Welcome back to this week’s installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I’ll be reviewing a whitepaper entitled “The Supply Chain: Your Recession Survival Kit?” from IBM, Oracle, and Supply Chain Management Review.
Now, I’m not reviewing this whitepaper for its great tips for supply chain success. Really, there aren’t any to find here. However, what I think is of value is that this whitepaper captures some shifting attitudes about supply chain management at a moment in time.
The recession is pretty much old news. And, based on how economists are responding to surveys, the recession will be over within a few months or quarters.
So will the end of the recession bring a change to supply chain strategy?
Let’s take a look at some excerpts from the whitepaper which capture some attitudes about supply chain management in a recession.
First, the whitepaper lists the top 7 corporate goals for 2009. As you might expect, “reduce costs/overhead” is #1. “Improve customer service” is #4. And “sustain revenue growth” is #6.
This order of prioritization fits wonderfully with supply chain and procurement departments. After all, our historical #1 focus has been on reducing costs. Right now, our historical core competency is aligned with senior management’s top priority. That’s a beautiful thing.
The whitepaper goes on to point out that “[c]ompanies not only plan to closely evaluate the relationships they maintain with their partners but also expect to reduce the number of vendors with whom they work.” Yep, supply base consolidation is another traditional focus of procurement groups.
But management’s attitudes and goals will changes as the economy changes, right?
What happens when growing revenues and reducing costs switch places on the senior management hierarchy of priorities?
Does that mean that procurement and supply chain management will lose their “teacher’s pet” status?
It could if you’re not careful.
Procurement and supply chain teams need to be agile. Their priorities must be in synch with senior management’s.
So while reducing costs and shedding suppliers may tickle management’s hot buttons today, how will you be supporting revenue growth when this recession turns into an economic expansion? How will supply chain management retain its new found value in the eyes of senior management?
That is what you should be asking yourself.
One aspect of recession-era supply chain management that fortunately can be immediately applied to expansion-era supply chain management is accurate demand planning. The whitepaper notes that organizations “possess a greater sense of urgency on critical decisions pertaining to demand planning. The current time period of the planning cycle is, on average, seven months, which is reduced from a year ago when the average timeline was nine months.”
The purpose of this contraction in the demand planning cycle was to be more in touch with changes in economic conditions so that inventory and production didn’t outpace demand. As the economy improves, companies are at the risk of demand outpacing inventory and production.
So, there will need to be a continued compression of demand planning cycle time. Those companies that do it well will have a significant advantage over those that fail to ramp up fast enough for economic expansion. There will be a lot of market share that is won and lost based on the quality of demand planning.
The whitepaper concludes with a section devoted to sales & operations planning (S&OP). I won’t review that here, but if you would like to get your own copy of this whitepaper, you can download it for free from Supply Chain Management Review’s Web site (registration required).
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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