The Future of Supply Chain Management
For example, according to a recent Wall Street Journal article, about three-quarters of the U.S. labor force was devoted to agriculture back in 1800; today, it represents less than 3 percent. And, at the end of World War II, manufacturing employed one-third of the work force compared to about 10 percent today. Americans are accustomed to economic transformation — are you?
My epiphany regarding macroeconomic change and transformation occurred in the late 1990s while working for IBM. After leading the offshoring of our tape storage manufacturing capability to Guadalajara, Mexico, I had the unfortunate experience of laying off 12 of 18 people and effectively sending U.S. jobs out of the country. This was my introduction to the world of outsourcing and offshoring, and it’s a trend that continues today. While the issues and drivers behind outsourcing and offshoring can be debated, my personal takeaway at the time was that, for better or worse, manufacturing-centric jobs were not the future. It was time to move on and adapt.
For my part, I moved on to lead a team of procurement buyers and sourcing managers at a leading software company in northern California. At our peak, we had about 10 buyers. Today, those buyer jobs don’t exist because they currently sit in India under the leadership of an outsourced service provider.
Similar stories pervade throughout the supply management profession. Outsourcing, offshoring and further divisions in labor will continue to be the norm. So, what are the implications for future supply management leaders?
Traditional entry-level procurement jobs (the buyer role, for example) are rapidly disappearing due to outsourcing and offshoring, labor arbitrage and the automation of entry-level processes. Other procure-to-pay roles in areas such as accounts payable and data analysis are following suit.
From a corporate employment perspective, the one role that has been historically safe is strategic sourcing. However, given the emergence of niche companies that make it their core competency to perform strategic sourcing — and even specific types of strategic sourcing (IT, telecommunications, energy and so on) — internal procurement and supply management organizations now find themselves competing with external entities that often can do it better and more efficiently. As a result, you’re probably starting to ask certain questions:
- From the organizational and client perspective, does the service we provide add or create value?
- Is our supply chain capability (sourcing, demand management, logistics and so on) rare? In other words, is there no other capability like it available in our organization?
- Are there alternatives to our capability — substitute capabilities, in other words — that will suffice?
The table below provides a framework for testing the strength of a business concept. It can also be used to ascertain the strength of your organization’s value proposition, as well as your personal value proposition. It asks, Is the service provided by your organization…
With challenges and change comes opportunity for those willing to anticipate it and adapt accordingly to the new circumstances of the profession. The need for more efficient and effective supply chains and value networks does not go away. In fact, with globalization and increased extension and fragmentation of supply networks, demand for those skilled in our profession is on the rise. In many leading organizations, business leaders are starting to ask procurement and supply chain leaders for more strategic contributions and services. That’s great news for the profession; however, we must be ready to step up and lead.
So, some of the natural questions we might ask include:
- How does our team up its game and value proposition to the organization?
- What does it look like to be strategic to the organization or company?
- What are the new skills sets (competencies) and mindsets needed for future success?
To answer these questions, we must first understand what our future operating environments might look like — where the puck is going. An anonymous procurement executive at a Fortune 500 software company relays this scenario: “Anything that’s not strategic is being put on the discussion block for outsourcing and offshoring. We divided tactical and strategic procurement into two parts and offshored the tactical component. Now, we’re even segmenting strategic procurement and determining what needs to be retained and colocated with the lines of business, and what work can be centralized in lower-cost locations.”
He went on to describe a future scenario wherein a new role might be born: the procurement business relationship manager. These individuals would interface with the business at a very strategic level and then feed sourcing activities back to the centralized sourcing operations teams. When asked what skill sets these business relationship managers will need, he replied, “They’ll look much like today’s sourcing managers, but they’ll be the cream of the crop — strategic thinkers and great communicators.”
Scott Beth, vice president of finance at Intuit, adds that sourcing and supply chain professionals need to examine each activity in their function to determine who is in the best position to add value. “If we understand the spectrum of our contributions and business need — from supplier-driven innovation, to early access to technology, to systemic process improvements that cross companies and organizations — then we can best align our talent and network of partnerships to deliver competitive advantage to the businesses we serve,” he explains.
While no one can predict the future, some assumptions about it can be made by examining the past, listening to what the thought-leaders are saying and observing where the tailwinds appear to be blowing.
The degree of change, complexity and speed in work environments has accelerated over the last 10 years more dramatically than in any other time in history. Whether you ascribe to Thomas Friedman’s “the world is flat” point of view or some other perspective, it is clear that our daily lives (work and home) have become much more complex and nuanced than in the past.
Given this degree of change, agility and adaptability will be key traits for supply chain leaders to cultivate if they hope to keep up with the accelerated pace of change. Static and slow-moving organizations will quickly lose their value propositions and be rendered either obsolete or shifted offshore to some low-cost country for efficiency purposes. If that happens, what are the implications for future organization designs?
The figure below is an example of a value network and a likely depiction of how future organizations will operate within a much broader ecosystem. The ability to manage the flow of value across this supplier ecosystem will require dynamic operating structures, strong interpersonal skills and the ability to think holistically and strategically.
A good parallel is to look at how military organizations structure themselves when agility and adaptability are keys to success. Two organizations that leverage value-network organizational designs in time of conflict are the Marine Corps and the Navy SEALs. Both are part of a larger, more static organization (U.S. Department of the Navy), yet are able to function very effectively through small teams and organizational structures that adapt as needed to ensure mission (client) success. Of course, the degree of agility and adaptability required will be a function of organizational strategy; it’s a question of appropriateness because every organization’s situation, or future, is unique. Nevertheless, the bottom line is this: Speed and agility will be keys for most, but never blindly apply others’ “best practices” to your own organization. In other words, it’s a leadership call.
Leadership will continue to be a highly sought-after trait in future supply chain leaders. Leadership, of course, is a bigger subject than time or space adequately allows us to address today. Even so, here are a few actionable points from which we can all immediately draw, beginning with a definition. One asserts that leadership begins where management science ends. This definition is great because it’s abstract — just like leadership. There is no black-and white approach; leadership takes on many permutations, but you know it when you see it.
There are four key traits of leadership by which you can assess yourself (current state) and plot a strategy to strengthen any gaps.
- Lead with courage. Leading and being a part of the change suggested here doesn’t come easy. Enter the leader who is willing to stand on principles, build strong coalitions and break the necessary glass when needed.
- Think end-to-end (systems thinking). Shift to a value network management point of view. In other words, shift away from the linear metaphors of traditional procurement or supply chain thinking toward a holistic, end-to-end (systems) point of view that sees the actions and reactions of decisions across a broader system (to include your supply network).
- It starts with your people. The people component of the organization trumps all other organizational assets. Invest in your most precious resource through training, education, empathy, mentoring and mobility. Further, don’t forget about the engagement of the people across your broader value network.
- Take some initiative. Seize the moment! The one piece of good news from the recent recession is that procurement and supply chain organizations have attracted the spotlight as companies have sought to impact the bottom line. Leverage this window of opportunity, and deliver on new, stronger forms of value.
Evolving from purchasing and supply chain thinking to value network thinking represents one of the profession’s greatest opportunities. That said, the opportunity is just that: an opportunity. We have no right of inheritance, so we must either seize the moment or it will seize us.