CEOs to Ask Supply Management More Strategic

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<p><strong>Tempe, Ariz. &mdash; May 10 </strong><br />An array of forces &mdash; including globalization, changing demographics, shifts in consumer demand, resource scarcity, environmental pressures, technology advances, governmental regulation and activism &mdash; are reshaping markets, industries and products. </p><p>Companies must pay special attention to how these forces will affect their supply.<br /><br />These forces and changes will cause CEOs to ask supply management leaders to take on a broader, more strategic mission, to be evaluated on a more comprehensive set of goals and to deliver a higher level of performance. </p><p>Supply management will be expected to deliver more innovation from suppliers, contribute more broadly to revenue generation, anticipate and monitor supply risk to ensure business continuity and expand the breadth and impact of cost management efforts.<br /><br />These are among the key findings of the global research study, &ldquo;Succeeding in a Dynamic World: Supply Management in the Decade Ahead,&rdquo; by CAPS Research, A.T. Kearney and ISM.&nbsp; </p><p>Paul Laudicina, A.T. Kearney managing officer and chairman of the board, presented the results of the study in his keynote presentation today at the ISM International Supply Management Conference in Las Vegas.<br /><br />In his comments, Laudicina pointed out that in the future, the success of supply management executives will be based on how well planning and execution is undertaken in seven critical areas:<br /></p><ul><li>Developing forward-looking category strategies</li><li>Engaging, developing and managing key suppliers</li><li>Designing and operating multiple supply networks</li><li>Leveraging technology enablers</li><li>Collaborating internally and externally</li><li>Attracting and retaining supply management talent</li><li>Managing and enabling the future supply organization globally</li></ul><p>The study results clearly show category strategies will strongly affect geographic sources of supply. </p><p>Survey respondents noted China, India, Eastern Europe and Brazil will continue to gain in importance as sources of supply over the next five years, while sourcing from the U.S., Canadian and Western European markets will decline. </p><p>North American companies will continue to look across the Pacific for supply from China and India, and European Union respondents will buy more from Eastern European sources. </p><p>Although North American companies expect to decrease local sourcing by 20 percent from 57.3 percent to 45.8 percent, Western European companies will reduce local sourcing by 42 percent, from 43.8 percent to 25.6 percent.<br /><br />The study findings also demonstrated that a decade-long run that saw the advantage in most supply markets take a pronounced tilt toward the buyers is coming to a close. </p><p>Although this cost-focused approach made significant contributions to the corporate bottom line, the new challenge will be to identify suppliers that offer goods, services and/or expertise that can contribute to the top line. </p><p>When evaluating the portfolio of current or potential suppliers in advance of a sourcing effort, consideration will have to be given to the value-added assets, capabilites and benefits that a supplier offers above and beyond price and specifications.<br /><br />Taking on such relationships will require a shift in mindset away from traditional sourcing, which seeks to exploit buying power, toward a relationship management focus that seeks to create competitive advantage. </p><p>The former fixation on unit price and cost savings will give way to a value focus that considers innovation, value chain optimization, strategic cost management, business continuity and operational excellence.<br /><br />Achieving major gains from supply management in the future also will require a much higher level of collaboration both internally and externally.<br /><br />To ensure a steady stream of innovation, companies will need to improve their integrated product and service development processes. </p><p>Supply management will play a make-or-break role by overcoming internal and external behavioral barriers and helping to integrate suppliers into the process. </p><p>Finding the right suppliers will prove to be just the start. Other keys will include strengthening relationships with the company&rsquo;s own research and development, engineering and marketing organizations; applying technology to enable process integration and ensuring mutual protection of one another&rsquo;s intellectual property.<br /><br />To gather firsthand views for the 2007 study, chief procurement officers and other high-level supply chain strategists participated in focus groups, conference calls and interviews. </p><p>Focus groups were held in Atlanta, Chicago, Dallas, New York, Milan, Madrid, Amsterdam, Sao Paulo and Mexico City. </p><p>Additionally, companies completed an online survey with five key areas: forces of change; business strategy elements; supply mission, goals and performance expectations; supply strategies, processes and enablers; and supply management metrics. </p><p>A total of 113 supply management executives participated in the meetings and conferences, and 99 companies completed the survey. </p>

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