[From iSource Business, July 2001] It's a safe bet that you have seen or at least heard of the movie Cast Away, starring Tom Hanks. Hanks plays an obsessive Federal Express troubleshooter who becomes stranded on a remote island for four years before miraculously journeying back to civilization, where he attempts to rebuild his relationship with his fiancée, played by Helen Hunt.
Well, what if we were to write a sequel to the movie in which Hanks plays a purchasing agent who is stranded on an island today and eventually returns to the office in the year 2005? We would have to answer three important questions in the script: How would the world of supply chain management have changed over those four years? Will the purchaser be able to pick up the pieces of shattered supplier relationships? And how will his newfound perspective alter the way in which he approaches the future?
Changes in the Landscape
Purchasers in 2001 are viewed in the corporate world as generalists or order takers. Traditional metrics used to judge purchasers' performance, including price and beating the fall plan, while supplier relationships often amount to little more than three quotes and a cloud of dust. Purchasers are still deciding between public and private marketplaces, still tinkering with online auctions, and still struggling with how to leverage both electronic data interchange (EDI) and Extensible Markup Language(XML).
Fast-forward to the world of purchasing in 2005. Our hero finds that heightened boardroom expectations for savings have helped purchasing emerge from the backroom. Now procurement is in the spotlight, a strategic function. Purchasers are seen as subject matter experts or specialists. The metrics have even changed, and now the emphasis is on delivering shareholder value and knowledge management. Relationships with non-strategic suppliers are minimized, while companies routinely engage in some form of collaboration with strategic suppliers. Companies use a mix of public and private e-marketplaces to purchase goods and services, and outsourcing has increased substantially. Finally, the purchasing uses for technologies are hands free which allows all stakeholders in the supply chain to participate and integrated into critical business systems.
Picking up the Relationships
Despite the positive advancements that have been made in purchasing, can the agent, arriving back at his desk in the purchasing department, revive the neglected relationships with his suppliers? Traditional supplier relationships will have changed and matured. Relations with strategic partners, those participating in a company's private e-marketplace, will have been consolidated and managed at the enterprise level, while relationships with non-strategic suppliers will have been conducted through the new intermediaries of the public e-markets.
Value will be created through collaboration, which will require hard work, investment and commitment from both sides of the transaction. Online auctions, when used, will be limited to spot buys for specific commodities. We will see the seamless integration of applications and business processes, which provides leverage across the supply chain.
What about the predictions that e-procurement would allow buyers to dynamically switch between suppliers on a daily basis? This prediction fell short, much like the promise of e-mail. Didn't e-mail seem like a great idea at first, with the ability to access many recipients around the world in an instant? But it's been abused over time with the excessive amounts of junk mail and undue hyperconnectivity. Relationships conducted exclusively via e-mail can be dysfunctional, and relationships with suppliers conducted via e-procurement can follow the same pattern. While buyers have more access to suppliers, real collaboration requires true relationships and commitment. Greater choice doesn't necessarily yield greater value (beyond price).