I was on the phone with a client CPO last week and he started telling me about a recent challenge with a very critical commodity that actually was impacting customers and therefore revenue. I won’t tell you what industry or commodity, but this was clearly a commodity that they had never had trouble with before. And in fact had very aggressively sourced this commodity and received very, very competitive prices. Except now there was a shortage in the market of this commodity and their supplier had no interest in supplying it to this client because they had been squeezed so hard in the past. The supplier was willing to walk away from the business and the client which is not an insignificant sized company. They are quite big in their industry. He ended up going to Korea to another supplier and paying a premium! I give you all this background to declare the following – THE LEVERAGE HAS SHIFTED. And it has shifted in many, many different ways and it’s not a quick temporary phase. And if you don’t recognize that and start dealing with it, you may risk being left far behind and letting your competitors gain significant advantage.
Let me start by pointing out two events from current news. The war in Ukraine has already had a major impact on a number of global supply chains that has already impacted a number of economies and the impacts will last a long time. And in case you thought we were done with the impact of COVID, the massive lockdown in China (more on that next time) will cause major supply chain disruptions across multiple industries. What that means is that the leverage has shifted away from buyers towards suppliers in a very dramatic fundamental way and it will last a long time. Similarly, there has been a shift in leverage from employers to employees. If you want the recruit the best and the brightest, you need to be prepared accept a totally different kind of employee with different needs and probably not willing to come to work to your location – at least not every day. The leverage your stakeholders have over your decisions has shifted because their risk appetite has shifted dramatically. The leverage that regulators can exert over you has increased. There are other examples but suffice it to say that THE LEVERAGE HAS SHIFTED. And not to be too melodramatic but since I need to get your attention, the shift is tectonic.
And what that means is that the old competencies won’t work no more. If you haven’t assessed what competencies your teams have and what they need in this new reality, it may be time to do so now and close those gaps. The old processes won’t work no more. Time to do an inventory and especially check out the integration of your processes with other core processes (demand planning, capital planning etc.) Th old tools won’t work. Old ways of working with employees won’t work requiring a dramatic shift in our operating models (WFH). Old ways of Supplier Relationship Management won’t work and will require an immediate shift to Supplier Relationship Optimization. Therefore, old ways of measuring Supplier relationships won’t work.
The shift in leverage is significant and fairly long term. We can either ignore it at our peril or acknowledge it and get ahead of it. Carper Diem!
