Successful Revolution Needs Suppliers
ISE Magazine –Volume 49: Number 08
By Suman Sarkar

Supply chain and sourcing should be seen for what they can be: hidden tools for outperforming the competition. Unfortunately, most company’ leaders continue to ignore supply chain management and sourcing.

Stuck in yesteryear

We are entering a time of testing for business leaders: Those who can evolve will survive; those who can’t won’t. In an era when management will need to exploit every competitive advantage, leaders who continue to think of supply chains and sourcing only in terms of cost reduction will be at a serious disadvantage to leaders who learn to see them as potential drivers of revenue growth, innovation and risk reduction.

Increase revenue

Supply chains are critical to improve customer satisfaction. The companies can provide better customer service without breaking the bank by tailoring service levels to customer segment.

This can be achieved:

  1. By classifying customers by segments and by developing a menu of service levels
  2. By identifying service levels appropriate for different segments
  3. By developing a service model that is difficult for the competition to match
  4. By pricing it appropriately and finding a way for the customer to pay for the increased service.

Amplify alliance performance

Alliance relationships are similar to supplier relationships, intertwined but at arm’s length. Sourcing organizations have experience with deal negotiations and governance of these types of relationships. The sourcing organization can make alliances successful through transparent deal negotiation to develop a win-win agreement and effective partner engagement or ongoing relationship management.

Efficient operations reduce business risk

The supply chain and sourcing organization can help with managing overall corporate risk, not just risk in its respective sphere of control. There are eight steps to debottleneck supply chains:

  1. Reduce nonmoving inventory.
  2. Simplify ordering.
  3. Streamline the supply chain.
  4. Simplify delivery.
  5. Simplify planning.
  6. Simplify new product introduction.
  7. Simplify internal organization alignment.
  8. Simplify engagement with suppliers.

Increase retail success

A sourcing organization can, however, help store development in many ways. First, the sourcing organization can collaborate with design teams to ensure that stores can deliver the predicted sales-to-investment ratio. Second, sourcing can use a more strategic, bundling approach to develop long-term relationships that improve the hiring and use of general contractors and construction crews. Third, sourcing can review the design of store materials and leverage volumes nationally, significantly reducing costs. And fourth, sourcing can collaborate with construction teams to reduce the time taken to build stores.

Moving beyond sourcing

Sourcing organizations can improve profitability from areas that are traditionally kept out of their purview.

The sourcing organization can help develop analytic tools to improve marketing ROI and can negotiate better deals with marketing vendors.

Sourcing organizations can help companies outsource more intelligently. To reduce costs, it may make sense to bring some work back in-house, to unbundle some services, to use technology (rather than an outside provider) to manage a portion of the work and to use suppliers more efficiently.

Sustaining business excellence

To benefit from change, companies have to sustain it by driving toward excellence. The concept of excellence can be achieved with help from suppliers. Sourcing organizations have an important role to play in achieving excellence.

The sourcing team then finds the best supplier for that solution and strikes a deal. The fact is most business organizations don’t know what solutions they will need to compete in the future. As a result, businesses end up working with the wrong suppliers and get stuck in deals that don’t add value.

Nurturing change

A more aggressive management approach to supply chains and sourcing can provide a competitive edge to companies in a disruptive and fiercely competitive business world. Change is sustainable if it’s demanded and nurtured from the top. It would mean getting intimately knowledgeable about business, relying more on analytical tools than on past experience, focusing on collaboration with internal organizations and suppliers and changing old practices. Embracing new approaches will be the first step to doing things differently. Most supply chain and sourcing leaders are trained to be risk-averse.