Time to tell your CPOs to collaborate with suppliers: how to create value by collaborating inside and outside the organization

Article Type: Abstracts From: Strategic Direction, Volume 28, Issue 3

Hales M., Zeranski O. and Disteldorf H.Industry Week, September 2011, Vol. 260 Issue: 9, Start page: 46, No of pages: 6

Describes how, over the past 20 years, most companies have used strategic sourcing to restructure their supply bases and reduce costs. Explains that the approach has tended not only to require confrontational relationships with suppliers, with any collateral damage deemed to be necessary in the striving for lower costs, but has also enabled some suppliers to become so embedded as to become immune to future competitive sourcing efforts. Argues that current conditions are such that, with 20-30 percent of a company’s external expenditure dominated by these embedded suppliers, reducing costs is no longer enough as companies want value and they want their chief procurement officers (CPOs) to deliver it. Suggests how CPOs can get the job done, notably by first identifying and then collaborating with their key suppliers. Notes that the CPO’s objectives may include: growth, creating incremental revenue growth; risk, demonstrating a significant reduction in enterprise risk, covering all potential relevant risk categories such as brand, catastrophes and commodity pricing; value chain, optimizing the value chain around the corporation’s core, and structural capabilities, demonstrating advances in select areas, such as a sustainable competitive cost advantage, improved agility or responsiveness, gains in corporate social responsibility or other structural capabilities essential to the future strategy.Article type: ViewpointISSN: 0039-0895Reference: 40AS852

Keywords: Manufacturing, Organizations, Procurement,Sourcing, Supplier relations, Supply-chain management