Spend Matters welcomes a guest post from Zycus. This post is intended only as an example of historical procurement lessons from World War I. Zycus does not endorse any innovations/strategies that are unethical or immoral, nor does it support war or any nations engaged in war.
This year marks the passage of a century since World War I broke out. It was possibly the first strategic war ever fought, with multiple product innovations, use of modern arms and ammunition and with partnerships forged. Let’s look at one of the biggest operational exercises in the history of human existence and seek to gain procurement lessons from it.
It all starts with a motivated team
The UK war secretary developed and publicized the slogan “Your King and Country Need You” for the first 100,000 men to enlist in Kitchener's New Army. The call, launched on August 11, 1914, was answered within two weeks. If the CPO doesn’t have the right people with the right mindset, it would be difficult for procurement to win battles for its business. Attracting and inspiring the right talent in procurement is as important as it is for warring nations to inspire and retain loyal soldiers.
Grab your opportunity
When the British entered Basra on November 23, 1914, they wisely set about securing oil supplies in the Middle East needed to supply most of the Royal Navy. The British strengthened their foothold in the war, thus staying ahead of their enemies. Capturing critical resources early in the game is necessary, if the procurement organization wants to strengthen its supply chain and be at a greater advantage.
Even the Battle of Lens (Hill 70) highlights the benefits of securing scarce resources. Hill 70, being 15 feet higher than the surrounding landscape, dominated the battlefield. On August 15, 1917, the Canadian troops took the hill and held it against five German counter attacks. Allies lost 9,200 men, and the Canadians were successful in preventing German formations from transferring local men and equipment to aid in defensive operations. For a company, Hill 70 could be having the safest supplier mix that distributes your risks by covering you against delivery failures, against competitive supplier poaching, or against supplier bargaining power. It could also be the most convenient distance for your company between the factory and the market, a place where the raw material is abundant or a country with low labor costs. Procurement needs to highlight its Hill 70.
Mark your time of action
The British launched a night attack with all three of their armies on October 23, 1918. This time they advanced six miles in two days. If the British had launched the same attack during daylight hours, with just one army, they probably wouldn’t have achieved much success. Just as the British attacked when the sun went down, procurement teams can aim to source when prices go down. Knowing the best time to strike by tracking market indices is important!
Make your supply chain hole-proof
In the third and the final Somme Offensive on September 15, 1916, the British army failed to break through German lines and was unable to achieve the objective of cutting a hole in the German line by using massed artillery and infantry attacks. Positioned at the head of a company’s supply chain, it is a huge responsibility for procurement teams to make it formidable and immune to demand fluctuations, supply shortages, or market transformations. Suppose your procurement team sources material X from region Y, where there's a history of civil wars. In situations like this, a healthy supply chain would not only keep the company ahead in the race but also create a moat that would protect the organization against larger socioeconomic uncertainties.
Another example is the third phase of the Ypres Offensive, on October 9, 1917, when the British and French troops took Poelcapelle with considerable bombardments. But in the next 48 hours, 25 mm of rain fell on already saturated ground. The remnants of the explosives joined the downpour, smashing the drainage systems and turning the battlefield into a quagmire that was difficult to survive in. Natural disasters, such as floods, can create havoc for any organization. They can ruin the supplies leaving procurement highly vulnerable. Procurement teams, by nature, are vulnerable to external forces and must carry out adequate risk analysis from time to time.
Never compromise on quality
On March 10, 1915, the British Offensive at Neuve Chapelle began. Allied losses amounted to 12,800 in just two days. Some of the blame fell on the shortage and poor quality of British shells that tended to explode before penetrating. The phenomenon initiated the infamous "Shell Crisis" which soon created political fallout.
Procurement teams are undoubtedly under heavy pressure to source good quality direct and indirect materials. No wonder that shortage of supplies and quality issues can lead to major losses as consumers, both internal and external, would lose trust in the company. A good example that comes to mind is the horsemeat scandal that affected Europe a while back. The performance of your company is dependent on the performance of your suppliers, and quality is an essential factor linking the two, which today’s supply chain managers cannot choose to ignore.
Use technology for speed and economies of scale
German assaults reached the Somme Line on March 23, 1918, initiating the greatest air battle of the war, with 70 aircraft involved in a single battle. Whether it is analyzing your enterprise-wide spend, or keeping tabs on the performance of hundreds of suppliers, or holding a huge sourcing event, when done piece by piece and manually, it can prove to be time-consuming and even counterproductive! With advanced technology, procurement is in a lot better position to devise strategies and get higher returns. Perhaps this is what Germany tried to achieve by using 70 aircraft in a single battle. Indeed, within a few days in March of 1918, the ground was once more in German hands.
Be close to supplies and ensure a continuous flow
On November 22, 1915 in the Battle of Ctesiphon, 25 miles south of Baghdad, allies inflicted heavy casualties on the Turks, but were forced to retire to Kut due to lack of supplies. The Turkish soldiers gave chase and besieged the town. The battle of Ctesiphon highlights the impact of having low stock of required items. Building a good relationship with suppliers will ensure supply of essentials, even during times of emergency.
Yet another example of poor planning was seen in the reversal of German success over Allied territory in March 1918, as gradually its troops began to tire, having been on the move without relief for four days. Added to troop fatigue was the fact that the supply of food, equipment, ammunition and horse fodder became problematic, the farther the infantry advanced ahead of their supply columns.
Spend and source responsibly
One estimate had put World War I's total cost at $400 billion. That is said to be five times the value of everything in France and Belgium at that time. There has been a lot of criticism of the economic loss resulting from World War I. Even when a company spends, it acts on the money entrusted to it by its shareholders. And sooner or later it has to justify the spending to them. A responsible procurement department can help the company build a positive and trustworthy public image, leading to investor confidence.
Any business operation in today’s global economy has to take into account human rights, environmental implications, and health hazards. While sourcing products and services ,make sure that there are no blood diamonds on your bottom line.