The Strategic Sourcing process that we all know and love today was actually started in the early 1990’s in the auto industry. The inefficiencies in the buying processes including lack of standardization, too many suppliers, too much inventory, etc. led to numerous changes that resulted in the way we are buying today. Over the years, the process and our function have matured and expanded into Category Management. While the process has not changed much over the last 30 years, our world and our supply chains certainly have. The same companies (Toyota, GM, Ford, etc.) that led the charge in making Strategic Sourcing a strategic business process are rethinking their focus on cost at the expense of basic risk management.
Over the last few weeks there have been numerous articles in the WSJ alone focusing on the vulnerability of our supply chains. The latest one, “Auto Makers Hit Brakes on Just-in-Time Manufacturing” goes on and on about the supply shortages resulting from COVID-19, the freak snowstorm in Texas, the traffic jam in the Suez Canal – and these are just recent events. In years past it was hurricanes, tsunamis, oil spills, forest fires and more and tomorrow it will be something else. We may not know what the event will be, but we do know there WILL BE a future event and we may not be any better prepared than we are today. What really made me sad was the way the article ended with a quote from a CEO – “this is where procurement has frankly dropped the ball, . . . . time and time again the stuff that brings us to our knees is not the expensive stuff, it’s the tiny stuff that we don’t manage closely”.
As Sourcing / Supply Chain professionals we are quite familiar with dealing with resistance from our Stakeholders. We, at The Mpower Group published a set of myths over twenty years ago which we still hear from our clients today. We have fought hard to debunk these myths and gain the credibility that we have earned. Here they are:
Myth #10: BUs / Users have no input into the Sourcing process
Myth # 9: No consideration is given to incumbent Suppliers, Minority Suppliers
Myth # 8: The Sourcing process tries to dictate business strategy
Myth # 7: Sourcing makes all of the decisions
Myth # 6: Supplier negotiations are adversarial
Myth # 5: Best purchasing practices at the company are not considered as part of the Sourcing process
Myth # 4: The Sourcing process seeks only short-term cost savings
Myth # 3: Quality is the trade-off for better prices
Myth # 2: Only the lowest price / cost Suppliers are selected
Myth # 1: Real dollar savings are not achieved
While I do believe that the exact opposite is true for each one of these myths, the dissatisfaction around our lack of focus on risk (which is not listed here) is legitimate. For those companies that have been doing Strategic Sourcing for a very long time, this is not acceptable. How many events need to happen for us to finally “get it”? COVID – 19 did not cause the vulnerability in our Supply Chains it merely exposed it.
We have spent years trying to build our credibility with our Stakeholders, Executives and even our Suppliers and an opportunity to do just that it is being handed to us on a silver platter. Wake up!! We can use risk management as our entree into the C suite.
Let us know what you think and join in the conversation . . . . . . .
