Most Americans probably couldn’t locate Crimea without the help of Google Earth. (It’s the peninsula that juts south from the northern coast of the Black Sea.) Nevertheless, the actions of the Russian army in and around Crimea are sending shock waves through some key commodity markets, including oil. Here’s the Washington Post coverage of the story.
Have you felt any effects from the spikes in market prices? Even if you have not, this is another reminder that your supply chains likely have connections around the world that may not be obvious from your first tier suppliers. It’s good practice to map your supply chains and analyze scenarios for disruptions that could happen at any moment.
While the chances of any individual incident might be very small, there are so many potential disruptions that it is quite likely something will go wrong sometime. Smart supply managers build risk management strategies into their planning to accommodate them.
Posted in Commodities, News Analysis, Risk Mitigation
Tagged commodity prices, fuel costs, global business, oil prices, procurement, purchasing, risk management, sourcing, supply chain, supply management
The ISM Manufacturing Index this month showed that the overall U.S. economy has been growing for 55 consecutive months. The manufacturing sector has trended positive for seven straight months. Employment numbers aren’t terrific, but they aren’t terrible either. These are generally favorable signs for business — but they suggest higher pressure on buyers to contain costs. Based on our experience and work with current clients, here are five predictions for the year ahead.
1) Buyers will see increasing pressure on pricing as industries with tight capacity or depressed margins attempt to improve margins.
2) Buyers will find longer lead times and reduced capacity as suppliers have left industries as a result of recession and remaining suppliers are enjoying higher margins based on high demand and low supply.
3) Talent management and development will be critical to the success of supply chain management success.
4) New government regulations in health care, energy, banking and other sectors will increase complexity, compliance and cost.
5) More procurement and supply chain leaders will reach the C suite.
How does this match what you are seeing?
Posted in Commodities, News Analysis, Report on Business
Tagged commodity prices, cost containment, global business, manufacturing, procurement, purchasing, sourcing, supply chain, supply management
The global economy is at a point now where more companies are considering mergers and acquisitions for various strategic purposes – and one of them is often perceived savings from consolidating purchasing and supply management functions. And while it is generally true that consolidations can generate significant savings, the execution is always harder in practice than it is on the org chart. It’s a case where more does not always lead to less — in this case, lower costs. Here are a few things to consider:
Knowledge is power. Conduct baseline assessments of supply management functions in each location or division. At a minimum there are likely differences in systems. In a worst case, there could be a huge mismatch where one division has a purchasing department fulfilling a purely administrative function while another has a supply management operation that operates at a strategic level working with cross functional teams driving innovation and quick market responsiveness. No easy blending in that situation.
Change is hard. Expect resistance both passively and actively. Some people will naturally prioritize saving their job over saving money for the firm. Others will just find adjustments to new procedures difficult. Create cross functional and cross-location teams to work on projects, and use specific stakeholder engagement strategies to help team members understand and work with each other.
Parts are parts – or not. Not every category of purchase is suitable for centralizing under a corporate purchasing center. What may seem like a commodity may have subtly different specifications for different locations. Analyses of where to source ought be based on the total cost of ownership – not necessarily a simple benchmark price.
Look for the low-hanging fruit. There are often significant savings in indirect categories where the ownership of the spend is dispersed. In your baseline assessment, identify those areas where a quick change can make a big difference. When executive management sees savings it is more likely to provide the support you need to implement more complex, long-term supply changes.
On the heels of Mary Barra’s appointment as CEO of General Motors, we can’t resist sharing this GreenBiz.com interview with another female executive in the supply management world. Kate Heiny leads the enterprise-wide sustainability strategy for Target, a Fortune 50 company and one of the most important retailers in the US with the more than 1,700 stores in 49 states.
Early in her career Heiny recognized that industries would need radical transformation in order to be successful in the future, and she views sustainability as the business strategy critical to the long-term viability of Target.
She and her Sustainability Team are responsible for helping Target’s guests and team members live more sustainable lives and minimize Target’s impact on the environment.
For example, Target is a founding member of the Sustainable Apparel Coalition, a trade organization of brands, retailers, manufacturers, government and non-governmental organizations and academic experts who are working to reduce the environmental and social impacts of apparel and footwear products around the world. Target uses the Coalition’s Higg Index to gauge its environmental sustainability performance and make changes for improvement.
With its grocery items, Target is making long-term commitments to offer food that will be GMO-free by year-end 2014, increase its organic food offerings by 2017 and replace farmed salmon with wild salmon.
Collaboration, creativity and sharing are three words Heiny uses frequently to describe how her team is working to imbed sustainability into their team members’ day-to-day work at Target. “Sustainability needs to be a holistic way of working and operating, not just one initiative or team,” Heiny said.
If you weren’t already convinced of supply management’s role in developing and driving overall corporate strategies in global companies — take a look at what General Motors just did.
The board of directors for General Motors took a bold step this week by naming a woman as the company’s Chief Executive Officer, replacing Dan Akerson when he retires next month. Here’s the GM News release. Mary Barra will be making history as the first woman to ever lead GM — or any global automaker — as Chairman and CEO, and that’s certain to receive plenty of attention.
It’s also very important to look at her experience because she is a 100% GM insider. Barra rose through the ranks at GM as an engineer and engineering manager, starting as a co-op student at General Motors Institute (now Kettering University). She was named the senior VP for product development in 2011, and a few months ago, also assumed responsibility for GM’s global purchasing and supply chain organization (with a promotion to executive VP).
That last step — tying together global product development with global supply chain sent a very strong signal that GM expects to deliver innovative products through its relationships with suppliers. Selecting the executive holding that dual position as the CEO over others who have managed brands or regional operations says a lot about GM’s strategy for the future.