E-Sourcing Forum » Jim Varilek on Supply Chain

Jim Varilek on Supply Chain

January 30th, 2007 at 03:14am David Bush - Iasta

Recently, Supply & Demand Chain Executive ran an interview with Jim Varilek of Dow Chemical who opened up on what the supply chain function needs to do in order to ensure its seat at the executive table with it belongs.

In the interview, Jim Varilek made some key points:

As a function, we’re clearly driven by our corporate strategy. … We’re trying to get more business connectivity with the function. What I mean by “connectivity” is ensuring that we’re talking the same language as the business.

Having a strong supply chain is important for our existing business as it’s defined today. Clearly we’ve got a shifting competitive environment, and we have to maintain efficiency and cost advantage. … But there’s another element that’s becoming increasingly important, and that’s safety and security.

The challenges in elevating the importance of the function and having that seat at the table are that the skill requirements increase, the connectivity that you need to have with the rest of the organization increases and your accountability increases.

What I really liked about this article is that even though he didn’t say it, he clearly articulated the case for good e-Sourcing tools.

Tools can help you standardize on a common language across the business.
Tools not only increase your efficiency and help you optimize your award decisions (maintaining cost advantage), but they can also be used to collect safety and security information from all of your suppliers and supply chain partners to give you the visibility you need to insure you are meeting your corporate and governmentally regulated responsibilities.
On-Demand Web-Based tools can connect your global organization through a central portal, giving everyone the same access to the same information.
Tools can give you the insights and reports you need to demonstrate your value to the rest of the business.

Varilek was also quoted with the following:

You have to speak in terms of what’s going to bring value to the business. At the end of the day, companies are in business to make money. They are there to deliver a service or product to their customer base. If we always keep that in mind, then whatever we’re trying to do in supply chain, we have to create a value proposition. Because the supply chain doesn’t deliver value in and of itself; it delivers value through the businesses. And if we’re not effectively putting a value proposition in front of the businesses, we’re going to have a hard time getting that seat at the table ‹or, even if you have a seat at the table, you’re not going to get the influence. But if you can articulate and develop a value proposition based on the capabilities that you bring to the table as a function, if you can tell a business that you can help enable growth and create this competitive advantage versus another company, then you’re going to get people to listen. Or if you say, “I can optimize this supply chain and we can lower your costs by X percent and that will open up this whole new area and this whole new market,” that will get their attention. If you can create that value proposition, then you’ll get the recognition of what you can bring to the table.

All-in-all a great article and a great case for on-demand e-Sourcing tools!

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Entry Filed under: General, Interviews, Supply Management Best Practices, Technology / SaaS

1 Comment Add your own

1. Mark Usher | January 30th, 2007 at 12:51 pm

Yes, nice article. In addition to linking supply chain optimization to a “x% cost reduction” I would add that to really talk in the language of the CEO and CFO we should be linking procurement and supply chain directly to metrics such as earnings, cash flow,ROIC, and ultimately enterprise value.

Personally I think free cash flow FCF (=cash flow from operations + invested capital) represents one of the most unambiguous linkages to enterprise value. Using free cash flow also allows avery granular analysis of how procurement and supply chain can impact enterprise value through the FCF components of revenue (great quality and customer service), cost of sales (direct product costs), operating expenses (indirect materials), working capital (inventory) and fixed assets (capital equipment TCO). The end game is “board level scorecard” that tracks how supply chain is moving each of these enterprise value drivers. The other beauty of this approach is that the specific financial metrics of EPS, cash and ROIC all fall out of the FCF calculation.

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