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No Finish Line: A View of the Future for Purchasing and Supply

Purchasing and supply management affect much more than material and service flow, and current trends cast their role and importance in sharper focus than ever. Research to examine key change drivers for trends in organizations of all sizes and in all industries has been undertaken as a joint initiative of the Center for Advanced Purchasing Studies, the National Association of Purchasing Management, and A.T. Kearney, Inc. Theresearch performed in 1998 was to identify trends most likely to have major implications for the purchasing and supply management profession and to develop ten-year forecasts (for year 2008), based on those findings.

Dr. Joseph R. Carter, D.B.A., C.P.M., who serves as National Association of Purchasing Management Professor and Chair, Supply chain Management Department at Arizona State University, explains the approach and components of the research. How changes in the competitive landscape affect CEO priorities was examined; the manner in which purchasing and supply organizations align themselves with organizational objectives; and the impact of technology, globalization and new competitors was examined.

Eighteen industry trends were identified through the research. Together, Dr. Carter says, “they reflect an endless quest for a finish line that does not exist. Only continuous improvement is considered a sustainable philosophy today. Technological innovation, as well as integration and simplification throughout the supply chain dominate these issues.”

Major Issues and Predictions Drawn from the Findings: Strategic Sourcing

.To provide for flexibility and maximize leverage, firms will be required to develop alliances that benefit both parties, and this will drive supply chain management initiatives. To facilitate the integration of cross-enterprise supply chains, purchasing personnel will be required to further develop strategic alliances with key supplier partners and key customers.A single cross-functional executive group will establish what work will be done internally and what will be outsourced. There most likely will be an unbundling of processes for those being outsourced, which will result in increasing the number of firms in some supply chains. Supplier/customer relationship management could be combined in one office or aligned to leverage relationship management knowledge. Management will likely focus on transaction elimination, outsourcing to full service suppliers and automation of the buy.

Companies will also create “virtual” organizations focused on specific customers and markets. As market-driven opportunities arise, companies will join together and commit resources to exploit these opportunities. The virtual organization of resources will dissolve as the product, market, or competitive opportunity changes.

Electronic Commerce

Security is currently viewed as a major inhibitor of Internet use. Once those issues have been fully addressed, Carter says that “purchasing transactions will explode on the Internet. Basic processes will be fundamentally changed by the way information can be transferred between supply chain members.” But it is predicted that the rapid change in technology and marketplaces will make it difficult to leverage purchases across a supply chain.

Supply Chain Partner Selection and Contribution

Lean supply chains will be a competitive strategy. Strategic cost management will be required, due to global competition, and supply chains will be increasingly forced to examine cost-improvement opportunities through cooperation and process improvements. Strategic purchasing competency centers will be established at dominant companies with highly trained personnel who will search for opportunities to achieve competitive advantage through supply chain partners. Resources will be increasingly shared between highly interdependent firms that rely on each other as customer/supplier in the supply.

Tactical Purchasing

Because activities such as ordering, quoting, and expediting will be automated and/or outsourced, head counts will be reduced. Structural purchasing organizations will not be eliminated; but the people who make up the group will change, as will their responsibilities. Companies will buy most non-tactical products and services under master contracts, some of which will be negotiated by consortiums that have leverage and buying expertise. Price negotiation will become more intensive because of greater price and cost visibility. All transactions, including selection and accounting, will be done over a secured Internet network.

Demand-Pull Purchasing

Although many are skeptical that demand-pull systems will ever be fully implemented, some forward-thinking firms predict that this will occur on a limited basis. The main challenge will be getting technological systems across key supply chain members to work together. Performance Measurement. Current trends indicate that efforts to design metrics that are very specific for particular supply chains will increase. This will increase the level of complexity involved in managing supplier evaluation and assessment systems. Some type of common performance metrics will need to be established in particular for supply chains in specific industries.

Complexity Management

Supply chains will form upstream and downstream from dominant companies. These companies will influence sourcing decisions and resource sharing throughout the supply chain. Management of the supply chains will be complex and require much relationship management. Joining and leaving the supply chain will become more difficult and complex actions. Complexity management will intensify, creating new challenges for procurement professionals.

Functional Specialist Personnel

To function effectively, purchasing and supply management goals will have to be more closely aligned with the strategic goals of the firm relative to specific value chains. The training for the staff will have to emphasize teaming and project management skills. Purchasing and supply management personnel will be called upon to operate successfully, under potentially different priorities as they move from one supply chain to another supply chain. This implies that purchasing and supply management staff will be more business-strategy oriented. Purchasing and supply management performance evaluations will be more closely linked to business goals of the entire supply chain.

The Surprising Timeframe

While not surprised at the research findings, Dr. Carter says he is very surprised by three things. The first is how quickly the findings are coming into fruition. “Given today’s speed of change and the speed of the impact of change, a four-year forecast might have been more appropriate,” Carter says. Secondly, he comments that “when we did this research, I felt the complexity of management issue was a distant dot. But the dot is getting larger very quickly. It is already a big problem that is being discussed in the media and in company boardrooms and is a very important issue.” Carter was additionally surprised that one issue did not arise in the research. He explains it as the problem of human capital and says, “I believe it will become a huge issue. How will companies find and develop people who will be able to take advantage of these trends and handle the complexities?”

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