In what was (and is) one of the most popular series in the Procurement Insights' Blog’s history, the Dangerous Supply Chain Myths series was based on my review of this ISM, CAPS and A.T. Kearney Report that was originally released in May 2007.
Considered to be a breakthrough assessment of the purchasing industry at the time, I felt that there were several gaps in the study. What is important, and within the context of present day realities, what do you think. Do the key areas highlighted in the study still carry weight in the here and now? If not, what has superseded them in terms of overall importance?
Whatever your thoughts, I am certain that you will find this series interesting.
Here is the URL Link to the Dangerous SUpply Chain Series: http://wp.me/P4HrB-2Il
Succeeding Institute for Supply Management™ in a Dynamic Compiled by CAPS Research, A.T. Kearney and “ redictionisverydifficult, P especiallyofthefuture.” cover story —NielsBohr[ 24 ] InsIde supply management MAY 2007 www.ism.ws
In this special report, we share the results of a comprehensive survey concerning expected industry trends in the next few years. T en years ago, ISM initiated a groundbreaking research project to probe the future of supply management. The need for such a study was great, as many organizations, including ISM, were trying to craft strategies that would help them prepare for what was widely predicted to be a decade of great change. The new Internet technology was upon us, global trade was starting to escalate, new markets were opening up, and offshoring and outsourcing were gaining momentum. Supply management would be an integral component of all of these changes. The resulting 1998 study, The Future Ahead. Beyond the sponsoring of Purchasing and Supply: A Five- and organizations, many senior executives Ten-Year Forecast, was undertaken by and managers participated in focus a joint partnership of CAPS Research, groups, conference calls, interviews A.T. Kearney and ISM. It was well- and surveys (see the Methodology received, and garnered great visibility sidebar on page 27). The collaboration in the supply management community. with these knowledgeable people madeWorld Many organiza- it possible to define well-reasoned and tions used it as valid statements about the future that a platform from will be of benefit to the whole of supply which to begin or management. renew their strategy How do the results of this latest discussions. study compare to those from nearly In 2007, successfully peering into 10 years ago? In 1998, the 18 trends the future is even more important. Many identified were areas that companies supply management executives think the would work toward achieving during next decade will see even more upheavals the next 10 years. However, today’s than the last. Certainly, the events taking study speaks to the volatility occurring shape around us every day suggest that outside the walls of the company. Thus, big changes are afoot. Thus, it is impor- there’s urgency for companies tant for all organizations to take stock of their current strategies, at a glance the main points covered test them against a predicted future in this article are: world and take appropriate actions. • Identifying the influences of To better enable this effort, the external environment on CAPS Research, A.T. Kearney companies; and ISM again sponsored this • Exploring how companies will adapt to external influences; latest inquiry into the future • Analyzing the six critical supply — Succeeding in a Dynamic World: strategies for the future. Supply Management in the Decadewww.ism.ws MAY 2007 InsIde supply management [ 25 ]
Section 1: Influence of the external envIronment a to address the critical strategies highlighted domain of supply management and speaks to s supply management executives in the study. As the forecasts reveal, supply strategies that will likely be employed in the know, the global environment out- managers must react sooner than later to future to meet the challenges of external forces side the walls of the company can the external factors shaping our profession. and organizational strategy. be extremely volatile. Consider the effect that The forecasts in this report are divided Finally, it’s always interesting to go back global warming has on industry, and how that into three main sections: in time, and evaluate the predictions made affects the cost structure and environmental Section 1: Influence of external in the 1998 report. How accurate was that practices of firms. Beyond environmental envIronment; study in predicting the future? At the end of issues are economic, regulatory, and mergers Section 2: corporate change; this special report (pages 32 and 33), you and acquisitions trends that keep the external Section 3: crItIcal Supply StrategIeS. will find a summary of the highs and lows of environment unpredictable. How are supply management executives responding? that exercise. As you will see, some forecasts The first two are outside the direct control were spot on, and others missed the mark. As forces of change of supply management, but impinge directly physicist Niels Bohr’s opening quote corrobo- In the coming decade, companies will be upon it. The last section is within the direct rates, forecasting is a difficult art. subjected to many external forces which they do not control or manage. To survive, com- panies must react to these forces and incor- porate their impact into their strategies and the report Structure — be unpredictable and outside of the control of supply plans. Supply managers must also be cog- The study is divided into three separate but related management. How companies react to the external nizant of these forces and adapt their plans sections: environment impacts their business models and and actions accordingly. Take, for example, 1. External environmental forces; strategies, as well as their missions, goals and per- the following two areas — environment and 2. Corporate change; formance expectations. While supply management global competition. 3. Change in supply management strategies. may have limited control over the external forces and Environmental forces. Companies In this chart, the structural framework of the study how the corporate world responds to them, supply will experience pressure from many groups is provided. It begins by examining the forces that management executives can adapt their strategies to to be responsive and proactive to environ- are external to the organization. These forces may meet new standards in a changing environment. mental concerns. This pressure will come from their customers, consumers, share- holders, nongovernmental organizations and Research Framework governments. Companies will be expected to take action to mitigate global warming, to contribute to sustainable economies, to forces recycle their products and packaging, and to of change • Environmental • MA, consolidations mitigate the impact of emerging technolo- • Global competition • Regulations gies. Because the costs and benefits of these activities will be uncertain, supply manage- ment will follow the lead of the corporate corporate executives in the arena. change • Business models and strategies Global competition. The impact of • Expanding the mission, goals and performance expectations China on the world economy will con- tinue to increase. To prosper, companies must embrace China both as a market and critical Supply a supply base. This will be also the case, but management Strategies • Managing and enabling the • Leveraging technology to a lesser extent, with other developing future SM organization • Collaborating internally • Developing category strategies and externally economies such as India, Brazil and Eastern • Developing and managing • Attracting and retaining Europe. Global competition will drive the suppliers supply management talent • Designing and operating consolidation of U.S.-based companies into multiple supply networks fewer, larger companies that can compete on a global basis. Many traditional supply chains[ 26 ] InsIde supply management MAY 2007 www.ism.ws
will be disintermediated as new suppliers in The MeThoDologydeveloping economies learn how to financeand distribute goods, as well as manufacture. A s part of a joint research initiative, CAPS Research, A.T. Kearney and Institute for Supply Management™ explored the future of the supply management profession.Section 2: The outcome of that research is contained in the study, Succeeding in a Dynamiccorporate changeI World: Supply Management in the Decade Ahead. The research team’s methodology in n response to the external forces, cor- developing, compiling and reporting the results are detailed below. porations will analyze, develop and implement the appropriate strategies Reach of The ReseaRch — business changes drive? What might newto withstand the pressure being applied. More than 100 supply management market opportunities or technologies makeWhether it’s a short-term modification or executives participated in face-to-face possible?a permanent change, supply management meetings and teleconferences with theexecutives must make balanced adjustments. research team, and 99 responded to an e-survey — There were 99 surveysWhat strategies are companies exploring to e-survey. This wide reach gives great completed across a wide variety ofsustain and enhance their businesses in the credence to the validity and reliability to industries. The e-survey covered fivenext decade? And how are those strategies the conclusions and forecasts contained in key areas:influencing the overall mission and goals of this report. • Forces of change — The degree to whichthe organization? marketplace and competitive forces impact ReseaRch objecTive — The company business models;Business models and Strategies 2007 research objective: Update and • Business strategy elements — The The research inquired about what busi- extend 1998: The Future of Purchasing and importance of various business strategyness models and strategies companies would Supply: A Five- and Ten-Year Forecast with elements to the future success of companyuse over the next decade to respond to more companies participating and greater business models;external forces and new market opportuni- global representation. Those objectives • supply mission, goals and performanceties. The new business models will strive were reached in the following ways: expectations — The importance of variousto improve both the income statement and • Participation by North America, elements of supply mission, goals and per-the balance sheet. The following are busi- Europe, Latin America and Asia/Pacific; formance expectations toward supportingness strategies with major implications for • Design began in early 2006, study company business strategies;supply management in the coming decade: results released in 2007; • supply strategies, processes and Revenue. Companies will follow sev- • Several research methodologies were enablers — The importance of variouseral strategies to increase revenue. The most used, as follows: supply strategies, processes and enablersradical will involve moving up the value for achieving a companys supply mission,stream and becoming designers, marketers Direct Dialog — More than 100 goals and performance expectations. Theand systems integrators, leaving behind or CPO and other high-level supply chain degree of implementation of each strategyoutsourcing traditional part or component strategists participated in focus groups, was also reported;design and manufacturing. Manufacturers conference calls and interviews. The • supply management metrics — Expectedwill expand their relationship with customers research used direct dialogue with supply magnitude/direction of change in keyby offering a wider range of services to sup- executives to probe three key areas: supply management metrics.port their products (such as after-sales service • How will supply management evolveand support). Service companies will increase in the next five years? What changes Review sessions — Follow-uptheir portfolios of high-value services, and will occur to supply strategies, supply sessions were held with small groups ofoutsource or abandon low-value services. management processes and supply supply executives to hear the tentativeAnd finally, as suggested earlier, companies management enablers? major conclusions from the research basedwill enter emerging markets to find sources • Beyond five years, how might the exter- on the quantitative and qualitative data.of revenue growth. nal and competitive environments change These groups helped the research team Cost reduction. Global competition for businesses? What changes could result judge the validity of the predictions andwill mandate that cost reduction remain a for business models and strategies? fine-tune the conclusions of the study.key strategy for companies in the coming • A decade from now, what could sup-decade. Ongoing cost reductions will ply management look like? What majorenable companies to compete in developing transformations could external forces andmarkets and meet the competitive challengeswww.ism.ws MAY 2007 InsIde supply management [ 27 ]
organizations must also better integrate all 1. Develop category strategies; parties into the company’s new product and 2. Develop and manage suppliers; Certainly, service development process. 3. Design and operate multiple supply Contributions to revenue networks; the events generation. Supply management should seek out opportunities that can lead to new 4. Collaborate internally and externally; 5. Attract and retain supply management taking shape business models or revenue streams (for example, finding suppliers of complemen- talent; 6. Manage and enable the supply around us tary products and services that could piggy- back on their distribution channels). management organization; 7. Leverage technology enablers. every day Supply risk mitigation. Companies will face more exposure to a wider range Develop category Strategies suggest that of risks, with less predictable impacts in the coming decade. Extended global supply The importance of written and detailed category strategies will increase in the big changes chains coupled with distant, unproven (or even unknown) suppliers pose supply con- decade ahead. Firms selling and buying globally require category strategies that tinuity, reputation and intellectual prop- ensure competitive cost, quality, delivery are afoot. erty risks. Volatility of commodity prices, and overall value from suppliers. Future currencies and interest rates add to the purchases will be from fewer suppliers complexity. with more volume focused on preferred of new competitors from low-cost countries Cost control. Supply will further suppliers. Increased outsourcing and in their home markets. expand control into nontraditional areas, customer segmentation will require more Fixed assets. Companies will pursue such as facilities management, legal, adver- effective strategies. The following are a variety of strategies to reduce fixed assets tising and contract manufacturing, by elements critical to the success of those and then make the remaining assets as effi- consolidating and leveraging corporate- strategies: cient, flexible and mobile as possible. This wide volumes. Pressure will intensify to A detailed category strategy will allow them to respond to changes in deliver higher cost savings faster, espe- development process. The category customer demands and sources of supply. cially following acquisitions or mergers. strategy development process must focus on Concomitantly, companies will continue Maximizing value from expenditures forces the overall value chain for goods and ser- to reduce working capital requirements greater standardization, tighter manage- vices over a three- to five-year time frame. and increase cash flow. ment of specifications and demand, and The strategy development team must: more focus on total lifecycle cost. • Understand customer requirements; missions, goals and • Conduct detailed industry analyses, performance expectations including competitive benchmarking; Tomorrow’s supply mission and goals Section 3 • Develop cost models; will be broader and more tightly linked crItIcal Supply • Establish value-stream mapping; to the strategic objectives of the busi- StrategIeS • Develop creative, worldwide strategy f ness. Performance expectations will be to or supply management execu- alternatives; deliver current performance and position tives, the strategies they develop • Execute based on detailed implementa- the supply base to support the future. and implement are influenced by tion plans; To achieve that, supply management two sources — the environment external • Adequately measure results; executives must focus on several supply to the organization and the internal cor- • Engage executives, customers and chain enhancements, such as the porate environment. As companies react suppliers. following: to changes in the external environment by Cross-functional team More innovation from suppliers. Fully modifying business models and missions effectiveness. Full, cross-functional repre- leveraging the capabilities of existing suppliers and goals, supply management must adapt sentation and effective teaming is required. is just the beginning. Other steps include its supply strategies accordingly. In the Supply has reduced cost and improved finding suppliers in related industries/tech- coming decade, adaptation may be required performance through negotiation, volume nologies that can adapt their ideas and capa- on several strategic fronts. The following aggregation and contracting strategies. bilities to a new setting, or use nontraditional seven areas are explored in detail next (each However, to maximize gain in the future, sources of innovation, such as design houses with corresponding elements critical to its category strategies must involve various or university researchers. Supply management implementation): functions. Future strategies will increasingly[ 28 ] InsIde supply management MAY 2007 www.ism.ws
focus on demand management, specifica- Gaining value from strategic the work streams or processes with whichtion changes, outsourcing, upward system relationships. Improving working rela- buyers and suppliers interface and modifymigration, leveraging networks of tionships with strategic suppliers has also to human behavior.suppliers, complexity reduction and been identified as one of the most impor-revenue-loss risk mitigation, all crossing tant future strategies, with a significant Design and operate multiplefunctional boundaries. gap between current implementation and Supply chain networks Data availability and accuracy. future importance. To achieve differential Diverse supply chains will be needed toGlobal databases of spend and supplier value from suppliers, firms will have to support competitive priorities. Meeting theperformance are required. Global strate- focus on achieving the position of preferred needs of developing economies will requiregies require worldwide data, common customers. This will require changes in companies to find domestic partners tocategory code, accurate spend data bypurchase item, supplier and user location,and supplier capabilities and performanceinformation. Relative Importance and level ofDevelop and manage Suppliers Implementation of 105 supply Improving the overall supply base andincreasing value achieved is critical to sup- management strategiesply’s value proposition in the decade ahead.Effectiveness in supplier management, high 5compared to competitors, will contribute (2.57) Medianto competitive advantage in cost, quality, high future high future importance,delivery/responsiveness, technology and importance, low high implementation nowinnovation achieved. The following exam- implementation now (42 strategies)ines strategies around that initiative: (12 strategies) Establish supplier development 4 Degree of Importancestrategy. Supplier-focused strategies suchas supply-base reduction, longer-termcontracting, increased volume to suppliers (3.74) Medianand negotiation have led to price and cost low future low future importance,reductions. In the future, supplier seg- 3 importance, low high implementation nowmentation, sourcing in emerging markets, implementation (11 strategies)requiring a greater role by suppliers in cost nowreduction and innovation, and improved (40 strategies)working relationships with suppliers willtake on increasing importance. 2 Shrinking supply base. Even thoughsupply bases have been reduced, firmsindicate further reductions of 51 percentof suppliers of direct goods and 77 percentof suppliers of indirect goods and services 1 2 3 4 5as firms continue to segment and identify lowtheir most important future suppliers. Building capabilities into the low level of Implementation highsupply network. In addition, effectivesupplier management requires moreattention to establishing the correct E-survey respondents rated the importance of more than 100 potential supply strategies to theirnumber of suppliers with required cur- company’s success by 2012 and the degree of implementation today. Individual strategies were groupedrent/future capabilities in correct locations into four types based on the relative importance and relative degree of implementation for each. Theworldwide to support a firm’s operations data indicated that the green quadrant, with its high future importance but low implementation of 12and markets. The role(s) of each supplier critical strategies, must be an area of focus for companies in the coming years. As seen in the chart,must also be specified. the medians for degree of importance (3.74) and the level of implementation (2.57) intersect to reveal which quadrants companies’ strategies reside in today.www.ism.ws MAY 2007 InsIde supply management [ 29 ]
supply chain risk. Companies will invest in suppliers is important, becoming a “pre- sophisticated models that will help detect ferred customer” will be key. Successful inherent risks, identify data needs, incorpo- companies will employ techniques such as rate individual assessments, assess costs and gain and risk sharing, helping the supplier benefits, and suggest risk prevention and develop its capabilities, co-investment in Increased mitigation strategies. In response, supply capacity and continually listening to the management will be required to develop “voice of the supplier.” outsourcing and implement sophisticated risk manage- ment strategies. attract and retain Supply and customer management talent collaborate Internally In the coming decade, supply manage- segmentation and externally The past decade saw tremendous strides ment organizations will take on more responsibilities and higher-value roles. will require more as companies strengthened their supply management capabilities and drove aggres- Success will hinge on whether an orga- nization can attract and retain individuals effective strategies. sive sourcing improvement programs. However, major gains from supply man- with the skills and capabilities the future demands, by doing the following: agement in the future will require a much Identifying needed skills and higher level of collaboration both internally capabilities. Individuals will need deeper and externally. Collaborative value creation supply market knowledge and more exten- will have to advance beyond just sourcing sive process knowledge. Broader business execute order fulfillment and delivery. The excellence to include the following: knowledge and multidiscipline experience final links of the supply chain will be tai- Multilateral collaboration. Com- will be a must, with foreign language skills lored to each developing market. To meet panies will increasingly expect suppliers and international experience also impor- the demands of small-market segments to collaborate with one another, as well tant. Other critical skills are leadership, without driving up costs, companies will as with the company. Emphasis will shift innovation and collaboration abilities. employ modular designs, postponement, from bilateral actions to improve how the Evaluating talent. Competency maps outsourcing, alternative transportation company buys and uses a particular item, will formally define both current and modes and warehouses, and creative part- toward multilateral actions to improve how future needs. They will be the basis for nering, such as the following: the company’s end products are designed, rigorous skills assessment and testing Using modeling techniques to produced and delivered. of current staff and potential internal evaluate strategy costs. Companies will Integrated product development. transfers or new hires. Talent succession aggressively manage supply chain costs. To keep the innovation pipeline filled, planning will be more important, as supply Fixed assets will be reduced as much as companies will need to improve their inte- organizations lose knowledge and experi- possible to reduce costs and increase flex- grated product and service development ence to retirements and recruitment efforts ibility. On-demand service will be a pre- processes. Supply management will have a by other companies. ferred model. Cost drivers will be tracked make-or-break role to play by overcoming Developing and retaining talent. and managed across trading partners. Cost the internal and external behavioral barriers, Companies will need a multipronged management over product lifecycles will be and helping to integrate suppliers into the strategy to acquire, develop and retain modeled and managed. Major investment process. Finding the right suppliers is just individuals with the needed skills and in new technologies, such as RFID, will be the start. Other keys will include strength- competencies. Recruiting externally for made to reduce inventory and distribution ening relationships with the company’s own industry expertise and/or supply manage- costs and help speed products to markets. RD, engineering and marketing organiza- ment expertise, transferring in industry/ Lean practices, Six Sigma and total quality tions, applying technology to enable inte- domain experts from other departments, management will be the norm in all supply gration of the process and ensuring two-way campus recruiting, ongoing training of chain activities. protection of intellectual property. their own staff and individual career path Building capabilities to “Customer of choice” positioning. development are all part of the mix. Fierce accommodate risk. Risk will be an over- In some supply market segments, capacity competition for talent will drive compensa- arching concern in designing and managing constraints, consolidation and attention tion and reward packages upward. supply networks. Global supply bases and to profitability will drive suppliers to be Managing the future workforce. markets, lean practices, increased com- more selective about which customers to Globalization, demographic shifts and plexity and tighter coupling will increase work with. Where collaboration with those greater cross-organizational collaboration[ 30 ] InsIde supply management MAY 2007 www.ism.ws
will create a more diverse, distributed practice experts. Those practices and and internal systems. Achieving that willworking environment. A key challenge processes include the following: involve the following:for leaders will be to manage and motivate Integrating the management of Internal enterprise-wide manage-individuals and teams across functions, functions. Organizations will find value ment of supply. Companies will continuegeographies, cultures and generations. in integrating separate functions in the to evolve toward greater ease of access to decade ahead. In some organizations, internal data sources, overcoming supposedmanage and enable the future supply management will be embedded barriers of multiple ERPs and nonstandardSupply management organization with a supply chain organization that data definitions. Increasingly, routine pur- In the next decade the center-led orga- includes operations, distribution and other chasing activities will be performed by users,nization will continue to dominate, but functions. In other organizations, CPOs while technology monitors compliance withchanging conditions will require modifying will have COO-type roles, managing demand management/procurement policies.organizational structure and relationships. inside and outside supply units. Within External supply chain visibility.Organizations will need to balance the many companies, supply management will Web-based tools will further enable theadvantages of centralized coordination with become the focal point for all cost control capture and sharing of operational informa-the need for local responsiveness. Some within the company. tion across the supply chain. Use of auto-IDsupply management organizations will Using technology to optimize the and remote monitoring technology willshift authority and leadership to local busi- business. Technology will give supply make it easier to track activities, locationsness units in order to build the leadership managers unprecedented access to internal and conditions. New tools will emerge forand develop the talent needed in offshore data that is standardized and rationalized monitoring and managing supply chain risklocations. Other organizations will shift from all business units. Web-based tools across multiple tiers in the supply chain.authority and responsibility back to stra- will give access to information from across Internal and external collaborationtegic business units as the pressures on the supply chains. Collaboration tools will tools. Collaboration platforms willcommodity prices attenuate. Best practices link internal and external partners to sup- link internal departments and externaland processes will be embedded in tech- port product design and strategic sourcing. partners for new product development,nology, diminishing the need for center-led Metrics. Companies will develop mea- design changes, and operating plan and sures that directly link supply management schedule changes. Systems will provide performance to company and business unit integrated data management (for example,ReseARch TeAm — strategies. Additionally, companies will product data management, CAD, RFx andThe research team was comprised of the develop total cost models and predictive the like) with 3-D definition, documentfollowing individuals: metrics to help guide strategic sourcing and management and collaboration capabilities. supply chain decisions.• phillip l. Carter, dBa, executive director for CAPS Research and professor of Supply Chain Management, Harold E. Fearon Chair in leverage technology more Data on the Way T Purchasing, W. P. Carey School of Business at When e-commerce emerged a decade his article presents only some high- Arizona State University, Tempe, Arizona; ago, supply management professionals did lights of the study. Two more extensive not initially embrace it. Technology was reports will be forthcoming in the near• Joseph R. Carter, dBa, C.p.m., Avnet professor, department of supply chain management for supposedly too slow, too insecure, didn’t future. The first will be a white paper from the W. P. Carey School of Business at Arizona have enough foreign language coverage, A.T. Kearney, scheduled for June 2007. State University, Tempe, Arizona; was too impersonal, might be misused or The second will be a comprehensive report was just too much hard work to deploy.• Robert m. monczka, ph.d., C.p.m., director, strategic from CAPS Research, available at In the ensuing period, technology pro- sourcing and supply chain strategy research for www.capsresearch.org in July 2007. Both CAPS Research, and distinguished research and viders have overcome nearly all of these false barriers. The needed technology has reports will contain a more comprehensive ISM professor of supply chain management for the W. P. Carey School of Business at Arizona been provided; leading supply managers are set of forecasts plus an assessment tool for State University, Tempe, Arizona; using it, and using it effectively. Paradoxi- companies to score themselves on their prepa- cally, many CPOs still believe that they will ration for the future. Hopefully this preview• thomas slaight, vice president for A.T. Kearney, New York; need more and better technology enablers article has sparked your interest in reading in the future. The remaining task is a man- both of these forthcoming reports. Ism• John d. Blascovich, C.p.m., vice president for agement and leadership task — to over- A.T. Kearney, New York; come concerns about confidentiality, legal This article was completed with contributions from CAPS Research, A.T.• William J. markham, principal for A.T. Kearney, security, misuse by suppliers or customers, Kearney and Institute for Supply Management™. To contact the authors or Chicago. and how technically to integrate external sources mentioned in this article, please send an e-mail to firstname.lastname@example.org MAY 2007 InsIde supply management [ 31 ]
lookingbackonadecadeofsupply managementtrends,it’sclearwhysomewere moreprevalent,butthatdoesn’t Where maketheothers anylessimportant. We ended Up By John Yuva i n 1998, a study unlike any other in the the DecaDe’S DynamIc trenDS supply management field was released by CAPS Research, A.T. Kearney and tactical purchasing. Such tactical purchasing activities as ordering, Institute for Supply Management™. quoting, expediting and the like will be automated and/or outsourced and head- Entitled The Future of Purchasing counts will be reduced. Selected low-value, noncritical, standard commodity and Supply: A Five- and Ten-Year Forecast, the purchases are likely to be outsourced to full-service providers. The reason? study revealed 18 initiatives that were predicted Companies are focusing on their core competencies and strategic purchases. to have a profound effect on the profession “Tactical purchasing has clearly shifted into the hands of the users, with more over the next several years. Nearly 10 years and more companies having requisition-to-pay systems to enable it. Many com- later, an evaluation of how these initiatives panies saw pressure to reduce headcounts in purchasing departments, but that was affected supply management reveals that many because of general downsizing in business, and not necessarily because consortia and third-party purchasing enabled it.” of the trends had a direct influence on propel- — WILLIAM J. MARkHAM, principal for A.T. kearney, Chicago ling the profession forward, while others were less influential than expected. global supplier development. As companies globalize and establish What follows are summations of six trends operations in emerging markets, the companies’ world-class suppliers will from the 1998 report (divided follow them and grow their operations in those regions. When localized con- among the three most tent requires the development of a new supplier, the trend is for a joint venture dynamic and least influ- between a local and strategic supplier. A strategic issue related to this trend is ential), as well managing these joint-venture relationships. as reactions “With continued globalization, new marketplaces, stretched supply from the current chains and limited best-in-class sources of supply, supplier development research team. has proven to be an absolutely critical part of any long-term category strategy. National governments in these emerging markets are becoming very active in requiring such local supply base investment and develop- ment. This has proven to be a good thing for both the multinational and the local population.” — JOSEPH R. CARTER, DBA, C.P.M., Avnet professor, department of supply chain management for the W. P. Carey School of Business at Arizona State University, Tempe, Arizona[ 32 ] InsIde supply management MAY 2007 www.ism.ws
electronic commerce. Because of an increasingly vola- Demand-pull purchasing. In an effort to become moretile marketplace, companies are realizing the need for speed in sophisticated with their customers on a part-number-by-part-both decisonmaking and product and service fulfillment. Thus, number basis, companies will invest and implement Internet, pull-combining the advancements of the Internet with the adoption of based systems that feed back into their systems and the systems ofenterprise-based systems will fundamentally change the way critical their suppliers. Such systems will be enabled by enterprise-basedinformation is transferred among supply chain partners. software and Internet technology. “As sometimes happens, consumer use of new technologies antici- “We predicted demand-pull capabilities beginning at the customerpates and exceeds business use. Consumers use the Internet to pur- level all the way to the supplier. But there are few companies that havechase, conduct market research, track orders and the like; meanwhile, enabled that kind of information transparency across the chain to wherebusiness comes up with all sorts of reasons for not deploying the tech- they can achieve a full pull. The reason may be related to some sys-nology. Some implementation has taken place — e-mails are pervasive, tems issues, skills issues and business model issues. I also don’t believeRFP responses are done over the Internet — but ubiquitous use has people have placed both the value proposition and the implementationyet to occur for forecasting and supply chain interaction. The Internet is certainty behind it.”too often used by businesses as an electronic fax machine.” — JOHN D. BLASCOVICH, C.P.M., vice president for A.T. kearney, — THOMAS SLAIGHT, vice president for A.T. kearney, New York New York virtual supply chains. As a secondary trend, the creation ofthe DecaDe’S unDerperformIng trenDS virtual supply chains will occur over the next 10 years. Why? To avoid the legal and contract perplexities associated with today’s cor-relationship management. The ability to have a flexible porate mergers, companies will enter into short-term alliances. Assupply chain, yet react to globalization, constricted resources and a result, resources usually tied up in merger activities can now beglobal competition will force companies to reexamine the rela- applied to global investment opportunities.tionship between their suppliers and customers. The management “We envisioned short-term, virtual organizations springing up toactivities of these relationships will be combined into one office to leap into the breach for particular issues, problems or opportunities, andensure alignment. The direct report for this office will be in the that just hasn’t happened. Companies continue to organize much likeexecutive level of the organization. they did 10 years ago. There haven’t been these virtual organizations “We predicted that relationship management would be further along set up that come and go on short notice, mainly because it’s too hard tothan it actually is, and I think part of the reason is that over this 10- get them formed, up and operating, and then shut down. Companiesyear timeframe, we had the advent of e-sourcing, e-reverse auctions and continue to rely on long-term alliances with suppliers and customers.”e-RFX, as well as some price movement in a deflationary way (prices — PHILLIP L. CARTER, DBA, executive director for CAPSwere declining across many industries because of available capacity as Research and professor of Supply Chain Management, Harold E.well as sourcing to emerging markets). And so the emphasis was placed Fearon Chair in Purchasing, W. P. Carey School of Business atmore on using strong competitive pressure to gain competitive prices.” Arizona State University, Tempe, Arizona — ROBERT M. MONCzkA, PH.D., C.P.M., director, strategic To review all of the predictions made in the full 1998 report, The sourcing and supply chain strategy research for CAPS Research, and distinguished research and ISM professor supply chain management Future of Purchasing and Supply: A Five- and Ten-Year Forecast, visit for the W. P. Carey School of Business at Arizona State University, CAPS Research at www.capsresearch.org. Additional information Tempe, Arizona about the new 2007 study also can be found at this Web site. Ism John Yuva is a senior writer for Inside Supply Management ®. To contact the author or sources mentioned in this article, please send an e-mail to email@example.com MAY 2007 InsIde supply management [ 33 ]