FOR RELEASE: May 8, 2007
Media Contacts:
Clare Donnalley for CAPS Research
1-480-752-6275 extension 3007
cdonnalley@capsresearch.org
Jim Brown for A.T. Kearney
1-312-223-6220
jim.brown@atkearney.com
CEOs to Ask Supply Management to Take on a More Strategic Mission in the Decade
Ahead
Global Study Shows that China, India, Eastern Europe and Brazil will continue to
gain in importance as sources of supply over the next five years
Tempe, AZ, May 8, 2007 – A vast array of forces – including globalization, changing
demographics, shifts in consumer demand, resource scarcity, environmental pressures,
technology advances, governmental regulation and activism are reshaping markets,
industries and products. Companies must pay special attention to how these forces
will affect their supply.
These forces and changes will cause CEOs to ask supply management leaders to take
on a broader, more strategic mission, to be evaluated on a more comprehensive set
of goals and to deliver a higher level of performance. Supply management will be
expected to deliver more innovation from suppliers, contribute more broadly to revenue
generation, anticipate and monitor supply risk to ensure business continuity, and
expand the breadth and impact of cost management efforts.
These are among the key findings of the global research study titled "Succeeding
in a Dynamic World: Supply Management in the Decade Ahead" conducted by CAPS Research,
A.T. Kearney and ISM. Paul Laudicina, Managing Officer and Chairman of the Board
of A.T. Kearney, presented the results of the study in his keynote presentation
today at the ISM International Supply Management Conference being held in Las Vegas.
In his comments, Laudicina pointed out that in the years ahead the success of supply
management executives will be based on how well planning and execution is undertaken
in seven critical areas:
- Developing forward-looking category strategies
- Engaging, developing and managing key suppliers
- Designing and operating multiple supply networks
- Leveraging technology enablers
- Collaborating internally and externally
- Attracting and retaining supply management talent
- Managing and enabling the future supply organization globally
Category Strategies
The study results clearly show that category strategies will strongly impact geographic
sources of supply. Survey respondents noted that China, India, Eastern Europe and
Brazil will continue to gain in importance as sources of supply over the next five
years, while sourcing from the U.S., Canadian and Western European markets will
decline. North American companies will continue to look across the Pacific for supply
from China and India, and European Union respondents will buy more from Eastern
European sources. While North American companies expect to decrease local sourcing
by 20 percent, European companies will be making a far more drastic move away from
Western European countries.
Value-Based Relationships
The study findings also demonstrated that a decade-long
run that saw the advantage in most supply markets take a pronounced tilt toward
the buyers is coming to a close. While this cost-focused approach made significant
contributions to the corporate bottom line, the new challenge will be to identify
suppliers that offer goods, services and/or expertise that can contribute to the
top line. When evaluating the portfolio of current or potential suppliers in advance
of a sourcing effort, consideration will have to be given to the value-added assets,
capabilites and benefits that a supplier offers above and beyond price and specifications.
Taking on such relationships will require a shift in mindset away from traditional
sourcing, which seeks to exploit buying power, toward a relationship management
focus that seeks to create competitive advantage. The former fixation on unit price
and cost savings will give way to a value focus that considers innovation, value
chain optimization, strategic cost management, business continuity and operational
excellence.
The Importance of Collaboration
Achieving major gains from supply management
in the future will also require a much higher level of collaboration both internally
and externally.
To ensure a steady stream of innovation, companies will need to improve their integrated
product and service development processes. Supply management will play a make-or-break
role by overcoming internal and external behavioral barriers and helping to integrate
suppliers into the process. Finding the right suppliers will prove to be just the
start: other keys will include strengthening relationships with the company's own
research & development, engineering and marketing organizations; applying technology
to enable process integration; and ensuring mutual protection of one another's intellectual
property.
Study Methodology
To gather first hand views for the 2007 study, chief procurement
officers and other high-level supply chain strategists participated in focus groups,
conference calls and interviews. Focus groups were held in Atlanta, Chicago, Dallas,
New York, Milan, Madrid, Amsterdam, Sao Paulo and Mexico City. Additionally, companies
completed an online survey with five key areas: forces of change; business strategy
elements; supply mission, goals and performance expectations; supply strategies,
processes and enablers; and supply management metrics. A total of 113 supply management
executives participated in the meetings and conferences and 99 companies completed
the survey.
A white paper will be released by A.T. Kearney and CAPS Research in June 2007 with
a high level view of the 2007 study findings and a comprehensive report will be
posted to the CAPS Research web site in the fall of 2007.
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CAPS Research
is a nonprofit research organization founded in 1986 to provide leading
research to our strategic-minded corporate sponsors and to the public. Our mission
is to work in partnership with a global network of executives and academics for
the discovery and dissemination of strategic supply management knowledge and best
practices. CAPS Research is jointly sponsored by the W. P. Carey School of Business
at Arizona State University, and the Institute for Supply Management™.
A.T. Kearney
A.T. Kearney is a global strategic management consulting firm known
for helping clients gain lasting results through a unique combination of strategic
insight and collaborative working style. The firm was established in 1926 to provide
management advice concerning issues on the CEO’s agenda. Today, we serve the largest
global clients in all major industries. A.T. Kearney’s offices are located in major
business centers in 32 countries.
Institute for Supply Managment (ISM)
As the oldest and largest supply management institute in the world, the mission
of Institute for Supply Management™ is to lead supply management. By executing
and extending its mission through education, research, standards of excellence,
influence building and information dissemination — including the renowned monthly
ISM Report On Business® — ISM continues to extend the global impact of supply management.
ISM's membership base includes more than 40,000 supply management professionals
in 75 countries. Supply management professionals are responsible for trillions of
dollars in the purchases of products and services annually. ISM is a member of the
International Federation of Purchasing and Supply Management (IFPSM).