Seven grand challenges for spend and supply chain management

RandyLittleson

If you follow a number of supply chain management blogs you’ve probably seen that there are a series of posts going out regarding the seven grand challenges for spend and supply chain management.  This was initiated by Michael Lamoureux at Sourcing Innovation.  Michael has a listing of all the posts there.  The idea was inspired by Gartner’s Seven Grand Challenges for IT over the next twenty-five years.

I’ve given this lofty idea some thought, solicited input from others here at Kinaxis, and came up with the following grand challenges (not a list of seven, but a list nonetheless of critical challenges).

  1. The struggle to connect outsourcing and lean.  Lean manufacturing requires a “synchronized” value chain.  Outsourcing makes that extremely challenging, especially if the goal is to maintain the lean state throughout that value chain.  Often companies only attempt to achieve a lean state internally and drive buffer inventory strategies at their sub-contractors (non-lean) to make sure they are positioned to support course corrections.  The benefits of both are seemingly clear, but how do the two interact?  Companies are plowing ahead with initiatives in each area, but do they have plans to make them work harmoniously?
  2. Being in control when you’re not in control.  Over the last several years, we’ve seen the pendulum swing for brand owners, from complete control of an integrated manufacturing function to a heavily (and in many cases, completely) outsourced model with globally distributed partners.  The initial driver for outsourcing was cost.  The problem of course is that with outsourcing came less control.  Their brand and reputation is on the line, but they don’t directly control the key aspects that impact quality, compliance, etc.  We’ve recently seen numerous high profile examples of where this has posed major problems.  On top of this, we’re seeing major changes in the cost structures that are impacting labor, transportation and other product and manufacturing costs.  A huge challenge for brand owners will continue to be balancing the issues of being in control when they are not directly in control of all aspects and to continually adjust to changing conditions “on the ground” that impact costs.  The ability to quickly take apart and rebuild supply chains to factor in these changing conditions will be key, while simultaneously building in the visibility, processes, controls and relationships to make it all work.
  3. Sustainability.  I do not believe, as some have argued, that this is the latest “hot topic” or fad, nor is it simply timely because of the political timeline.  I think these are real and serious issues that will only increase in priority on a global basis.  The challenges of designing sustainability into products is one thing, but one aspect that I think is a huge, huge issue hanging over this important topic is the lack of global standardization.  It’s tough enough to meet the needs of, say the EU, but when their standards are different than those in China which are different than those in the US and so on, you have a major issue.  I think we’re going to need some better global standardization to make huge breakthroughs here or the costs and overhead associated with these initiatives will prevent full adoption.
  4. The role of supply chain in a company.  I continue to believe that far too many companies are taking far too tactical a view on their supply chains.  Supply chain excellence is NOT a priority to most CEOs.  They are focused on revenue, profitability and compliance and view the supply chain as a tactical and operational necessity.  The reality is that as companies become more globalized both in terms of their operations and their revenue potential, the supply chain continues to take on a growing strategic role.  Supply chain risk management is a hugely important topic that needs to be led from the top down.  Failure to elevate the important and signifance of the role supply chain plays will continue to place companies at risk.
  5. Increasing volatility.  If you compare the environment/world you live in today vs. that of, say 5-10 years ago, I think most would agree that things are moving at a faster pace and customer expectations continue to climb while their loyalty is less.  Volatility is on the rise.  I see nothing on the horizon that will change this.  Think of how easy it is today for a startup in China, India, or you name it to compete with you on a global basis – in your backyard, with your previously most loyal customers.  It can happen to anyone seemingly overnight.  This means that customers are in the driver’s seat and are calling the shorts.  My sense is that most companies are not wired to win in this environment.  For years companies have been built around the mindset that we plan, then we execute.  If we can do this better than anyone else – strictly speaking from a supply chain perspective (not all other aspects of competitive differentiation) – then we will win.  That’s just no longer enough and I think the trend here will continue to accelerate and place even greater pressures on companies to rethink the way they approach supply chain management.  Dealing with increasing volatility is a very substantial challenge.

I hope some of these grand challenges are thought provoking.  Would welcome your thoughts as well.

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