As always, the pace of change is unprecedented, traditional services continue to be delivered faster and cheaper than ever before increasing how many vendors are used by an organisation and for differing and new services affecting how large the supply chain has potentially become. It still remains that the most commonly outsourced services are either technical (information technology) or financial (accounting services) in nature. Consolidation activity and cost containment very much continues to be a top of mind issue for most organisations that we speak to.
Global supply chain resiliency has been tested by major events over the last 5 years such as BREXIT and COVID-19. The second being responsible for a huge increase in the number of home workers worldwide over the last 12 months causing an already emerging trend to hockey stick. Governing practises need to be updated and digitised to cope with this as it is unlikely to return to what it was previously.
All the while in parallel regulations are maturing, now becoming better defined across an increasing number of industries. The impact of this against all industries and verticals needs to be considered now and how it may affect internal operating models in the future.
There is an increasing amount of risk now residing outside of the boundaries of the organisation where visibility needs to be achieved through different means than the methods that previous generations used where the workforce and process beings used largely came under the control of the same management hierarchy.
It is now being recognised that Vendors, especially smaller more agile ones are able 3 to add much more value to an organisation if engaged in the right way. What is low value for even a small niche supplier can be of high value to their customers increasing the buyer’s agility and ultimately time to market. Performance and building fully integrated valued partnerships is what matters and no longer based on just the relationship of certain key individuals within both businesses. Everyone in the organisation working with or alongside vendors needs to be given the clarity of task and capability to succeed in capturing meaningful data points as they go.
The need to accelerate growth is now more urgent than ever. The old growth model – loosely based on the premise that a rising tide lifts all boats – is gone. In such circumstances, unlocking growth from within the organisation is essential and, fortunately, eminently doable. Companies that rethink and reinvent the way they manage procurement, vendors and supply chains have a significant opportunity to improve their bottom line.
Consultants McKinsey estimate that poor management of supplier performance is adding 10-20% to total costs in the contracted category. Most companies recognise they can do better: one study from the Massachusetts Institute of Technology found that 77% identified two of their three greatest procurement risks as ‘dependency on suppliers’ and ‘supplier quality problems.’ Historically, procurement has been regarded as a function that does, rather than thinks, yet any CPO who can argue credibly that they can add a percentage point or two to operating profit will grab other stakeholders’ attention.
McKinsey stated in their Next generation supply chain 2020 report that Supply chains of the future will need to have dedicated functional leaders, and companies will start to focus on the transformation of the supply chain through dedicated supply chain academies, and develop change agents to achieve supply chain excellence. How do you measure up to this today and more importantly how will you tomorrow.
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