What will a typical supply management organization look like in 10 years? It's hard to say for sure, but it likely will be complex, high-tech, supplier network-driven, and spread out across the globe. Companies will be asking more of supply managers -- they will be expected to contribute to revenue generation, innovation, collaboration, technology application and strategic management. A recent report co-authored by Phil Carter, a professor of supply chain management at the W. P. Carey School and executive director of CAPS Research, examines the challenges facing supply managers in the coming decade."/> Supply management: A changing industry in a rapidly changing world

Supply management: A changing industry in a rapidly changing world

November 07, 2007

What will a typical supply management organization look like in 10 years? It's hard to say for sure, but it likely will be complex, high-tech, supplier network-driven, and spread out across the globe.

 

Supply managers have always helped their organizations cut costs by negotiating favorable rates for procuring goods and services. But to survive and thrive in the coming decade, cutting costs alone will not be enough in most companies. Supply managers also will be expected to contribute to revenue generation, innovation, collaboration, technology application and strategic management. They should also become deft at packing up their households, because taking positions in far-flung locations around the world will likely also become part of their job description.

 

"Companies will be asking more of supply management going forward -- they will expect more performance, and want them to deliver more value to the organization. Supply management people have to be prepared for those demands," says Phil Carter, a professor of supply chain management at the W. P. Carey School and executive director of CAPS Research. The new report, "Succeeding in a Dynamic World: Supply Management in the Decade Ahead," examines these demands.

 

The comprehensive report, a joint effort between CAPS Research, A.T. Kearney and the Institute of Supply Management, surveyed executives in more than 260 companies from North America, Europe, Latin America and Asia/Pacific to gauge the challenges and opportunities the supply management industry faces in the coming decade. Carter's co-authors are W. P. Carey School supply chain professors Joseph Carter and Robert Monzka, and A.T. Kearney's John Blascovich, Thomas Slaight and William Markham.

 

 

Marketing to developing nations

 

Foremost among the challenges is dealing with the external forces that are impacting businesses and supply management. Not surprisingly, globalization -- and more specifically, the impact of China, India and other developing economies on the competitive landscape -- plays a major role. Global companies have been manufacturing goods and procuring services in low-labor-cost countries for some time now, but the pace of outsourcing is accelerating dramatically, and it will continue to increase during the next 10 years, says Carter.

 

"To survive and prosper, companies must embrace China and other developing nations both as sources of supply and as markets in their own right," he explains. With another 10 years of maturation, these countries will serve as potentially prosperous consumer markets -- a development which impacts supply management in profound ways. Product costs, of course, are a major concern. "To win in these developing markets, you have to get costs down to rock bottom," explains Carter. "You can't sell many $400 iPods in India, but if you can sell one for $100 or $50, the market is huge."

 

Western companies will not be able to fully market to these developing nations from their home bases, says Carter. Instead, they will require locations in those countries to properly source the goods and services they need.

 

An exodus of high-level supply managers to foreign outposts has already begun. IBM's Chief Procurement Officer is located in the company's Shinjin, China, office, Carter points out. For many companies, however, the long-term strategy is to develop people in these markets who know how to operate in that economy. "In the long-run, finding and developing local talent is cheaper and more effective than sending expatriates over. Local people know the economy and the local customs," Carter adds.

 

 

Collaborative software and complex relationships

 

Another force driving change in the supply management industry is technology. Breakthroughs in technology -- in both the applications used to enable and improve supply management, and technologies which have altered the way goods and services are provided -- are shaping the future supply management job function. Mirroring what has happened in the consumer space with web sites such as YouTube and MySpace; technologies that emphasize collaboration are the next wave for businesses in general and supply managers in particular.

 

"New developments in technology will help supply managers better collaborate on projects -- not just by communicating through email, but by experiencing full, rich exchange of information on a virtual, real-time basis around the world," says Carter. In addition, new information systems will help companies navigate the increasingly complex nature of business relationships -- where one company can be your supplier, your business partner, and your competitor all at the same time. The limitation today is that these IT systems do not always "talk" to one another efficiently, and different systems often define data in different ways. Carter expects these issues to be resolved within the next five to 10 years, and as a result, supply managers will need to shed any remaining tech phobias and embrace IT solutions fully.

 

Globalization and technology are expected to generate tumult, but one factor shaping the next 10 years of supply management is more of a wildcard: government legislation and regulation. This change driver will define some of the issues supply managers will have to cope with, explains Carter. New regulations and legislation aimed at environmental controls, supply chain security, financial reporting, and economic development are all factors for businesses to watch and consider.

 

In addition, regime changes and political instability in various regions remain looming issues. "We don't know what governments may do in the future" Carter says. "In general, trends are good for business and supply. China is slowly but surely loosening up controls, India's economy is opening up, and capitalism is growing in Eastern Europe as well. But with the Middle East, who knows what will happen?" In the globally and technologically connected future of supply management, these are all important considerations.

 

 

Staying afloat in a complex role

 

Supply managers find themselves faced with both an industry and a business world in constant flux. What can they -- and must they -- do to survive? Making sure their organizations are agile is one sure way to climb the corporate supply ladder, notes Carter. "Businesses need to be able to change adeptly. They will have to be able to shift people around, change jobs and reporting structures, etc., on very short notice," he says. For individual supply managers, this means the possibility of working in the United States one day, and in China or India the next.

 

This global wandering is but one reason the role of supply manager is destined to become increasingly complex in the next decade. In addition, once fairly simple buyer-supplier relationships have morphed into multiple supply networks -- a trend that will continue to accelerate. "The companies that supply managers do business with will change rapidly as global conditions, technology and markets change," says Carter. Keeping up with this change, and managing and developing an ever-widening net of supplier relationships will largely fall on the shoulders of supply managers.

 

"As companies continue to cut back to core processes, they will need more and more partners to help them fill out their product/service line. It falls to supply management to reach out to the supply base to determine which companies make good partners, and to manage those relationships," Carter explains. The pluralistic nature of companies operating on all sides of the supply chain -- companies you compete with you also partner with; you buy from them, they buy from you, points out Carter -- adds to the complexity. In addition, supply managers will have to keep up to speed on the rules and regulations of various different governments in the countries in which they do business or have supplier partners. "Ultimately," Carter says, "Supply managers will end up functioning more like business managers, not buyers."

 

But finding next-generation supply executives who are eager to tackle the challenge of learning how to collaborate, proactively develop value-added relationships with multiple suppliers, embrace high-tech solutions, and properly manage new supply organizations may be a big challenge for companies. Surprisingly, Carter says, the CAPS research has revealed a looming talent shortage in industry. Though procurement and supply chain management are becoming more integral to business and attracting more attention from C-level management, the discipline will face a dearth of experienced, midlevel people in the next 10 years.

 

Several factors are contributing to this talent drought. Baby boomers are starting to retire, and many companies that downsized their supply management departments during hard times now don't have enough employees to fill the necessary positions. "They are scratching their heads, saying, 'Where will we find someone with 10 years experience who knows how to buy specialty chemicals?'" explains Carter.

 

"In many ways, talent management could be the deciding factor between success and failure for tomorrow's supply management organizations," he says. Companies that can attract and retain effective supply managers will have an advantage when it comes to facing the external forces driving such rapid change in the practice's processes and technologies.

 

For supply professionals themselves, Carter has a few words of advice for approaching the next decade in their industry: "Be attuned and ready to adapt to technology -- don't be afraid of change. And, be prepared to move and take overseas assignments -- with your current company and to land your next job."

 

 

Bottom Line:

 

By the Numbers: the Next Decade in Supply Management

Supply management in the decade ahead will be complex, high-tech and global, finds a new survey from CAPS Research. A quick numerical breakdown highlights some of the report's most impactful findings.

 

  • Eight external forces will affect all businesses:
  1. Global competition
  2. Mergers, acquisitions and supply market consolidations
  3. Increased governmental regulation
  4. Technology advances
  5. Customer and channel dynamics
  6. Increased product variety and shorter product lifecycles
  7. Social responsibilities
  8. Environmental responsibilities

 

  • Five business strategies will have the greatest impact on supply management:
  1.  Focusing on cost competitiveness
  2. Aggressively managing resources
  3.  Pursuing new revenue sources
  4. Targeting specific customer and market segments
  5.  Improving the level and speed of innovation

 

  • Four areas future supply managers will be expected to tackle:
  1. Delivering more innovation from suppliers
  2. Contributing more broadly to revenue generation
  3. Anticipating and managing supply risk to ensure business continuity
  4.  Expanding the breadth and impact of cost management efforts

  • Seven key strategies for supply organizations in the next decade:
  1. Developing robust and forward-looking category strategies
  2. Developing value-added relationships with suppliers
  3. Designing and operating multiple supply networks to meet the needs of specific market segments
  4. Leveraging technology for internal productivity and external effectiveness
  5. Collaborating internally across functions and externally with suppliers and customers
  6. Attracting and retaining supply management talent
  7. Managing and enabling the global supply management organization