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Integrating Supply Management
for Competitive Advantage
Supply Management Integration for
Competitive Advantage
The Evolving Role of Purchasing
Purchasing offices were once considered corporate backwaters, filled with people who did not aspire to advance to the top levels of their organization. However, this perception has changed significantly in recent years.
Purchasing and supply management have become increasingly integrated with other functional areas within organizations, playing a crucial role in achieving competitive advantage.
The Need for Integration
Integration requires that people create a common understanding of the end goal or purpose. This shared vision is essential for effective collaboration and decision-making.
Outsourcing products through low-cost country sourcing environments or contract manufacturers is significantly different from sourcing in North American buyer-seller situations. The former often involves greater cultural and operational complexities.
The close links between operations and supply management have led to supply management often reporting directly to operations in many organizations.
Many firms are now co-locating supply management personnel directly at operating locations to enable quicker response to operational needs.
The linkages between supply management and marketing/sales are perhaps the most important and challenging, as these functions have traditionally operated in silos.
Supply management groups are recruiting commodity managers with strong technical backgrounds, enabling them to communicate effectively with their engineering counterparts.
Supply management maintains significant data about individual activity costs, which can help identify opportunities to reduce total costs.
Developing Closer Buyer-Supplier Relationships
In collaborative relationships, the relationship is bilateral, with both parties having the power to shape its nature and future direction over time.
Long-term contracts can provide an incentive for suppliers to invest in new plants and equipment, as they offer greater assurance of future business.
Confidentiality regarding financial, product, and process information is often cited as a reason for not developing closer supplier relationships.
Closer buyer-supplier relationships do not interest all suppliers, as some may prefer to maintain a more transactional approach.
Shifting to a more trusting buyer-supplier relationship can be challenging, as it requires a significant change in mindset and behavior.
External relationship management begins with internal relationship management; internal alignment is key to successful external collaboration.
The Use of Cross-Functional Sourcing Teams
Experience reveals that cross-functional sourcing teams are often part- time or continuous assignments, making their use a challenging way to work.
The primary objective of using teams is to bring together individuals with diverse perspectives and expertise to perform better on a task compared to individuals or departments acting alone.
Once a team makes a decision, implementing the decision often becomes easier due to group buy-in.
The use of cross-functional sourcing teams does not guarantee a successful outcome to a project or assignment.
Membership on a team can have both positive and negative effects on individuals, as they may experience both increased motivation and pressure to conform.
Extensive planning is required before a team should be allowed to pursue an assignment, as organizations should use teams selectively due to limited resource availability.
Interacting as a team requires a different set of skills compared to traditional work, and team members must be trained and supported accordingly.
If positive work is never recognized or reinforced through rewards, the positive effort will likely be extinguished.
e. Integration : The process of incorporating or bringing together different groups, functions, or organizations, either formally or informally, physically or by information technology, to work jointly and often concurrently on a common business-related assignment or purpose.
a. Ability to conduct detailed price and cost analyses : This is not considered a relationship management skill.
b. Hiring English majors into supply management to correct document language : This is not an example of the different methods that supply management will apply to achieve integration.
b. Collaboration : The process by which two or more parties adopt a high level of purposeful cooperation to maintain a trading relationship over time to achieve specific goals.
e. the buyer unilaterally resolving disputes : This is not a characteristic that defines a collaborative buyer-supplier relationship.
c. cross-functional sourcing team : A team consisting of personnel from different functions and increasingly from suppliers who are brought together to achieve supply management or supply chain- related tasks.
e. Groupthink : This is not a benefit of using a cross-functional sourcing team.
b. Negative effects on individual members : This is not a potential drawback of using a cross-functional sourcing team.
e. Relationship capital : A function of the professional's ability to translate supply market data into compelling insights that solve business problems and to enable organizational connections and networking that accelerate business success.
d. Process loss : Occurs when a team does not complete its task in the best or most efficient manner or members are not motivated to employ their resources to create a successful outcome.
a. process loss….less than : When process loss is present, the total group effort is less than the expected sum of the individual parts.
e. Groupthink : The tendency of a rational group or team to arrive at a bad decision when other information is available.
b. Routine purchasing decisions : This is not an example of an appropriate use of a cross-functional team.
d. meaningful task : A task that requires members to use a variety of higher-level skills, supports giving members regular feedback about performance, results in an outcome with a significant effect on the
organization and others outside the team, and provides members autonomy for deciding how they will do the work.
c. Has the right corporate political connections : This is not a requirement of being an effective team member.
e. sitting in on all team meetings : Management can exert subtle control over a team's tasks through all the other listed methods, but not by sitting in on all team meetings.
d. Teams establish goals only because they have to : This is not true regarding establishing sourcing team goals.
Teams with Goals Perform Better
Teams with goals perform better, on average, than teams that are asked simply to perform their best without explicit end goals.
Monitoring and Anticipating Supply Market
Activity
All of the following are examples of how supply management should monitor and anticipate activity in its supply market, except ensuring that cost accounting keeps track of historical prices paid.
Examples of Supply Market Monitoring
Forecasting long-term supply and prices for its basic commodities Monitoring technological innovations that impact its primary materials or make substitute materials economically attractive Evaluating not only its existing suppliers but also other potential suppliers Providing timely visibility to new-product requirements
Considering New or Existing Suppliers
All of the following questions are important in considering new or existing suppliers for integration, except whether the supplier has sufficient marketing funds for promoting its new products.
Key Supplier Consideration Questions
Is the supplier capable of hitting affordable targets regarding cost, quality, conductivity, weight, and other performance criteria? Will the supplier be able to meet product introduction deadlines? Will the supplier be able to increase capacity and production fast enough to meet our market share requirements? Do the supplier's personnel have the required training to start up required processes and debug them?
