Today, our final answer to the question:
Do you have any advice for more tenured strategic sourcing teams? What should these teams be doing to prepare for the next 5-10 years?
If the focus on savings, efficiency, and cash management during the last recession brought more sourcing leaders to the front lines, globalization will certainly keep them there for the next five to ten years. Globalization presents numerous challenges to sourcing teams and our most recent articles listed below try to address some of them via some recommendations.
Today’s recommendation looks at an extraordinary opportunity that globalization presents for sourcing teams to drive efficiencies and innovation and help their companies expand into new markets. Three facts assumptions facts why this recommendation is important.
Fact 1: The speed of business will not decelerate. Your company’s customers will not wait for you. They don’t need to anymore. If your company delivers its products and services profitably and with a decent margin, other companies are coming for it. Actually, they are coming for your company’s customers. Customer loyalty is under siege.
Fact 2: Product (and service) lifecycles will continue to shrink. Innovation will win. Innovation is not just about function or design; cost, platform, network, access, are also a part of the broader view that is now taken of innovation. Today’s global customers believes that Moore’s Law should apply to everything they buy. Is your company delivering a better AND cheaper version every 18 months? Shouldn’t it?
Fact 3: The buying power of the “Eastern” and “Southern” regions of the world will grow faster than the “West.” The economic shift has begun. There may be ebbs and flows to the shift, but the rise of the “non-Western” world is one of the most significant events in our lives (and in world history too).
Think Globally and Act Globally: Start Developing the Next Generation of Strategic Suppliers
The facts above paint the somewhat grim picture (for those in the “West,” anyway) of a unsettled world where new, lower-cost and/or more innovative competitors forever take market share away from today’s leading companies. Fair enough, that will surely happen; but surely, that has been happening.
What’s the last Sony product you purchased? Sony, meet Korea.
For the past twenty years, Korean-based consumer electronics manufacturers have gained market share. At first, they competed on cost, but pretty soon, they began to compete on quality. For example, Samsung is both the largest seller of flat-screen TVs today and the company with the highest-rated quality.
Most well-established companies eventually falter and cede ground. How many century-old corporations are there? Those in that group may be well-known, but, they represent a very small percentage of all corporations.
Yes, today’s recommendation could be taken as a defensive one. To be fair, “We need Chief Procurement Officers to save the day!” is a common call from these pages. “Defend the bottom line and do the things that procurement does best.” It is absolutely our view that procurement will be a driving force in business this next century. The CPO and procurement in general will continue to rise! But today, our recommendation is meant as one to support a business’ offensive strategy.
For while Japan fights a tough battle against Korea (Sony, meet LGE; Toyota, meet Hyundai), it is also fighting a tough battle against the US (Sony, meet Apple). As the economic balance of power tilts away from the West, huge and untapped markets are developing. Capitalized, experienced companies with superior products and distribution and marketing prowess have great opportunities in those markets. So, while the CFO will continue to need procurement leaders to deliver, Sales and Marketing will need them too. One not so small problem here is that many in Sales and Marketing won’t know they need procurement until it is too late – one needs only look at most product development teams today to see this issue. Ideally, these groups can be engaged to collaborate with their sourcing teams as they identify and develop more strategic supplier relationships. If sales and marketing support is slow in coming, sourcing teams can and should start anyway.
Strategically-located suppliers can and will be a powerful asset in the years ahead. For some categories, this will mean a long campaign to invest in supplier education and regional infrastructure; for other categories, it will mean the development of partnerships with current suppliers to move production to new locations. Entering new markets and developing new products/services can be greatly eased if sourcing teams are already engaged and partnered with (some of) tomorrow’s market leaders.