Supply Management: Design of the Future
Over the years, global companies have experienced pendulum swings between decentralized and centralized organizational designs of their procurement/supply management groups. Lately, there has been a strong swing away from a decentralized design, a structure that makes it more difficult to leverage corporate spend, align with business unit objectives, share best practices and reduce supply costs. But a centralized design also has drawbacks: suboptimal regional purchases, increased risk of maverick spend, friction with business partners and slower reaction times to changes in supply or demand.
Enter the center-led design, which is becoming more steadily embraced by global supply/procurement organizations. It combines the strengths of centralized (strategic direction coordinated centrally) and decentralized (transactional execution coordinated locally or with business units) designs.
How is Your Supply Management Group Staffed?
The strategic role of the supply management group is growing, but at many companies, existing head-count levels and resources are unchanged. Supply management personnel as a percentage of all company employees (regardless of industry) is holding steady — 1.8 percent in 2016, 1.9 percent in 2015 and 1.7 percent in 2014.
On the Front Line of Managed Spend
Sourceable spend is increasingly being managed by supply management/procurement groups, and category employees are on the front lines of managing that spend. That growing influence gives an organization a more strategic approach, increased savings and more protection from supplier risk. It could also mean more investment in category resources and even new category employees. The average annual spend per category employee across organizations, regardless of industry, is US$124 million. How does your company compare?