Key Challenges of Tomorrow, Part III

In Part I, David Bush summarized the fifth installment of the CPO Agenda 2007 debate series – What are procurement’s key challenges in the next 10 years? that took place early this summer in Paris and featured a dozen procurement executives from leading companies in the region.

In Part II, after I added what was missing from a minimally complete list, I briefly defined what each of the concepts were and indicated I would tie them together in this post.

First of all, many of the key challenges of tomorrow will be the same challenges faced today. It will still be about knowing where your products are (visibility), risk management to prevent supply disruptions that are becoming all too common, SRM (supplier relationship management) to make sure relationships go smoothly, SPM (supplier performance management) to make sure the course gets corrected quickly if things go wrong, compliance to make sure regulations are adhered to, and the right talent to make it all happen.

And it will still be about having first-rate analytics to know what you’re spending on, and more importantly, where you’re over spending, kick-ass decision optimization to make the best award decisions when faced with multiple cost variables and constraints, applying best practices, accepting corporate social responsibility on the path to sustainability, and embracing outsourcing and group purchasing organizations to help you spend better.

Secondly, it will also be about continuing mastery of the emerging challenges that leading organizations are starting to face. The need to manage collaborative partnerships with strategic suppliers to reduce costs while increasing quality and decreasing turn-around time, the need to incorporate better strategic planning to make sure the procurement function is more closely aligned with the direction of the business and that procurement gets invited to key planning sessions, better change management to deal with the constantly fluctuating nature of business, markets, and consumer demands today, and the introduction of guided sourcing tools to help junior buyers make the right decisions on commonly sourced categories.

It will also be about accepting and mastering on-demand solutions that give you what you need, when you need it; open source principles, practices, and, when appropriate, software to make sure your organization stays current on best practice methodologies; and crowdsourcing to help you take advantage of the new talent pool of independent consultants and semi-retired graybeards that will be constituting a larger and larger part of the available workforce as time progresses.

Thirdly, it will be about embracing some of the radical new philosophies that are starting to enter the mainstream consciousness, but not quite yet a reality at most leading sourcing and procurement organizations. These philosophies include the securitization of capacity and material in advance as well as hedging in emerging energy markets, working with marketing and R&D to help shape demands to levels that lead to optimal profits, using scenario simulation to determine likely demands based upon different price-points and market directions, embracing the concept of the extended enterprise where you understand that your business is but a cog in a larger supply chain clockwork, and replacing your current ERP with a new ERP (SCRP) system built for the distribution supply chain.

Finally, it will be about innovation. It will be about doing things differently tomorrow than you do them today. As time goes on and businesses start to realize its not sales, marketing, and MBAs that ultimately determine their financial success but spend management that insures the business always spends less than the revenues it makes, they will be expecting a transformation of the purchasing function. Instead of the 1950’s paper pushing department that they always thought purchasing was, they will be expecting the 22nd century supply chain design center that spend management needs to become to truly take business to the next level. And even though it will involve everything I’ve discussed in this post and more, it is still anyone’s guess as to what spend management will ultimately be when the company revolves around the supply chain departments, and not the all-talk but no-walk marketing MBA’s that have been running the show for the last twenty years.

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