It’s an exciting time to be involved in the Supply Chain and for Supply Chain jobs. Across every industry, every geography and every country there are advances in Technology, the Internet of Things (IoT), Industry 4.0, Artificial Intelligence (AI), Blockchain and more.
But none of this can function without Supply Chain professionals. Your expertise and experience are the backbone of developing the strategies and action plans for making these evolutionary and revolutionary improvements .
The theory is simple! If you can increase spend levels through centralized spend aggregation across entities then you increase your leverage in negotiations. This leverage should translate to lower costs and better terms and conditions. But there is a spend aggregation obstacle course to be overcome first.
These entities may be different departments or facilities within your own company. They may be different companies under common ownership. They may be disparate companies within an industry. Or they may be unrelated companies spanning many industries.
The benefits seem clear. So why is there so much resistance when it comes to trying to aggregate spend across these entities?
Indirect procurement of goods and services can be one of the largest areas of expenditure in any company. And the operational impact that the provision of Indirect goods and services can have on a company can be significant, either positively or negatively.
Yet the lack of attention and focus that Indirect Procurement is often given is inconsistent with the true importance of this area. Indirect Procurement takes a back seat to Direct Procurement unfortunately.
Everywhere you turn there is talk of a lot of very exciting technologies requiring Supply Chain investment. The Internet of Things (IoT), Augmented Reality (AR), Drones and Autonomous Vehicles, Robotics, Virtual Reality (VR), Artificial Intelligence (AI) and Intelligent Analytics are front and centre.
And all of these technologies have applicability for the Supply Chain in every business and in every industry around the world. The Digital Supply Chain vision is within our line of sight.
But most companies are still working with the same, manual, non-automated Supply Chains that they have had for at least the last decade. And they will continue to do so in the foreseeable future. They are faced with challenges which are going to impede technology investments to advance their Supply Chains going forward.
Doing business with suppliers located overseas or in another country can be an overwhelming and daunting task even for expert Sourcing professionals. But what if you considered Outsourcing Sourcing?
Recently a friend of mine asked me to have lunch with him and one of his associates. The other gentleman had invented a new product. He had a marketing plan. He knew what his cost point had to be on the product which meant that he had to have the product manufactured overseas.
But beyond that he had no idea on where to start to source his product.
For his entire career my Father worked in the field of Procurement. But the job titles that he had during his career alternatively included either the word Procurement or the word Purchasing. I seem to recall that one of his business cards included both words.
When I was young I thought I had a somewhat clearer understanding of what my Dad’s Purchasing job was. His job involved buying, negotiating, contracts, overseas travel, sourcing, suppliers, parts, services, managing, supplier qualification, product qualification, terms and conditions, quality issues and delivery problems.
But was that Procurement or was it Purchasing? Procurement sounded like a somewhat loftier and more sophisticated word than Purchasing but by the same token it also seemed like they were synonymous and interchangeable terms.
What exactly is Procurement? And what is Purchasing?
For a considerable portion of my career I have worked in the Manufacturing and Logistics/Distribution Industries. In these industries a segment of the Procurement organization is called Commodity Management, not Category Management.
However when I entered the Retail industry the group largely responsible for Procurement, amongst other things, was called Category Management.
At its core each group was procuring goods. But while there were shared responsibilities there were also key differences.
Supply chain collaboration is a hot topic today and no wonder: companies that collaborate effectively across the supply chain have enjoyed dramatic reductions in inventories and costs, together with improvements in speed, service levels, and customer satisfaction.
Supplier chain collaboration itself isn’t new. What’s new is that it’s taken on a much greater urgency and importance.
Gartner recently announced their Top 25 Supply Chains List. I always find it interesting to see the list, to see who came out on top, and to hear what their views are on prevailing trends.
But as I review the list, compare it to prior years, and consider the scoring methodology I do wonder whether the list in its current form continues to be relevant for identifying the best of the Supply Chain.
The Coronavirus Pandemic has quickly and severely disrupted Supply Chains of every kind around the world. Lockdowns have resulted in the temporary closure of Manufacturing and Distribution facilities and discontinuation of Logistics and transportation modes.
Additionally dramatically higher demand for household supplies (eg. toilet paper) and medical personal protective equipment have resulted in stockouts and shortages.
In many cases the use of single sourcing, or sole sourcing, Procurement strategies has limited the ability for Supply Chains to access alternate sources of supply and more rapidly support higher than normal demand levels.
As we progress through and past the pandemic, is it time for Procurement to adopt parallel Supply Chain strategies, such as dual sourcing, and limit or abandon single sourcing and sole sourcing?
Early in my career I worked in a department that was responsible for the design,testing, sourcing and procurement of packaging materials. It was a great experience and introduction to so many aspects of the Supply Chain.
But one day one of my peers was fired. He was responsible for negotiating with the packaging suppliers. As it turns out he was taking kickbacks. When that was discovered and verified he was summarily dismissed. He went over to the dark side.
I never got the precise details but I don’t believe he could have got more than a few thousand dollars for his illicit efforts. More importantly he got a black mark on his resume, and in his life, that he could never erase.
That was my first lesson on the do’s and don’t of Supplier Relationships.
Lots of things are happening in Supply Chain Management! Is Supply Chain immune from fake news?
The field is becoming more digital, with end-to-end planning and blockchain technologies transforming the way products are coming to market. It’s becoming more strategic, as companies integrate their Supply Chains and use them as a source of competitive advantage – instead of just a back-office function.
Larger societal changes are affecting the way companies are planning their Supply Chains of the future – everything from the looming arrival of driverless cars, to consumers’ demands that companies be more socially responsible. And the prevailing use of the term “Fake News“.
As we’ve chronicled on the Argentus Blog, it’s no secret that the world of Procurement is changing and fast. With automation, big data and burgeoning AI systems removing more and more of the profession’s “tactical” or “clerical” tasks, the Procurement report card is that companies are calling on their Procurement teams to be more strategic, more nimble, and more innovative.
They’re expecting their Procurement functions to deliver not just bottom-line cost-savings, but other sorts of value, adding to organizations’ overall competitiveness.
Procurement, you’ve come a long way, baby!
But a new survey of 200 C-Suite executives from a variety of industries and functions presents a rather dispiriting picture of the Procurement function today – or at least how it’s perceived.