5. Focus on Cost Drivers and Business Impacts — It should not be surprising that understanding what makes up the costs of your supply chain is critical to obtaining value from strategic sourcing/supply chain activities. Creating a sustainable competitive advantage requires more than that. Costs are symptoms; cost drivers are the cause. As we saw above, creating a sustainable competitive advantage requires that you focus on causes, not symptoms. Across the entire supply chain, your sourcing and supply chain professionals have to know more than just the cost difference between two possible solutions to a specific problem. They have to be able to answer the question "Why is there a difference?" and do so in depth.
In addition, strategic sourcing and supply chain metrics have to be tied in some fashion to economic/financial results. That is why most world-class strategic sourcing/supply organizations either employ financial analysts or work in concert with finance people to conduct regular financial reviews of their operations. Doing so makes it possible to become more accurate in predicting, and more confident in describing, the financial impact of strategic sourcing/supply chain decisions. The ability to link a supplier's cost driver with a business impact that affects your company's bottom line is a critical competency for professionals in this arena.
6. Don't Waste an At-bat — If an idea is worth pursuing, it is worth pursuing to its full and natural conclusion. Opportunities to make a sustainable competitive impact are all too frequently missed because strategic sourcing/supply chain personnel "drove one off the fence" and merely trotted down to first base, content that they had gotten a hit. To make a significant impact on the business, strategic sourcing and supply chain professionals need to understand that, over the course of a season, the difference between "hall of fame" and "journeymen" hitters is largely that the hall-of-famer is driven to excel on every swing. The utility players frequently take an at-bat off to "celebrate" their last extra base hit.
In the strategic sourcing/supply chain world, all too often an RFP is simply sent to a handful of known suppliers because it is the easy answer. Some savings result, but little thought is given to the potential for achieving a much greater impact if someone were to take the time to research all potential suppliers for that good or service. Decisions are far too often based on price rather than understanding what is the true value impact to a company because fewer internal feathers are ruffled by that approach. Regardless of the reason, when strategic sourcing/supply chain professionals take half-hearted swings, they are wasting the future of their company as well as settling for less than the best for them and their suppliers. If strategic sourcing/supply chain professionals are going to make a sustainable, competitive difference, they have to swing for the fences every time, whether in their dealing with suppliers or in their interactions with their internal stakeholders.
At the end of the day, the hardest part of achieving a competitive advantage is sustaining it. There is always a new financial vehicle, software package, logistics platform, manufacturing expertise or product enhancement emerging somewhere in the world. The key is to build an atmosphere of constant improvement and not present competitive advantage as a one-time revolution but rather as a continuing evolution. This means the strategic sourcing/supply chain team must keep up-to-date on emerging strategies and technologies and critically evaluate how any ideas can help create or sustain an advantage in the marketplace for their specific company. Management must take the time to invest in training — internal and external — to help generate ideas, must take time to insert itself into the process and must ensure cross-functional participation so that major issues or opportunities aren't missed. It takes discipline and patience, but once the ball starts rolling, the benefits will accelerate the transformation. Success breeds success and, in this realm, will drive a company to create, renew and maintain its competitive advantage.
About the Authors:
Dr. Lowell Yarusso is a senior vice president with The Mpower Group and has over 30 years experience in the delivery of professional education, especially in the areas of supply chain, strategic sourcing and change management.
Ronald J. Sanderson is a principal with The Mpower Group, with over 25 years of management consulting experience in supply chain, strategic sourcing, procurement, business strategy and operations for companies in a wide variety of industries.