A recent survey from APICS and Michigan State University, “Creating Value through Procurement and Sourcing Efforts in Integrated Supply Chains,” examines ways that procurement and supply chain management professionals can optimize supply chain value.
“As an association serving today’s most talented and innovative supply chain management professionals, APICS aims to equip our community with the latest information about how supply chains are evolving,” says APICS CEO Abe Eshkenazi.
Collected from in-depth interviews with over 50 supply chain management firms around the world, the five fundamental strategies identified in the report are:
1. Understanding value – Most individuals recognized that low costs do not equate to the highest value, emphasizing that while cost reduction strategies are important, they are not the only approach for generating value. Respondents shared that there are many opportunities for supply chain professionals to impact revenue. For example, they can increase collaboration with suppliers, implement innovative technologies, improve product quality and enhance service offerings.
2. Creating strategic impact – Connecting supplier capabilities to customer requirements and developing value propositions that are unique and compelling is critical. Four components – procurement process discipline, leveraging buying power, strategic sourcing and engaging strategic suppliers – are required for procurement and sourcing professionals to create a competitive advantage.
3. Expanding relevant scope – The interviews illustrated that when procurement and sourcing professionals transcend traditional functional boundaries, value creation can occur – creating unlimited potential, increasing visibility and enhancing an end-to-end integrative process.
4. Facilitating co-creation – Many executives supported the idea that value is derived from the ability to combine knowledge and capabilities in new and compelling ways. Involving procurement and sourcing professionals in the early stages of the innovation activities extracts more value and allows both parties to jointly meet business goals, which provides vast opportunities for enhanced outcomes in cost, quality, delivery, design, etc.
5. Earning preferential treatment – In order to attract the best suppliers – those that have capacity and capability to co-create and drive higher levels of value, those that have the best talent, and those that have the best ideas – firms must learn how to become preferred customers. It is important to shift the relationships with key suppliers toward becoming your partners, rather than vendors.