Reflections on Supply Chain Management Trends
by Jill Kauffman Johnson, Executive Director, Chemical
Strategies Partnership
In early November, CSP was invited to present at the Institute
for Supply Management (ISM) conference, “Value x4, the
Essential Supply Management Conference.” In addition
to being a great speaking venue, the conference also gave
me the opportunity to hear first hand what top purchasing
professionals were saying about their current purchasing strategies.
The good news is that many of the purchasing executives speaking
at the conference described their efforts towards “supply
chain management” and away from pounding suppliers for
price reductions. The Vice President for Global Sourcing at
Bausch and Lomb talked about their “extended enterprise
relationships,” where they focus on helping their suppliers
reduce their operating costs, not their profit margins. Another
interesting trend was the elevated status of purchasing executives.
Several of the speakers were in the midst of a three to five
year effort to develop and implement new supply chain strategies.
They all had high level support and visibility for their initiatives
that often included regular meetings with the CEO of the company.
However, in side conversations with the Director of ISM,
he readily acknowledged that most companies have not yet
made the leap to supply chain management. This was evident
from the types of questions the audience asked during many
of the presentations. For the most part, participants wanted
to know how to collect basic spend information, how to begin
organizing a supply chain effort, and how to conduct e-procurement
transactions. In addition, most of the exhibitors were technology
providers with products for data analysis and e-procurement.
Still, much of the conversation concerned supply chain
management and several speakers made some very interesting
points. In an opening presentation, the Director of ISM,
Joe Cavinato discussed the evolution of the purchasing field.
In the 1970s and 1980s, there was an era of consolidation-based
practices. In the late 1980s and early 1990s, there were
strategically oriented practices primarily with the firm’s
directions and needs in mind. Now, he believes the field
is moving toward “supply integration” which
involves active oversight, leadership, and management across
the network of suppliers and customer firms. After hearing
CSP and Raytheon’s joint presentation detailing Raytheon’s
CMS program, an ISM staff person said, “CMS involves
all the components of supply integration.”
Another speaker, Kent Brittan, Vice President of Supply
Management for United Technologies Corporation (UTC), highlighted
chemicals as an example of their new supply chain management
strategy. Over the next five years, they are looking to
“attack the entire process” of both “product”
and “non-product” processes. Non-product (indirect
product) purchases account for about 40% of their total
purchases. One strategy they are using to save money, as
well as receive additional benefits to their operations,
is simply eliminating use of the product where possible.
He gave an example of reducing travel for the company, but
the concept is illustrative of CMS.
Philip Lang, the Vice President for Global Sourcing at
Bausch and Lomb provided some wonderful examples of working
with suppliers to reduce operating costs for both enterprises.
In one case, he was touring a bottling plant and found out
they spend $100 million corporate-wide on corrugated cardboard.
Bausch and Lomb spends only $3 million on corrugated, so
they began combining their buy and Bausch and Lomb realized
a 30% reduction in their corrugated costs. With the same
bottling plant, Bausch and Lomb learned that the supplier
was spending approximately $500,000 a year on audit reviews.
Both the bottling plant and Bausch and Lomb are required
to use the stringent FDA templates for audits. Thus, the
two companies teamed together to conduct auditing resulting
in a savings of $50,000 a year for the bottle maker.
Although the majority of purchasing professionals are still
operating low on the evolutionary track, there are leaders
in the field providing examples and inspiration. As companies
look for ways to work more collaboratively with their suppliers,
CMS is well-poised as a sound supply chain approach.
For more information on this article, please contact Jill
Kauffman Johnson at (415) 421-3405 x13 or jill@chemicalstrategies.org.
