In what was (and is) one of the most popular series in the Procurement Insights' Blog’s history, the Dangerous Supply Chain Myths series was based on my review of this ISM, CAPS and A.T. Kearney Report that was originally released in May 2007. Considered to be a breakthrough assessment of the purchasing industry at the time, I felt that there were several gaps in the study. What is important, and within the context of present day realities, what do you think. Do the key areas highlighted in the study still carry weight in the here and now? If not, what has superseded them in terms of overall importance? Whatever your thoughts, I am certain that you will find this series interesting. Here is the URL Link to the Dangerous SUpply Chain Series: http://wp.me/P4HrB-2Il

1. Succeeding
Institute for Supply Management™
in a
Dynamic
Compiled by CAPS Research,
A.T. Kearney and
“ redictionisverydifficult,
P
especiallyofthefuture.”
cover story
—NielsBohr
[ 24 ] InsIde supply management MAY 2007 www.ism.ws

2. In this special report, we share
the results of a comprehensive survey
concerning expected industry trends
in the next few years.
T
en years ago, ISM initiated a groundbreaking research project to
probe the future of supply management. The need for such a study
was great, as many organizations, including ISM, were trying to craft
strategies that would help them prepare for what was widely predicted to
be a decade of great change. The new Internet technology was upon us,
global trade was starting to escalate, new markets were opening up, and
offshoring and outsourcing were gaining momentum. Supply management would be
an integral component of all of these changes.
The resulting 1998 study, The Future Ahead. Beyond the sponsoring
of Purchasing and Supply: A Five- and organizations, many senior executives
Ten-Year Forecast, was undertaken by and managers participated in focus
a joint partnership of CAPS Research, groups, conference calls, interviews
A.T. Kearney and ISM. It was well- and surveys (see the Methodology
received, and garnered great visibility sidebar on page 27). The collaboration
in the supply management community. with these knowledgeable people made
World
Many organiza- it possible to define well-reasoned and
tions used it as valid statements about the future that
a platform from will be of benefit to the whole of supply
which to begin or management.
renew their strategy How do the results of this latest
discussions. study compare to those from nearly
In 2007, successfully peering into 10 years ago? In 1998, the 18 trends
the future is even more important. Many identified were areas that companies
supply management executives think the would work toward achieving during
next decade will see even more upheavals the next 10 years. However, today’s
than the last. Certainly, the events taking study speaks to the volatility occurring
shape around us every day suggest that outside the walls of the company. Thus,
big changes are afoot. Thus, it is impor- there’s urgency for companies
tant for all organizations to take
stock of their current strategies,
at a glance
the main points covered
test them against a predicted future
in this article are:
world and take appropriate actions.
• Identifying the influences of
To better enable this effort, the external environment on
CAPS Research, A.T. Kearney companies;
and ISM again sponsored this • Exploring how companies will
adapt to external influences;
latest inquiry into the future
• Analyzing the six critical supply
— Succeeding in a Dynamic World: strategies for the future.
Supply Management in the Decade
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3. Section 1:
Influence of the
external envIronment
a
to address the critical strategies highlighted domain of supply management and speaks to
s supply management executives
in the study. As the forecasts reveal, supply strategies that will likely be employed in the know, the global environment out-
managers must react sooner than later to future to meet the challenges of external forces side the walls of the company can
the external factors shaping our profession. and organizational strategy. be extremely volatile. Consider the effect that
The forecasts in this report are divided Finally, it’s always interesting to go back global warming has on industry, and how that
into three main sections: in time, and evaluate the predictions made affects the cost structure and environmental
Section 1: Influence of external in the 1998 report. How accurate was that practices of firms. Beyond environmental
envIronment; study in predicting the future? At the end of issues are economic, regulatory, and mergers
Section 2: corporate change; this special report (pages 32 and 33), you and acquisitions trends that keep the external
Section 3: crItIcal Supply StrategIeS. will find a summary of the highs and lows of environment unpredictable. How are supply
management executives responding?
that exercise. As you will see, some forecasts
The first two are outside the direct control were spot on, and others missed the mark. As
forces of change
of supply management, but impinge directly physicist Niels Bohr’s opening quote corrobo-
In the coming decade, companies will be
upon it. The last section is within the direct rates, forecasting is a difficult art. subjected to many external forces which they
do not control or manage. To survive, com-
panies must react to these forces and incor-
porate their impact into their strategies and
the report Structure — be unpredictable and outside of the control of supply plans. Supply managers must also be cog-
The study is divided into three separate but related management. How companies react to the external nizant of these forces and adapt their plans
sections: environment impacts their business models and and actions accordingly. Take, for example,
1. External environmental forces; strategies, as well as their missions, goals and per- the following two areas — environment and
2. Corporate change; formance expectations. While supply management global competition.
3. Change in supply management strategies. may have limited control over the external forces and Environmental forces. Companies
In this chart, the structural framework of the study how the corporate world responds to them, supply will experience pressure from many groups
is provided. It begins by examining the forces that management executives can adapt their strategies to
to be responsive and proactive to environ-
are external to the organization. These forces may meet new standards in a changing environment.
mental concerns. This pressure will come
from their customers, consumers, share-
holders, nongovernmental organizations and
Research Framework governments. Companies will be expected
to take action to mitigate global warming,
to contribute to sustainable economies, to
forces recycle their products and packaging, and to
of change • Environmental • MA, consolidations mitigate the impact of emerging technolo-
• Global competition • Regulations
gies. Because the costs and benefits of these
activities will be uncertain, supply manage-
ment will follow the lead of the corporate
corporate executives in the arena.
change • Business models and strategies Global competition. The impact of
• Expanding the mission, goals and performance expectations
China on the world economy will con-
tinue to increase. To prosper, companies
must embrace China both as a market and
critical Supply a supply base. This will be also the case, but
management
Strategies • Managing and enabling the • Leveraging technology to a lesser extent, with other developing
future SM organization • Collaborating internally
• Developing category strategies and externally economies such as India, Brazil and Eastern
• Developing and managing • Attracting and retaining Europe. Global competition will drive the
suppliers supply management talent
• Designing and operating consolidation of U.S.-based companies into
multiple supply networks fewer, larger companies that can compete on
a global basis. Many traditional supply chains
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4. will be disintermediated as new suppliers in The MeThoDology
developing economies learn how to finance
and distribute goods, as well as manufacture.
A
s part of a joint research initiative, CAPS Research, A.T. Kearney and Institute for
Supply Management™ explored the future of the supply management profession.
Section 2:
The outcome of that research is contained in the study, Succeeding in a Dynamic
corporate change
I
World: Supply Management in the Decade Ahead. The research team’s methodology in
n response to the external forces, cor- developing, compiling and reporting the results are detailed below.
porations will analyze, develop and
implement the appropriate strategies Reach of The ReseaRch — business changes drive? What might new
to withstand the pressure being applied. More than 100 supply management market opportunities or technologies make
Whether it’s a short-term modification or executives participated in face-to-face possible?
a permanent change, supply management meetings and teleconferences with the
executives must make balanced adjustments. research team, and 99 responded to an e-survey — There were 99 surveys
What strategies are companies exploring to e-survey. This wide reach gives great completed across a wide variety of
sustain and enhance their businesses in the credence to the validity and reliability to industries. The e-survey covered five
next decade? And how are those strategies the conclusions and forecasts contained in key areas:
influencing the overall mission and goals of this report. • Forces of change — The degree to which
the organization? marketplace and competitive forces impact
ReseaRch objecTive — The company business models;
Business models and Strategies 2007 research objective: Update and • Business strategy elements — The
The research inquired about what busi- extend 1998: The Future of Purchasing and importance of various business strategy
ness models and strategies companies would Supply: A Five- and Ten-Year Forecast with elements to the future success of company
use over the next decade to respond to more companies participating and greater business models;
external forces and new market opportuni- global representation. Those objectives • supply mission, goals and performance
ties. The new business models will strive were reached in the following ways: expectations — The importance of various
to improve both the income statement and • Participation by North America, elements of supply mission, goals and per-
the balance sheet. The following are busi- Europe, Latin America and Asia/Pacific; formance expectations toward supporting
ness strategies with major implications for • Design began in early 2006, study company business strategies;
supply management in the coming decade: results released in 2007; • supply strategies, processes and
Revenue. Companies will follow sev- • Several research methodologies were enablers — The importance of various
eral strategies to increase revenue. The most used, as follows: supply strategies, processes and enablers
radical will involve moving up the value for achieving a company's supply mission,
stream and becoming designers, marketers Direct Dialog — More than 100 goals and performance expectations. The
and systems integrators, leaving behind or CPO and other high-level supply chain degree of implementation of each strategy
outsourcing traditional part or component strategists participated in focus groups, was also reported;
design and manufacturing. Manufacturers conference calls and interviews. The • supply management metrics — Expected
will expand their relationship with customers research used direct dialogue with supply magnitude/direction of change in key
by offering a wider range of services to sup- executives to probe three key areas: supply management metrics.
port their products (such as after-sales service • How will supply management evolve
and support). Service companies will increase in the next five years? What changes Review sessions — Follow-up
their portfolios of high-value services, and will occur to supply strategies, supply sessions were held with small groups of
outsource or abandon low-value services. management processes and supply supply executives to hear the tentative
And finally, as suggested earlier, companies management enablers? major conclusions from the research based
will enter emerging markets to find sources • Beyond five years, how might the exter- on the quantitative and qualitative data.
of revenue growth. nal and competitive environments change These groups helped the research team
Cost reduction. Global competition for businesses? What changes could result judge the validity of the predictions and
will mandate that cost reduction remain a for business models and strategies? fine-tune the conclusions of the study.
key strategy for companies in the coming • A decade from now, what could sup-
decade. Ongoing cost reductions will ply management look like? What major
enable companies to compete in developing transformations could external forces and
markets and meet the competitive challenges
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5. organizations must also better integrate all 1. Develop category strategies;
parties into the company’s new product and 2. Develop and manage suppliers;
Certainly, service development process. 3. Design and operate multiple supply
Contributions to revenue networks;
the events generation. Supply management should
seek out opportunities that can lead to new
4. Collaborate internally and externally;
5. Attract and retain supply management
taking shape business models or revenue streams (for
example, finding suppliers of complemen-
talent;
6. Manage and enable the supply
around us tary products and services that could piggy-
back on their distribution channels).
management organization;
7. Leverage technology enablers.
every day Supply risk mitigation. Companies
will face more exposure to a wider range Develop category Strategies
suggest that of risks, with less predictable impacts in the
coming decade. Extended global supply
The importance of written and detailed
category strategies will increase in the
big changes chains coupled with distant, unproven (or
even unknown) suppliers pose supply con-
decade ahead. Firms selling and buying
globally require category strategies that
tinuity, reputation and intellectual prop- ensure competitive cost, quality, delivery
are afoot. erty risks. Volatility of commodity prices, and overall value from suppliers. Future
currencies and interest rates add to the purchases will be from fewer suppliers
complexity. with more volume focused on preferred
of new competitors from low-cost countries Cost control. Supply will further suppliers. Increased outsourcing and
in their home markets. expand control into nontraditional areas, customer segmentation will require more
Fixed assets. Companies will pursue such as facilities management, legal, adver- effective strategies. The following are
a variety of strategies to reduce fixed assets tising and contract manufacturing, by elements critical to the success of those
and then make the remaining assets as effi- consolidating and leveraging corporate- strategies:
cient, flexible and mobile as possible. This wide volumes. Pressure will intensify to A detailed category strategy
will allow them to respond to changes in deliver higher cost savings faster, espe- development process. The category
customer demands and sources of supply. cially following acquisitions or mergers. strategy development process must focus on
Concomitantly, companies will continue Maximizing value from expenditures forces the overall value chain for goods and ser-
to reduce working capital requirements greater standardization, tighter manage- vices over a three- to five-year time frame.
and increase cash flow. ment of specifications and demand, and The strategy development team must:
more focus on total lifecycle cost. • Understand customer requirements;
missions, goals and • Conduct detailed industry analyses,
performance expectations including competitive benchmarking;
Tomorrow’s supply mission and goals Section 3 • Develop cost models;
will be broader and more tightly linked crItIcal Supply • Establish value-stream mapping;
to the strategic objectives of the busi- StrategIeS • Develop creative, worldwide strategy
f
ness. Performance expectations will be to or supply management execu- alternatives;
deliver current performance and position tives, the strategies they develop • Execute based on detailed implementa-
the supply base to support the future. and implement are influenced by tion plans;
To achieve that, supply management two sources — the environment external • Adequately measure results;
executives must focus on several supply to the organization and the internal cor- • Engage executives, customers and
chain enhancements, such as the porate environment. As companies react suppliers.
following: to changes in the external environment by Cross-functional team
More innovation from suppliers. Fully modifying business models and missions effectiveness. Full, cross-functional repre-
leveraging the capabilities of existing suppliers and goals, supply management must adapt sentation and effective teaming is required.
is just the beginning. Other steps include its supply strategies accordingly. In the Supply has reduced cost and improved
finding suppliers in related industries/tech- coming decade, adaptation may be required performance through negotiation, volume
nologies that can adapt their ideas and capa- on several strategic fronts. The following aggregation and contracting strategies.
bilities to a new setting, or use nontraditional seven areas are explored in detail next (each However, to maximize gain in the future,
sources of innovation, such as design houses with corresponding elements critical to its category strategies must involve various
or university researchers. Supply management implementation): functions. Future strategies will increasingly
[ 28 ] InsIde supply management MAY 2007 www.ism.ws

6. focus on demand management, specifica- Gaining value from strategic the work streams or processes with which
tion changes, outsourcing, upward system relationships. Improving working rela- buyers and suppliers interface and modify
migration, leveraging networks of tionships with strategic suppliers has also to human behavior.
suppliers, complexity reduction and been identified as one of the most impor-
revenue-loss risk mitigation, all crossing tant future strategies, with a significant Design and operate multiple
functional boundaries. gap between current implementation and Supply chain networks
Data availability and accuracy. future importance. To achieve differential Diverse supply chains will be needed to
Global databases of spend and supplier value from suppliers, firms will have to support competitive priorities. Meeting the
performance are required. Global strate- focus on achieving the position of preferred needs of developing economies will require
gies require worldwide data, common customers. This will require changes in companies to find domestic partners to
category code, accurate spend data by
purchase item, supplier and user location,
and supplier capabilities and performance
information.
Relative Importance and level of
Develop and manage Suppliers Implementation of 105 supply
Improving the overall supply base and
increasing value achieved is critical to sup- management strategies
ply’s value proposition in the decade ahead.
Effectiveness in supplier management, high
5
compared to competitors, will contribute
(2.57) Median
to competitive advantage in cost, quality, high future high future importance,
delivery/responsiveness, technology and importance, low high implementation now
innovation achieved. The following exam- implementation now (42 strategies)
ines strategies around that initiative: (12 strategies)
Establish supplier development 4
Degree of Importance
strategy. Supplier-focused strategies such
as supply-base reduction, longer-term
contracting, increased volume to suppliers (3.74) Median
and negotiation have led to price and cost
low future low future importance,
reductions. In the future, supplier seg- 3
importance, low high implementation now
mentation, sourcing in emerging markets,
implementation (11 strategies)
requiring a greater role by suppliers in cost
now
reduction and innovation, and improved
(40 strategies)
working relationships with suppliers will
take on increasing importance. 2
Shrinking supply base. Even though
supply bases have been reduced, firms
indicate further reductions of 51 percent
of suppliers of direct goods and 77 percent
of suppliers of indirect goods and services 1 2 3 4 5
as firms continue to segment and identify low
their most important future suppliers.
Building capabilities into the low level of Implementation high
supply network. In addition, effective
supplier management requires more
attention to establishing the correct E-survey respondents rated the importance of more than 100 potential supply strategies to their
number of suppliers with required cur- company’s success by 2012 and the degree of implementation today. Individual strategies were grouped
rent/future capabilities in correct locations into four types based on the relative importance and relative degree of implementation for each. The
worldwide to support a firm’s operations data indicated that the green quadrant, with its high future importance but low implementation of 12
and markets. The role(s) of each supplier critical strategies, must be an area of focus for companies in the coming years. As seen in the chart,
must also be specified. the medians for degree of importance (3.74) and the level of implementation (2.57) intersect to reveal
which quadrants companies’ strategies reside in today.
www.ism.ws MAY 2007 InsIde supply management [ 29 ]

7. supply chain risk. Companies will invest in suppliers is important, becoming a “pre-
sophisticated models that will help detect ferred customer” will be key. Successful
inherent risks, identify data needs, incorpo- companies will employ techniques such as
rate individual assessments, assess costs and gain and risk sharing, helping the supplier
benefits, and suggest risk prevention and develop its capabilities, co-investment in
Increased mitigation strategies. In response, supply capacity and continually listening to the
management will be required to develop “voice of the supplier.”
outsourcing and implement sophisticated risk manage-
ment strategies. attract and retain Supply
and customer management talent
collaborate Internally In the coming decade, supply manage-
segmentation and externally
The past decade saw tremendous strides
ment organizations will take on more
responsibilities and higher-value roles.
will require more as companies strengthened their supply
management capabilities and drove aggres-
Success will hinge on whether an orga-
nization can attract and retain individuals
effective strategies. sive sourcing improvement programs.
However, major gains from supply man-
with the skills and capabilities the future
demands, by doing the following:
agement in the future will require a much Identifying needed skills and
higher level of collaboration both internally capabilities. Individuals will need deeper
and externally. Collaborative value creation supply market knowledge and more exten-
will have to advance beyond just sourcing sive process knowledge. Broader business
execute order fulfillment and delivery. The excellence to include the following: knowledge and multidiscipline experience
final links of the supply chain will be tai- Multilateral collaboration. Com- will be a must, with foreign language skills
lored to each developing market. To meet panies will increasingly expect suppliers and international experience also impor-
the demands of small-market segments to collaborate with one another, as well tant. Other critical skills are leadership,
without driving up costs, companies will as with the company. Emphasis will shift innovation and collaboration abilities.
employ modular designs, postponement, from bilateral actions to improve how the Evaluating talent. Competency maps
outsourcing, alternative transportation company buys and uses a particular item, will formally define both current and
modes and warehouses, and creative part- toward multilateral actions to improve how future needs. They will be the basis for
nering, such as the following: the company’s end products are designed, rigorous skills assessment and testing
Using modeling techniques to produced and delivered. of current staff and potential internal
evaluate strategy costs. Companies will Integrated product development. transfers or new hires. Talent succession
aggressively manage supply chain costs. To keep the innovation pipeline filled, planning will be more important, as supply
Fixed assets will be reduced as much as companies will need to improve their inte- organizations lose knowledge and experi-
possible to reduce costs and increase flex- grated product and service development ence to retirements and recruitment efforts
ibility. On-demand service will be a pre- processes. Supply management will have a by other companies.
ferred model. Cost drivers will be tracked make-or-break role to play by overcoming Developing and retaining talent.
and managed across trading partners. Cost the internal and external behavioral barriers, Companies will need a multipronged
management over product lifecycles will be and helping to integrate suppliers into the strategy to acquire, develop and retain
modeled and managed. Major investment process. Finding the right suppliers is just individuals with the needed skills and
in new technologies, such as RFID, will be the start. Other keys will include strength- competencies. Recruiting externally for
made to reduce inventory and distribution ening relationships with the company’s own industry expertise and/or supply manage-
costs and help speed products to markets. RD, engineering and marketing organiza- ment expertise, transferring in industry/
Lean practices, Six Sigma and total quality tions, applying technology to enable inte- domain experts from other departments,
management will be the norm in all supply gration of the process and ensuring two-way campus recruiting, ongoing training of
chain activities. protection of intellectual property. their own staff and individual career path
Building capabilities to “Customer of choice” positioning. development are all part of the mix. Fierce
accommodate risk. Risk will be an over- In some supply market segments, capacity competition for talent will drive compensa-
arching concern in designing and managing constraints, consolidation and attention tion and reward packages upward.
supply networks. Global supply bases and to profitability will drive suppliers to be Managing the future workforce.
markets, lean practices, increased com- more selective about which customers to Globalization, demographic shifts and
plexity and tighter coupling will increase work with. Where collaboration with those greater cross-organizational collaboration
[ 30 ] InsIde supply management MAY 2007 www.ism.ws

8. will create a more diverse, distributed practice experts. Those practices and and internal systems. Achieving that will
working environment. A key challenge processes include the following: involve the following:
for leaders will be to manage and motivate Integrating the management of Internal enterprise-wide manage-
individuals and teams across functions, functions. Organizations will find value ment of supply. Companies will continue
geographies, cultures and generations. in integrating separate functions in the to evolve toward greater ease of access to
decade ahead. In some organizations, internal data sources, overcoming supposed
manage and enable the future supply management will be embedded barriers of multiple ERPs and nonstandard
Supply management organization with a supply chain organization that data definitions. Increasingly, routine pur-
In the next decade the center-led orga- includes operations, distribution and other chasing activities will be performed by users,
nization will continue to dominate, but functions. In other organizations, CPOs while technology monitors compliance with
changing conditions will require modifying will have COO-type roles, managing demand management/procurement policies.
organizational structure and relationships. inside and outside supply units. Within External supply chain visibility.
Organizations will need to balance the many companies, supply management will Web-based tools will further enable the
advantages of centralized coordination with become the focal point for all cost control capture and sharing of operational informa-
the need for local responsiveness. Some within the company. tion across the supply chain. Use of auto-ID
supply management organizations will Using technology to optimize the and remote monitoring technology will
shift authority and leadership to local busi- business. Technology will give supply make it easier to track activities, locations
ness units in order to build the leadership managers unprecedented access to internal and conditions. New tools will emerge for
and develop the talent needed in offshore data that is standardized and rationalized monitoring and managing supply chain risk
locations. Other organizations will shift from all business units. Web-based tools across multiple tiers in the supply chain.
authority and responsibility back to stra- will give access to information from across Internal and external collaboration
tegic business units as the pressures on the supply chains. Collaboration tools will tools. Collaboration platforms will
commodity prices attenuate. Best practices link internal and external partners to sup- link internal departments and external
and processes will be embedded in tech- port product design and strategic sourcing. partners for new product development,
nology, diminishing the need for center-led Metrics. Companies will develop mea- design changes, and operating plan and
sures that directly link supply management schedule changes. Systems will provide
performance to company and business unit integrated data management (for example,
ReseARch TeAm — strategies. Additionally, companies will product data management, CAD, RFx and
The research team was comprised of the develop total cost models and predictive the like) with 3-D definition, document
following individuals:
metrics to help guide strategic sourcing and management and collaboration capabilities.
supply chain decisions.
• phillip l. Carter, dBa, executive director for
CAPS Research and professor of Supply
Chain Management, Harold E. Fearon Chair in leverage technology more Data on the Way
T
Purchasing, W. P. Carey School of Business at When e-commerce emerged a decade his article presents only some high-
Arizona State University, Tempe, Arizona; ago, supply management professionals did lights of the study. Two more extensive
not initially embrace it. Technology was reports will be forthcoming in the near
• Joseph R. Carter, dBa, C.p.m., Avnet professor,
department of supply chain management for supposedly too slow, too insecure, didn’t future. The first will be a white paper from
the W. P. Carey School of Business at Arizona have enough foreign language coverage,
A.T. Kearney, scheduled for June 2007.
State University, Tempe, Arizona; was too impersonal, might be misused or
The second will be a comprehensive report
was just too much hard work to deploy.
• Robert m. monczka, ph.d., C.p.m., director, strategic from CAPS Research, available at
In the ensuing period, technology pro-
sourcing and supply chain strategy research for www.capsresearch.org in July 2007. Both
CAPS Research, and distinguished research and viders have overcome nearly all of these
false barriers. The needed technology has reports will contain a more comprehensive
ISM professor of supply chain management for
the W. P. Carey School of Business at Arizona been provided; leading supply managers are set of forecasts plus an assessment tool for
State University, Tempe, Arizona; using it, and using it effectively. Paradoxi- companies to score themselves on their prepa-
cally, many CPOs still believe that they will ration for the future. Hopefully this preview
• thomas slaight, vice president for A.T. Kearney,
New York; need more and better technology enablers article has sparked your interest in reading
in the future. The remaining task is a man- both of these forthcoming reports. Ism
• John d. Blascovich, C.p.m., vice president for agement and leadership task — to over-
A.T. Kearney, New York;
come concerns about confidentiality, legal This article was completed with contributions from CAPS Research, A.T.
• William J. markham, principal for A.T. Kearney, security, misuse by suppliers or customers, Kearney and Institute for Supply Management™. To contact the authors or
Chicago. and how technically to integrate external sources mentioned in this article, please send an e-mail to author@ism.ws.
www.ism.ws MAY 2007 InsIde supply management [ 31 ]

9. lookingbackonadecadeofsupply
managementtrends,it’sclearwhysomewere
moreprevalent,butthatdoesn’t
Where maketheothers
anylessimportant.
We ended Up By John Yuva
i
n 1998, a study unlike any other in the
the DecaDe’S DynamIc trenDS
supply management field was released
by CAPS Research, A.T. Kearney and tactical purchasing. Such tactical purchasing activities as ordering,
Institute for Supply Management™. quoting, expediting and the like will be automated and/or outsourced and head-
Entitled The Future of Purchasing counts will be reduced. Selected low-value, noncritical, standard commodity
and Supply: A Five- and Ten-Year Forecast, the purchases are likely to be outsourced to full-service providers. The reason?
study revealed 18 initiatives that were predicted Companies are focusing on their core competencies and strategic purchases.
to have a profound effect on the profession “Tactical purchasing has clearly shifted into the hands of the users, with more
over the next several years. Nearly 10 years and more companies having requisition-to-pay systems to enable it. Many com-
later, an evaluation of how these initiatives panies saw pressure to reduce headcounts in purchasing departments, but that was
affected supply management reveals that many
because of general downsizing in business, and not necessarily because consortia and
third-party purchasing enabled it.”
of the trends had a direct influence on propel-
— WILLIAM J. MARkHAM, principal for A.T. kearney, Chicago
ling the profession forward, while others were
less influential than expected. global supplier development. As companies globalize and establish
What follows are summations of six trends operations in emerging markets, the companies’ world-class suppliers will
from the 1998 report (divided follow them and grow their operations in those regions. When localized con-
among the three most tent requires the development of a new supplier, the trend is for a joint venture
dynamic and least influ- between a local and strategic supplier. A strategic issue related to this trend is
ential), as well managing these joint-venture relationships.
as reactions “With continued globalization, new marketplaces, stretched supply
from the current chains and limited best-in-class sources of supply, supplier development
research team. has proven to be an absolutely critical part of any long-term category
strategy. National governments in these emerging markets are becoming
very active in requiring such local supply base investment and develop-
ment. This has proven to be a good thing for both the multinational and
the local population.”
— JOSEPH R. CARTER, DBA, C.P.M., Avnet professor, department
of supply chain management for the W. P. Carey School of Business at
Arizona State University, Tempe, Arizona
[ 32 ] InsIde supply management MAY 2007 www.ism.ws

10. electronic commerce. Because of an increasingly vola- Demand-pull purchasing. In an effort to become more
tile marketplace, companies are realizing the need for speed in sophisticated with their customers on a part-number-by-part-
both decisonmaking and product and service fulfillment. Thus, number basis, companies will invest and implement Internet, pull-
combining the advancements of the Internet with the adoption of based systems that feed back into their systems and the systems of
enterprise-based systems will fundamentally change the way critical their suppliers. Such systems will be enabled by enterprise-based
information is transferred among supply chain partners. software and Internet technology.
“As sometimes happens, consumer use of new technologies antici- “We predicted demand-pull capabilities beginning at the customer
pates and exceeds business use. Consumers use the Internet to pur- level all the way to the supplier. But there are few companies that have
chase, conduct market research, track orders and the like; meanwhile, enabled that kind of information transparency across the chain to where
business comes up with all sorts of reasons for not deploying the tech- they can achieve a full pull. The reason may be related to some sys-
nology. Some implementation has taken place — e-mails are pervasive, tems issues, skills issues and business model issues. I also don’t believe
RFP responses are done over the Internet — but ubiquitous use has people have placed both the value proposition and the implementation
yet to occur for forecasting and supply chain interaction. The Internet is certainty behind it.”
too often used by businesses as an electronic fax machine.” — JOHN D. BLASCOVICH, C.P.M., vice president for A.T. kearney,
— THOMAS SLAIGHT, vice president for A.T. kearney, New York New York
virtual supply chains. As a secondary trend, the creation of
the DecaDe’S unDerperformIng trenDS virtual supply chains will occur over the next 10 years. Why? To
avoid the legal and contract perplexities associated with today’s cor-
relationship management. The ability to have a flexible porate mergers, companies will enter into short-term alliances. As
supply chain, yet react to globalization, constricted resources and a result, resources usually tied up in merger activities can now be
global competition will force companies to reexamine the rela- applied to global investment opportunities.
tionship between their suppliers and customers. The management “We envisioned short-term, virtual organizations springing up to
activities of these relationships will be combined into one office to leap into the breach for particular issues, problems or opportunities, and
ensure alignment. The direct report for this office will be in the that just hasn’t happened. Companies continue to organize much like
executive level of the organization. they did 10 years ago. There haven’t been these virtual organizations
“We predicted that relationship management would be further along set up that come and go on short notice, mainly because it’s too hard to
than it actually is, and I think part of the reason is that over this 10- get them formed, up and operating, and then shut down. Companies
year timeframe, we had the advent of e-sourcing, e-reverse auctions and continue to rely on long-term alliances with suppliers and customers.”
e-RFX, as well as some price movement in a deflationary way (prices — PHILLIP L. CARTER, DBA, executive director for CAPS
were declining across many industries because of available capacity as Research and professor of Supply Chain Management, Harold E.
well as sourcing to emerging markets). And so the emphasis was placed Fearon Chair in Purchasing, W. P. Carey School of Business at
more on using strong competitive pressure to gain competitive prices.” Arizona State University, Tempe, Arizona
— ROBERT M. MONCzkA, PH.D., C.P.M., director, strategic
To review all of the predictions made in the full 1998 report, The
sourcing and supply chain strategy research for CAPS Research, and
distinguished research and ISM professor supply chain management Future of Purchasing and Supply: A Five- and Ten-Year Forecast, visit
for the W. P. Carey School of Business at Arizona State University, CAPS Research at www.capsresearch.org. Additional information
Tempe, Arizona about the new 2007 study also can be found at this Web site. Ism
John Yuva is a senior writer for Inside Supply Management ®. To contact the author or sources mentioned in this
article, please send an e-mail to author@ism.ws.
www.ism.ws MAY 2007 InsIde supply management [ 33 ]