Return of a Castaway

How will the landscape of purchasing look four years from today? It's most likely that supplier relationships, collaboration and purchasing departments will look much different.

[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).

The Future Today

In short, today we are at a crossroads. As supply chain managers, we need to define what is core to our business and determine whether or not we are too reliant on internal expertise. At a corporate level we should look to partners and providers that bring specialized expertise. We have to move past the not invented here syndrome. The real issue is how well we integrate across our enterprises and collaborate with our suppliers.

At a personal level, supply chain professionals will need new skills. We need to build stronger skills in areas such as project management and consulting (being internal consultants within our companies). We will also need more specialized skills in the area of strategic sourcing. Supply chain practitioners should rotate outside of procurement to payables or perhaps customer-facing roles and wear another's shoes for a time, with the goal of making them more effective when they are returned to procurement.

William Schaefer is vice president of procurement services at IBM Global Services.
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