Next Level Supply Management Excellence

When authors Robert A. Rudzki and Robert J. Trent speak to supply management professionals, they often ask the audience to please raise their hands if they believe that most senior executives around the world understand the enormous potential of modern supply management.

“At best, 10% of the audience raises their hands,” the authors write in the first chapter to their book Next Level Supply Management Excellence: Your Straight To The Bottom Line ® Roadmap. They then ask the audience to keep their hands raised if they believe that those same executives understand how to achieve that enormous potential or how to build the transformation roadmap. “Typically no hands remain raised,” they write.

If you're not familiar with Rudzki and Trent, they are supply chain leaders in their own right – and long-time contributors to Supply Chain Management Review. Robert A. Rudzki is President of Greybeard Advisors LLC; a former senior vice president and chief procurement officer for Bayer Corp., the North American subsidiary of Bayer AG; co-author of the supply management best seller Straight to the Bottom Line ®, and an advisor to organizations that are seeking to successfully navigate the journey to world-class supply management status. Robert J. Trent is the supply chain management program director and the George N. Beckwith professor of management at Lehigh University. Prior to his return to academia he worked for the Chrysler Corporation. He is the author or co-author of numerous books and articles, including Strategic Supply Management: Creating the Next Source of Competitive Advantage.

In this Q&A, Rudzki discusses Next Level Supply Management Excellence, along with the trends he sees in supply management today. You can read a chapter excerpt on SCMR.com.

SCMR: Bob, let's start with the simplest question. Next Level Supply Management Excellence is a sequel to Straight to the Bottom Line ®. For those who are unfamiliar with that book, tell us briefly what it covered.

Rudzki: Straight to the Bottom Line ® is an ISM book selection. We wrote it when I was a chief procurement officer and a member of a CPO peer group, where I had interactions with well over 100 CPOs. What we discovered is that most of us faced the same challenge, which is how to create awareness among our executive colleagues of the value of modern supply management. That is the theme of Straight to the Bottom Line ®.

SCMR: Since this was conceived as a sequel, where does the first book leave off and Next Level Supply Management Excellence pick up?

Rudzki: Our first book created the awareness, understanding and the basic framework for moving a supply management organization forward. As the title suggests, in this book, we show you how to take the organization to the next level in terms of your processes, objectives, asset management, and talent management, including the interaction with other parts of the organization. We explain how to create a comprehensive road map for transformation. We brought in contributions from 14 supply chain leaders to illustrate our points.

SCMR: One of the phrases we hear at conferences like ISM is the idea of a procurement transformation. What does a procurement transformation look like?

Rudzki: The word is often so casually used that it has almost lost its meaning. First, there's Webster's definition, which is “to change in composition, structure, character or condition, to change the outward form or appearance.” At Greybeard Advisors, my consulting firm, we define transformation as “to fundamentally alter the capabilities and improve the achievement of sustainable results.” We're really talking about enhancing the capabilities of the organization to accomplish greater things.

SCMR: How does that translate to procurement?

Rudzki: Supply management has the capability to impact the four drivers of Return on Invested Capital, or ROIC, and Cash Flow. Those drivers are revenue, cost, working capital, and capital expenditures. When we work on all four of those things simultaneously, we can have a huge impact on the ROIC of the company. The problem is that most procurement departments are responsible for a relatively small slice of the pie. My argument is that procurement should be involved in all areas, including revenue activities that can enhance a supply chain's responsiveness to customers, like transportation, working capital initiatives like payment terms and inventory that are often not assigned to anyone in the company, and capital expenditures such as optimizing the redeployment of used assets that can be reused at other locations or monetized in the used equipment market. And, we think that procurement needs to be involved earlier in the product design process. What we're really talking about is transforming procurement from a paper- pushing, back office function to a strategic value creator.

SCMR: In the January issue of SCMR, we are running a piece by two former CPOs who point out that the average tenure of today's CPOs is about three years. Why do you think CPOs are turning over so quickly and what can they do differently?

Rudzki: Some of those transitions have been voluntary. Some have been encouraged by the company, especially when there's been a culture clash. Another reason for turnover is the lack of attention to transformation within an organization; instead, they pursue a quick win agenda. If you take that approach, after a year or two, you don't have a lot to show for your efforts and you haven't put in place any strategic programs and the momentum to go forward.

SCMR: There is a lot of talk these days about the talent crisis. In the chapter excerpt, you write that “having people available for a job is not always the same as having the talent available for a job.” I was really struck by that sentence. Tell us what that means.

Rudzki: One point I made throughout my career, and I butted heads with Chief Accounting Officers, is that head count is not a valid strategic metric. Organizational capability as measured by accomplished results is what really matters. When we work with clients, we put a strong emphasis on ROI. Most senior executives will respond to a strong, successful business case, and that's a challenge for CPOs. My view has always been that focusing on head count is like focusing on price. You're not focusing on the whole picture, the strategic direction of the business. However, the CPO has to be able to go to their executive team and make the business case for investing in talent. They have to show what they can accomplish in three to five years by investing in talent and demonstrate a return on that investment. The first time you do it it's a little uncomfortable, but once you do it a few times, it's a very straightforward thing to go in front of your executive board and make your case.

SCMR: If you had one piece of advice for CPOs and other procurement executives regarding their talent management strategies, what would it be?

Rudzki: CPOs need to view talent management as one of their most important strategic investments year in and year out. Not just for this calendar year. And, they need to get their colleagues to support this. They should set an investment goal such as 40 hours of enrichment or training per year for each member of the team. That's the equivalent of a full week a year, which sounds like a lot, but that's only 2% of the work year. If you cannot make a commitment of just 2% of the work year, you might as well accept that you're going to live with mediocre capability in your organization.

You can read the most recent contributions to Supply Chain Management Review by Rudzki and Trent by clicking on their names.

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