Transforming Sourcing and Supplier Management: People, Process, and Technology

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This is the first in a three-part guest series by Michael Cross of Directworks.

Recently I got to spend a full day with the Spend Matters team. The knowledge and varying perspectives of Jason, Lisa, Pierre, and Thomas always help energize my thinking about sourcing, procurement, and supply chain. I find a lot of the conversation forward-thinking and based on deep market intelligence, and one topic that came up, one that really interested me, was the manufacturer of the future.

Most manufacturers will tell you that their business is changing faster than ever before. Nearly every aspect of the business, such as demand sensing, sales and marketing, new product introduction, sourcing, and supplier management, must evolve. Best-in-class manufacturers are looking at what needs to evolve from a people, process, and technology framework. I will discuss each component of the framework over the next few days.

As manufacturers work to transform their sourcing and supplier management processes, the first area they need to focus on is the set of skills their staff needs to master. Most manufacturers recognize that there is a skills gap on the operations side, but I would argue that the emerging skills gap in the back-office is even more significant.

The positions of procurement, sourcing, supply chain, and supplier management have become very strategic. There should be no more order taking, and your team needs to be able to show that they add significant value. Your staff must be good communicators who can manage upward and across business functions. They need to be very good at project management and data analysis. In addition, there are three specific qualities you need to look for and develop.

1) Judging trade-offs: Sourcing and supplier decisions are complex, without straightforward answers. For manufacturers, the decisions are about trade-offs, not finding the cheapest supplier. Your team needs to be able to build fact-based decision trees and understand the trade-offs that are in front of them. They must be able to communicate the pros and cons of each option and help the team come to the best overall decision. They also must understand all the different types of trade-offs to evaluate. Decisions are not made solely based on price and quality; rather, one must consider supplier risk, supply certainty, and company reputation, among other factors.

2) Early stage collaboration: Your staff will need to get involved earlier in the process, including stages where they may have been previously excluded. And to be accepted by others, they will need to show that they add value as strategic thinkers. Sourcing, procurement, and others need to get involved before final design decisions are made to allow for as many options as possible. They can do this by bringing deep knowledge of their supply base to the table. Suppliers often have great insights that should be used during the product design phase or even during an initiative to lower product costs. Early involvement can mean fewer change orders, more control over risk, and higher profits for your company as well as for the supplier.

3) Do more, better, faster: This might be the biggest challenge of them all. The “manufacturer of the future” must be able to accelerate sourcing cycle times. Simply put, you must do more, and do it better and faster. Evaluate various assessment tools that focus on each individual’s ability to handle a large workload and to multi-task. Also, look for people who can adapt to, or even lead change. Finally, seek out employees who are comfortable with using technology, as the manufacturer of the future will be looking to enable transformation through using tools and process re-engineering as well.

Tomorrow I will examine the second part of the framework for transforming sourcing and supplier management: process.

The series is based off Directworks’ new paper, A Manufacturer’s Guide to Transforming Sourcing and Supplier Management. If the topic of supplier collaboration is one that you would like to delve into further, join Pierre Mitchell and Directworks’ Stacy Leidwinger on next Wednesday’s webinar.

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