The Big Picture: Seven Global Trends Driving the Supply Chain
Mark A. Crowder, C.P.M.
Mark A. Crowder, C.P.M., Supply Management Specialist, John Deere CWP, Loudon, TN 37774, 423/458-8462, firstname.lastname@example.org.
83rd Annual International Conference Proceedings - 1998
Abstract. Current research indicates that the trends driving change through the supply chain fall into four broad categories: The knowledge revolution; the integration of supply management; the greening of supply management; and a values-based infrastructure. The trends themselves include management of complex information, professional development initiatives, supplier/customer integration, integration of internal functions, cost-management through the supply chain, environmental impact, and an ethics infrastructure.
Introduction. As purchasing and supply management practitioners it is easy for us to become immersed in the tactical demands placed upon us. While we have an obvious responsibility to the tactical, i.e., urgent daily issues inherent in supply management, we have at the same time a responsibility to our respective employers and profession to understand and manage the strategic side, the "Big Picture." This presentation provides an overview of seven key trends which are emerging as driving forces within the supply management profession.
The Challenge. The following trends represent a synthesis of research to date. As this Conference Proceedings submission precedes the actual conference presentation by more than five months, these trends may be amended to reflect newest information available.
The trends described below are broad in scope. The challenge is to stimulate our thinking as supply management practitioners to reflect how we, and our organizations, fit into the competitive landscape. Whether these trends are the most significant remains a matter of debate. It is imperative, however, that we recognize the forces driving the industry in which we play a key role, and that we develop creative and timely response to these forces.
Overview: Seven Trends Driving Change. The following trends fall under four broad categories as listed below. Each is discussed in detail in the following section. Please note that the lines distinguishing these concepts are not clearly defined; by nature, each of these ideas overlaps and intersects with the others.
- The Knowledge Revolution:
- Management of knowledge and communications: fact-based decision making
- Professional development initiatives
- The Integration of Supply Management:
- Supplier development
- Integration of internal and external functions
- Cost management through the supply chain
- The Greening of Supply Management:
- Environmental impacts through the next millenium
- A Values-Based Infrastructure:
- A global ethics framework within the supply chain
The Knowledge Revolution. Twenty years ago the action of obtaining facts about competitors and suppliers consumed thousands of hours per year in large organizations. Today, companies at the forefront of supply management strategy are those who can wade through oceans of trivia and filter readily-available facts into meaningful knowledge. The act of obtaining facts has been replaced by the process of managing knowledge. Inherent in this process is efficient and effective communications through the supply chain, utilizing Email and internet communications media. Current research indicates that traditional EDI will be supplanted by secure intranet communications links.
Intellectual property will continue to be a subject of debate. Such concepts as "ownership" and "property" will be redefined in light of the knowledge revolution.
Fact-based decision making is replacing traditional negotiation methods. Rather than taking a spot price and demanding further price reductions, OEM purchasing organizations are developing complex databases of component target costs with which to base sourcing decisions. These professionals incorporate aggressive cost management with long-term supplier integration strategies, as will be discussed below.
An area of tremendous growth in recent times is the commitment that leading-edge firms are placing on staff professional development. Today, such firms require 40-60 hours per year of meaningful professional development coursework from supply management, finance, and engineering staff members. This strategy ties in closely with the concept that managing knowledge is the most significant single trait of the coming age in supply management.
The Integration of Supply Management. True customer-supplier partnership arrangements are rare even today. Most take the form of collaborative efforts such as joint ventures, strategic alliances, and long-term purchasing agreements. The rhetoric of "partnership" within the structure of the traditional arms-length relationship, however, is fast being replaced with true melding of cultures to streamline the supply chain as a single entity. A number of manifestations of this trend are surfacing: companies are continuing the growth of outsourcing those aspects of the business that are not "core competencies". Functions such as internal and external logistics are being performed on-site by outside companies ("co-habitation"). Drastically reduced cycle times are demanding that supply management professionals directly interact and influence marketing, engineering, and manufacturing functions. Some leading-edge companies are eliminating traditional office layouts for a more open concept in an attempt to integrate functions and eliminate the "tossing over the wall" mentality of work flow. Cost management is agressively pursued, from concept through production, with supply management leading the discussion of trade-offs (e.g., added cost for added marketability).
Supplier development will be a key trend in optimizing the supply chain. Just as top firms are recognizing the value of professional staff development, they are also understanding the need to develop key suppliers. Those firms with expertise in key performance areas who need assistance in developing enabling processes will ask for and receive expertise with the long-term view of aligning corporate goals. This is especially true for small disadvantaged and minority suppliers who can compete effectively long-term with such assistance.
The Greening of Supply Management. Within the global community, the United States is lagging behind in attention to environmental issues. In coming years, U.S. organizations will expend a great deal of energy in developing sourcing and production strategies that are responsive to environmental concerns. Much of the decision process will fall on supply management professionals, under the umbrella of "management of external operations."
A Values-Based Infrastructure. Perhaps the most difficult obstacle to overcome in the global supply chain is the vast array of cultural norms and ethical frameworks. One defining trend of the coming age, however, is for leading-edge firms to begin driving the process towards aligned ethical standards. Even though different peoples have far different frames of reference and have been brought up under quite different value systems, a global economy will necessitate the formulation of a generally accepted set of ethical norms akin to the push for ISO quality standards has swept the global quality management community.
Conclusion. The challenge is before us. Our first goal as supply management professionals is to recognize that the purchasing environment is radically different than it was even five to seven years ago. The next decade will bring change to an order of magnitude beyond our comprehension. How we plan for and adapt to the coming trends will determine our effectiveness in years to come.