The Signs of a Solid Strategy
Paul Novak, C.P.M., A.P.P.
More about Paul Novak
March 2006, Inside Supply Management® Vol. 17, No. 3, page 6
When you hear it often from successful executives, it's obvious: The best laid plans all have a familiar ring — alignment, measurements and validation.
It is one of the privileges of my job that I am allowed to sit in on many presentations made by chief purchasing and supply officers. Frequently, these are presentations that outline the strategy that they have developed for their supply management activities.
As I listen to these strategies, some things come readily to mind. First and foremost is that the plans with the best chance for success are those in which the plan is aligned with the business strategy. For example, when an American company wants to market its products as "Made in America," it seems logical that the supply management strategy is to source in America. But this isn't always easy. Some things just are not made here, or the best producers are outside of the United States. This situation demands that we review our supply strategy with a senior management team to determine how far we go in sourcing in other countries. We are also expected to know which parts of our suppliers' parts come from outside the United States.
Next, with regard to success strategy, is the creation of measurable objectives. These need to be carefully crafted to support the objectives of the strategic plan. We sometimes forget that you get what you measure, and that a plan with the wrong measurements is not very likely to succeed. We also need to align our measurements with our customers; too often we have measurements that work at cross-purposes with our customers' priorities.
One measurement that is both prominent and sometimes problematic is cost savings. We work hard and spend a great deal of energy on driving costs down. Often, what happens is that the CEO or CFO asks, "If you've saved all this money, where is it now?" The answer, of course, is that it was spent by various business units in other areas. That is, unless senior management takes control of the savings and decides where it should be applied. However, before senior management can take control of these savings and decide to possibly cut budgets or otherwise reallocate the savings, they have to be convinced that the cost savings is real. Our personal creditability plays an important role in this, but it's seldom enough. We require outside verification of these savings, usually from someone assigned from finance specifically to carry out this role.
The expectations placed on us as professional supply managers are daunting, but we can meet them. As we strive to meet ISM's mission to "lead supply management," we continue to create programming and products that address the toughest challenges you're facing today, as well as some of the challenges we think you'll be facing in the future. One of our most visible resources at your disposal is the publication you have in your hands now.
You may have noticed that this issue of Inside Supply Management® has a new look. Beyond its graphic changes, the evolved content inaugurates a focus on strategy and its implementation. We will tackle the issues I have mentioned here and many others as we go forward. We hope the magazine proves of value to you. Please send us your suggestions and comments; after all, we do this for your benefit!