. “When you have an increase in data delivery and consumption, you're also increasing the risk of cyber threats,” states Irvin S. Varkonyi, president of Supply Chain Operations Preparedness Education (SCOPE) in Fairfax, Virginia.

Varkonyi sees three specific areas of vulnerability that supply chain executives must address. The first is that confidential company information may be opened and exposed to others. The second is having someone insert threats within the systems. He explains: “For instance, if data that is thought to come from a trusted vendor is not what it appears to be, it could lead to problems in the movement of goods.” The third is the challenge of integrating technology among a lot of different stakeholders in the supply chain. “Companies use a lot of different systems, which may not integrate well with each other,” Varkonyi notes.

Trends. Through late 1970s, U.S. companies operated at arm's length from suppliers, and purposely so. With the “Japanese Invasion” of the late 1970s and its arsenal of tools —including just-in-time, quality management, and close supplier relationships —the landscape changed. Companies began reducing their supplier base, then working more closely and cooperatively with the remaining suppliers.

However, according to Steve Rogers, that all changed again in the late 1990s and early 2000s. Rogers is a senior consultant with the Cincinnati Consulting Consortium (www.cincconsult.com), and adjunct professor in the business school at Xavier University. “In 2000, everyone was excited about leveraging by globalizing, greater competition through reverse auctions, or downsizing the supply base to provide more volume to fewer suppliers,” he recalls. “At the time, it was all about leveraging volume to create lower cost.” However, these activities tended to be adversarial and served to push suppliers further away from customers.

Things are now moving in the other direction again, according to Rogers. “Today, there are some tight markets.” That is, some commodities, materials, and parts have ended up being in tight supply. This is leading customers to once again want to get closer to their suppliers.

“In the future, I think the need to become closer will continue to exist,” says Rogers. “The reasons are that some markets continue to remain tight, most customers have already leveraged their volume, and they have also explored low-cost country sourcing.” As such, there will be fewer incremental gains in the future. This will make it important to understand how to gain the next level of value from the supply base. The best way to do this, according to Rogers, is to leverage the suppliers that have skills that aren't being fully leveraged. “This is where supplier relationship management comes into play,” he says.

The first step in developing good supplier relationship management skills is to define the concert. According to Rogers, some people think of it as a piece of software by that name. Others consider it to be the relationships they have with their key suppliers, designed to get the most value out of them. Still others see supplier relationship management as a strategy for managing the whole supply base. Rogers subscribes to the third definition. “The goal is to get value and performance, while at the same time managing the risk.” Rogers believes.

The Green Supply Chain. There is no denying that “green” has captured the minds of most people, including corporate executives. According to Jessica Fullmer, chairman and founder of the Sustainable Business Institute (www.sustainablebusiness.org), interest in the concept is huge, especially since Al Gore's movie (“An Inconvenient Truth”) and more recently his Nobel Prize award. Another significant trigger, she believes, was the speech given by author and environmentalist Bill McKibben at the 2007 CERES Conference in Boston, attended by 650 executives. “McKibben noted that it's not ten years, but rather two to four years, before CO2 emissions rise to the point where, for the first time in history, the natural systems will lose the abilities to repair themselves,” says Fullmer. “There were senior executives from hundreds of companies in attendance, and you could hear a pin drop.”

Within the past year, Fullmer has seen a significant increase in the number of companies seeking speakers, seminars, and other resources to help them get on the “green” track.

One company making a strong commitment to “green” management, including supplier relationships, is Wal-Mart. In late 2005, the company laid out these three interlinked goals:

1. Be supplied 100 percent by renewable energy.
2. Create zero waste.
3. Sell products that sustain Wal-Mart's resources and the environment.

These goals have necessitated transforming the Wal-Mart supply chain and working more closely with suppliers. For example, the company is now providing suppliers with knowledge and process assistance in tandem with environmental nonprofit organizations.

Can supply management professionals do anything to impact the direction or magnitude of trends like globalization, technology, or supplier relationships? Probably not. But what they can to is to thoroughly understand the dynamics taking place so that they can effectively respond to them. That's the best way to position you and your company for success.