Business Finance Tackles Global Supplier Management

Recently, Business Finance took an in-depth look at the broad topic of global supplier management (hat-tip: Pierre Mitchell, who is quoted in the article). The piece interviews over half a dozen experts on the subject and is an excellent primer on the topic -- especially considering that it's aimed at finance-types rather than procurement. It's full of useful anecdotes, not to mention practical suggestions for improving supplier management practices from a global perspective. As one example, an expert quoted in the piece refers to a recent "experience of a very large North American manufacturer to illustrate the magnitude of problems that distance between supplier and buyer can cause."

In this case, "The company moved significant manufacturing operations to an external supplier based in a low-cost region. The corporation followed a methodical transfer process, complete with detailed process control diagrams and specific performance metrics, to ensure that the supplier's quality assurance capabilities were up to snuff. Only 12 months after the supplier's operations were up and running did the company realize that no one had taken responsibility for overseeing the implementation of corrective actions." As a result, despite the investment in metrics, the factory "came to a standstill ... and the company lost tens of millions of dollars in value. It brought the company to its knees."

Rather than summarize the rest of the piece, I'd suggest taking a close read of it yourself. And then print out a copy and hand it to your CFO and controller to read it as well. Then hopefully they'll realize that it's not just procurement's job to identify low cost sources of supply but also to proactively manage the risks involved in global sourcing. Perhaps most saliently as the article points out -- and as Spend Matters, Sourcing Innovation, and numerous other sources frequently call attention to -- when supply chains become more dispersed, the chance of disruptions and other risks become magnified.

- Jason Busch

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