As a supporter of open innovation in SM we present our thoughts on what is involved in advancing Supply Management as a core competence and invite interested parties to share their views to develop this theme.

1. Supply Management as a Core Competency
(SMCC)
Jan 2010 (rev 1)

2. Welcome to Purchasing Practice
Purchasing Practice is a specialist niche consultancy specialising in procurement -
Procurement is all we do.
We are passionate about helping you realise the powerful benefits
to be gained by developing key capabilities in supply management (SM).
So passionate we believe SM must become a core capability
In all organisations.
As a supporter of open innovation in SM we present our thoughts on what is involved
in advancing Supply Management as a core competence and invite interested parties to
share their views to develop this theme.
Thanking you in advance,
David Henshall
Founder
Purchasing Practice
Building Capability in Procurement & Supply
www.purchasingpractice.com
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3. Aligning Business & Supply Management (SM) Strategy
Integrating Supply & Demand Side Plans is Critical to Delivery of the Business Plan
Business Strategy SM Strategy
Branding & Reputation CSR
Revenue Growth CRM & SRM
Organisation Structure Cost Optimisation
Product Differentiation Innovation
Customers & Supply Market
Stakeholders SCM Capabilities
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4. Supply Management as a Core Competency(SMCC):
SMCC is a key enabler of the management of risk from threats and the exploitation of opportunities in
a company’s external environment.
Core business competency = strategic capability
Primary Sales & Source & Convert Service
Business Marketing Procure (Add Value) Delivery
Competency
Sustain competitive advantage
Primary Value Chain
+
Tangible Resource In -Tangible Resource
Organize
Resources to Finances
People
exploit Structure
Planning & control + Innovation
Reputation
Technology
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5. Supply Management as a Core Competency(SMCC):
A core competency must be invested in to build capability
Core business competency = strategic capability
Primary
Business Sales & Source & Convert Service
Marketing Procure (Add Value) Delivery
Competency
Sustain competitive advantage
Follower Leader Innovator
Capabilities Capabilities Capabilities
 Market Making
Planning  Leadership  Maximise Opportunity
Build Supply Category Management  Cost Management  Balance Risk
Management Strategic sourcing  Collaboration  Cost Optimisation
Capabilities Opportunity Assessment  Innovation  Entrepreneurial Core
Contracts Management  Risk Management  Agility
Supplier relationship  HR & Talent Mgt  Market Sensing
Mgt  Brand & Reputation
P2P Mgt
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6. SMCC and Capability Maturity
The more Highly Developed SM Competency is the More Strategic Value is Gained
Process &
Behaviour
Market
Cost Optimised – Management
Capability
Focus
Stage 3
Differentiated Product Value
Market
Management
Making
Collaborative Demand
& Supplier
Management
Customer
Strategies
Cost Out
Stage 2
Focus
Supplier
Relationship
Management
Category
Category
Management
Stage 1
Cost Down
Focus
Strategic Leverage
Sourcing Strategies
Value
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7. SMCC at the Market Management Level:
SMCC Is at its Optimal State when Procurement Develops its Entrepreneurial Core
Sensing & Responding
Maximise Opportunities
Optimise Cost
Market Making
Opportunities
Drive
Entrepreneurial Growth
Core
Innovate
Balance Risk
The Entrepreneurial Core Collects & Disseminates External Information to
Formulate Strategies to Capture New Business Opportunities
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8. SMCC Becomes a Primary Business Process in the New Business Value Chain
The Value Chain has evolved - modern businesses are much less vertically integrated and
continue to outsource more and more and SM has become a core competency:
Value Chain Strategy
Business Processes
Strategic Responding
Primary
Supply Chain Convert Service
Planning (Add Value) Delivery
External Sensing Business
Procurement & SC Sales & Marketing Strategy
Delivery
Business Processes
Information Technology
Secondary
Enablers
Finance & Accounting
Human Resources 8
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9. SMCC + Entrepreneurial Core = Deep External Market Understanding
External Forces Need to be Monitored, Filtered, Processed & Acted Upon:
Knowledge Management
Sensing & Responding Sales & Sensing & Responding
Marketing
Product
Strategy
Category +/- Supply Demand +/-
Market Market &
Plans Impacts Impacts
Forces Forces Marketing
Procurement Plan
Opportunities & Risk & SCM Opportunities & Risk
Framework
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The ability to respond to external forces faster and more effectively than competitors delivers a clear
competitive advantage – Category & Marketing Plans Provide the Link to Business Strategy Delivery
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10. The New Competency Driven Value Chain Must Evolve & Respond to External Forces
Strategic competencies in this less vertically integrated environment are significantly different:
Environmental Competitor
Concerns & Activity
Events
Political
Activity
Customer
Activity
Supplier
Activity
Trends
Social
Substitute Technological
Products Developments
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11. Integrating Supply & Demand Side Plans
External Sensing is Translated into Responses via Category & Marketing Plans:
Marketing
Demand Environment Forces +/- Impact on Plan
Supply Market
Internal Factors =
Macro-environment Micro-environment
Sales & Marketing Strengths &
Company Weaknesses
Customers Product
Maximise
= Opportunities or Threats
= Opportunities or Threats
Competition
Opportunities
Policy
External Factors
External Factors
Optimise Promotion
Cost
Company
Balance Cultural Price
Environment Forces
Risk
Micro-environment
Procurement
Capture Company Place
Innovation Internal Factors Suppliers
= Strengths & Innovation
Weaknesses Policy
Demand Market
Category
Plans
+/- Impact on Supply Environment Forces
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12. SMCC Supports Business Strategy Optimisation
Organising and defining what will be done as part of any Strategy Optimisation programme
Category Category
Evaluation Setting Prioritising Plans
Cost
Targets Initiatives
Optimisation
Process
Internal View
Re-engineering
Baseline
Strategy Competitor View Outsourcing
Strategy
Evaluation Optimisation
Best in Class View Strategic Sourcing
Investor View Investments
Product
Resources, Governance, Alignment
Differentiation
Marketing Marketing
Evaluation Plan
Supporting
Organisation
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13. SMCC Requires World Class Organisation and Capabilities:
Purchasing Practice Model of Procurement Excellence
Vision & Leadership
Organizational Policies & Roles &
Structure
Alignment Procedures Responsibilities
Supplier Operational
Sourcing
Processes Relationship Purchasing Market
Management
Management Management Making
Opportunities
Standards & Performance Knowledge Drive
e-enabled Growth
Tools Measures Management
Contract & Continuous
Performance Compliance Supplier Improvement
Measurement Management & Innovation
HR Management
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