Are we still looking for a C-level Executive to champion the business value that external supply relationships can bring?
According to a survey by the "European Leaders Network," a remarkable 90 percent of respondents said their procurement departments were now seen as a key function that enjoyed sponsorship from the company's board or senior management. This compares with fewer than one in five who said it was seen in this way in 2000.
Two thirds of respondents also said they now reported to their company's board, Chief Executive Officer or other top-level manager, compared with 41 percent in 2000. This very marked development is confirmed by another finding: The proportion of companies where procurement is regarded as an administrative function has decreased from 36 percent to a mere 1 percent.
As more value is outsourced to partners and suppliers, executives with responsibility for the performance of the extended enterprise will play an increasing strategic and important role in their organizations' management.
Would we classify our need to secure information both from an intellectual property (IP) and regulatory perspective as high?
The need to protect core intellectual property has never been greater. With aggressive outsourcing strategies, intellectual property related to core designs is often an OEM's primary competitive differentiation. Globalization is another contributing factor to secure IP concerns; developing countries are rapidly growing strong manufacturing capabilities, but they are also known as providing poor protection of intellectual property rights. This puts the onus on those doing business in the region to protect their IP.
Do we need to put programs in place to understand the total cost of ownership of each component we make or source in our extended supply network?
Economic growth has generated tight supply markets for many natural resources. Companies are proactively taking steps to secure key raw materials for both themselves and their suppliers, such as Boeing and Airbus securing major contracts for titanium in the last year. The next question is how do large manufacturers ensure that they are benefiting from these preferred contracts, when the purchase and consumption is happening multiple tiers down the supply chain? For example, how can Boeing and Airbus be assured that a supplier's titanium purchase is for a Boeing or Airbus project, and not for another competitor, with the supplier profiting?
As with any major change in the business landscape, the ability of companies to effectively manage their growing external networks of partners and suppliers will create winner and losers. Those companies that have the vision to understand the impact of these trends, as well as the flexibility and discipline to adapt their business faster than the competition, will emerge as leaders in their markets over the next five years.
About the Author: Peter Scott is vice president of Corporate Development for Exostar, LLC. He can be reached at firstname.lastname@example.org.