March 2016 | Commentary | Smart Moves

Three Keys to Global Supply Chain Prowess

Tags: Supply Chain Management, Logistics, Supply Chain

Thomas W. Derry is Chief Executive Officer, Institute for Supply Management, 480-752-6276

The world's increasing interconnectedness presents opportunities for supply management professionals to be more efficient and effective as they work to help companies achieve a sustainable competitive advantage. That same interconnectedness, however, poses three serious challenges that must be addressed if we are to continue to be successful.

  1. The ongoing security threat to companies' networks, computers, programs, and data. Cyberspace is hard to secure for three reasons: the ability of malicious people to operate from anywhere in the world; the linkages between cyberspace and physical systems; and the difficulty of reducing vulnerabilities and consequences in complex cyber networks, reports the U.S. Department of Homeland Security.

    Businesses around the world are attacked nearly 17,000 times each year, IBM Security Services estimates. While most of these attacks don't make it past a corporation's defenses, an average of nearly two attacks per week are successful.

    The risk is particularly onerous in supply chain management because companies routinely exchange sensitive corporate information with multiple suppliers around the world. It's difficult, if not impossible, to identify and manage risk across all suppliers.

  2. Finding the right talent. Procurement professionals are struggling with building the ideal team to work in a profession that has changed radically and continues to become increasingly more global and complex.

    Procurement has evolved from a tactical buying function to strategic supply management with responsibilities that directly impact corporate performance. Corporations now operate in many nations throughout the world, creating global supply chains. What intellectual skills are necessary to work in this environment? Is the supply management workforce diverse enough to be effective in a world of shifting geographies and emerging new markets?

    The supply chain team needs to have a blend of operational, financial, and even marketing skills in addition to the core knowledge of supply chain and procurement. The benefit of having a team with these skills is a collective and important voice at the executive level.

  3. Broadening the financial acumen of procurement professionals, which is inextricably linked to building the ideal team. The supply management group manages an average of 83 percent of a company's sourceable spend, according to CAPS Research, placing the function squarely in the spotlight as a key driver of profitability. Suppliers are an asset, not just a cost, closely aligned with a company's goals and objectives.

    No longer are supply professionals merely the "cost police" tasked with getting the best price from their suppliers for the department in which they work. Today they are much more strategic, focused on understanding the total business and identifying the best suppliers to help that business achieve its goals.

    This is best illustrated by the fact that the percentage of chief procurement officers who report directly to the CEO, or one level down from the CEO, has increased from 60 percent in 1999 to 82 percent in 2014, according to CAPS Research.

    Greater Opportunities

    Supply chain professionals have a stronger voice in their organizations than ever before. To become more interconnected and successful with internal and external stakeholders, they must address the challenges of managing the complex global supply base by preparing for security concerns, identifying preferred team member attributes, and developing a collective financial acumen.