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The Future of Purchasing and Supply: a Ten-Year Forecast 1
Bron:
Auteur(s):
The Journal of Supply Chain Management, Winter 2000
P. L. Carter, J. R. Carter, R. M. Monczka, T. H. Slaight & A. J. Swan
Summary
The purpose of this research was the development of the 10-year forecasts for purchasing and
supply based upon a close examination of key change drivers. The authors aimed at highlighting
the most important areas of concern for purchasing executives. The research included trends of
importance for organizations of all sizes, in all major industries - profit and nonprofit, private and
public. To this end, the research team:
• Identified the major economic, demographic, societal, competitive, and technological trends
most likely to have major implications for the purchasing and supply management profession,
its professionals, and organizational processes.
•
Projected the identified trends for 10 years (2008).
•
Determined the impact of these trends on purchasing and supply executives.
•
Forecasted the environment for purchasing and supply in 10 years (2008).
•
Projected the changes to the purchasing and supply profession, its professionals, and
organizational processes implied as a result of the research.
Design of the study
The research examined macro-environmental factors that are shaping industry, identified
the most pressing issues faced by chief executive officers (CEOs), and solicited the
viewpoints of purchasing professionals. A balanced approach was thereby assured. This
research is intended to identify trends of concern to three key corporate constituencies: the
CEO, purchasing and supply executives, and external groups. In so doing, common areas
of focus are identified as well as any existing ‘disconnects’ between outlooks, viewpoints,
and perspectives.
The research team used a triangulated approach to obtain inputs for the research study.
The research consisted of three components:.
1 An Environmental Scan of Future Trends.
2 CEO Interviews and Survey.
3 Purchasing/Supply Executive Focus Groups and Survey.
1
A Joint Research Initiative of Center for Advanced Purchasing Studies, National Association of
Purchasing Management, and A.T. Kearney, Inc.
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Each component served as input to the other two and provided the basis to validate and
challenge the findings derived from the other two areas. This research approach sought to
identify and understand the interactions among the three areas addressed in the research:
• How changes in the competitive landscape affect the CEO’s priorities and the
organization’s agenda for action.
• How purchasing and supply organizations align themselves with these CEO and
organizational objectives.
• How purchasing decisions and supply restructuring impact the competitive landscape.
• How technology, globalization, and new competitors alter the rules for purchasing and
for the overall organization.
• How supply opportunities and constraints help reshape strategy and the CEO agenda.
The process was iterative, interactive, contingent, and highly changeable. The information
obtained over the course of the nearly 10 months of this study helps to illuminate how the
linkages work today and where future opportunities lie.
Even though this was an integrated, multiphase project, the Purchasing/Supply Executive
Focus Groups and Survey provided a wealth of data. Consequently, this phase of the
project is highlighted in the discussions that follow.
The Purchasing/Supply Executive Focus Groups
The study team conducted 11 regional focus groups with over 160 purchasing/supply
executives. Prior to each focus group, the executives completed a survey containing 37
forecasts. The survey measured the executives’ agreement and disagreement with each
statement. The researchers discussed the responses with the focus group participants. An
impressive group of primarily U.S.-based organizations participated. Highlights from these
discussions, as well as pertinent anonymous quotations, are contained in the full research
report available from the Center for Advanced Purchasing Studies (Carter, Carter,
Monczka, Slaight, and Swan 1998). A two-pronged approach was used to solicit and record
input from these executives:
1 A questionnaire was distributed to participants prior to the sessions. This survey
contained a list of projected developments, trends, and hypotheses of the research
team. A five-point Likert scale was used to register the participant’s agreement/
disagreement with each statement. Appendix 1 contains a sample of the survey
instrument along with the mean and standard deviation of responses for all participants.
2. A cumulative national average response to each statement in the questionnaire was
provided to all focus groups alongside the individual group’s average responses. A
research team member probed the sessions’ participants about their responses. The
moderator facilitated discussions of survey statements when the group exhibited a high
degree of variance in response, when the group’s response exhibited unanimity, or
when there was a wide difference between the group’s averages and those of the entire
sample.
Focus group discussions were audiotaped and recorded by a professional stenographer to
enable the research team to analyze transcripts of the participants’ statements. These
transcripts provided a rich pool of insights into the procurement profession’s 10-year
outlook. Highlights from these discussions, as well as pertinent anonymous quotations,
have been extracted and are contained in the subsequent sections.
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Purchasing and supply executive issues
The researchers applied a statistical social science tool called factor analysis to uncover
key issues or constructs in the survey data (Carter et al, 1998). Purchasing supply
executives raised 18 notable areas of concern regarding the next 10 years. These issues
are examined in descending order of consensus (A.T. Kearney).
(1) Electronic Commerce
Electronic commerce technology will support electronic efficiency efforts. The
overwhelming consensus of the focus groups was that this trend will accelerate over the
next 10 years. The Internet (including intranet, extranet, and Internet technology) and the
World Wide Web will be the backbone of electronic commerce once several issues are
addressed. A very powerful communication integration is underway matching future
improvements in the Web with the adoption of enterprise-based systems. This trend is
being driven by the need for speed in both decision making and product and service
fulfillment.
Many firms are already using the Internet for information sharing and for accessing
electronic catalogs. In the future, the Internet will be used to support demand-pull
throughout the supply chain. The Internet will become a critical medium for accessing
critical information. Currently, security is viewed as a major inhibitor of Internet use. Once
security issues are fully addressed, purchasing transactions will explode on the Internet.
Order tracking, funds transfer, production planning and scheduling, receipt
acknowledgement, and other basic processes will be fundamentally changed by the way
information can be transferred between supply chain members. The Internet’s effect on the
supply chain will rival the interstate highway’s impact on the transportation industry.
10-year forecast
The Internet/World Wide Web will be the backbone of electronic purchasing.
• ‘What I see is using the Internet to communicate information, share agreements, share
information with suppliers on strategic alliances, and share cost information or technology
information on a worldwide basis in a much more responsive time.’
•
The Internet/World Wide Web will be used for purchasing transactions.
•
‘The order placing has got to be just an accepted rudimentary electronic ‘ZIP’ , whether it’s the
Internet, EDI, or whatever. Fifty percent of the procurement budget will disappear at the
headcount level from fulfillment teams, and then will be moved into other more strategic areas.’
•
Systems for low strategic value items will emphasize electronic efficiency.
•
‘I think you are going to see the majority of your tactical procurement organization disappear
over this timeframe.’
(2) Strategic Cost Management
Cost competition will increase due to worldwide competitive pressures. Firms within
competing supply chains will be increasingly forced to examine cost improvement
opportunities made possible by cooperation and by process improvements, including
identification and elimination of non-value-added costs within and across firms. Achieving
the magnitude of cost reductions required to maintain a competitive position will require
increasing cooperation between firms to establish cost drivers and individual/joint costreduction strategies.
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Formula pricing approaches will have to be developed for engineered and specified
products and services to ensure equitable profits and return on investment, while reducing
costs. Cost models and cost-saving sharing will become increasingly important in noncommodity markets. Principally, strategic cost management will influence competitive cost
structures.
10-year forecast
Dominant supply chain companies will increasingly influence supply chain member costs though
target setting and communication.
• ‘The customer sets the price. It’s a constant battle to meet that price of your product line, and
you drive that backwards.’
• ‘The supply chain will work together to find the lowest cost through cooperation.’
Decision making cost results will be measured across the supply chain.
• ‘As you leverage more buys, the impact will be known across your supply chain.’
•
‘Top-notch suppliers bring many intangibles that lower the total cost-of-business.’
(3) Strategic Sourcing
Strategic sourcing will drive supply chain management initiatives. Comments from the focus
group participants indicate that there are two related but distinct trends occurring. First,
supplier assessment metrics will become more detailed and precise as purchasing spends
more and more time examining finer and finer levels of detail in performance. Second, the
metrics will become more individualized as companies specialize the metrics for individual
supplier performance. Companies will create supply strategies to achieve cost and
technology advantages. These two trends will increase the level of complexity involved in
managing supplier evaluation and assessment systems.
Over the next 10 years, there will be an intellectual fight over designing metrics that are
very specific for particular chains. However, the metrics cannot be so complex that they are
difficult to manage on a corporate level. There is no strong trend occurring to reduce
complexity and standardize as much as possible by applying one metric throughout a
supply chain.
10-year forecast
Supplier assessment and evaluation will become more detailed and precise.
• ‘I’m not thinking of a supplier evaluation as a static document where you use the same formula
for every supplier, but you measure the supplier based on where you’re at with that particular
supplier and that particular relationship.’
Companies will create supply strategies to achieve cost and technology advantages.
• ‘In order for us to move to the next generation, it absolutely requires very tight integration with
suppliers.’
(4) Supply Chain Partner Selection and Contribution
Determination of first-, second-, and possibly third-tier suppliers will become more critical to
supply chain dominant companies in the future. ‘Lean supply chains’ will be a competitive
strategy. Resources will be increasingly shared between highly interdependent firms that
rely on each other as customer/supplier in the supply chain to maximize value-added
contributions and reduce duplication of resources.
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Increasingly integrated supply chains with two to four partners will provide the basis for
competing and generating cash flow and return on investment. This is a logical extension of
firms first improving efficiencies within functions, then across functions, to process
improvement between and across multiple firms.
Strategic purchasing competency centers will be established at dominant companies with
highly trained personnel who study their supply chains and search for opportunities to
achieve competitive advantage through their choice of supply chain partners; determination
of core competencies; and influence of design, manufacturing, operations, and sourcing.
10-year forecast
Dominant supply chain players will increase sourcing influence at the design and development
stage.
• ‘The trend is to influence the design and development stage.’
• ‘The farther forward you can move into the product design, the more influence you acquire.’
Buyers and suppliers will increasingly participate in joint planning and development activities.
• ‘I think if you accept the concept that we are headed toward the virtual organization through the
supply chain, I think joint planning and development is key to making that work.’
•
‘We are looking at how to take one of our best suppliers in the United States and develop it so
that it is one of our best suppliers in the global marketplace.’
Companies in the supply chain will increasingly share resources including-intellectual properties,
people, information, and other assets. This resource sharing will be driven by the focus on care
competencies and the need to maintain flexibility.
• ‘Yes, the trend is toward a seamless organization between suppliers and buyers; however,
many boundaries are in place that must be broken down before that happens.’
•
‘As partnerships become more strategic, we are learning to share more easily. We have moved
up the learning curve.’
(5) Tactical Purchasing
The future will hold tremendous changes in tactical procurement in purchasing activities
and how they are accomplished. Focused strategic purchasing organizations will be a
major contributor to their businesses. Key activities will continue to include supplier
evaluation, selection, and development, including cross-functional and cross-enterprise
teams. However, tactical purchasing activities such as ordering, quoting, expediting, and so
forth will be automated and/or outsourced, and head-counts will be reduced. Selected lowvalue, non-critical, standard commodity purchases are likely to be outsourced to full-service
providers.
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10-year forecast
Supplier evaluation and development will remain in-house.
‘As the supply base shrinks, the remaining suppliers become too important, and I do not want to
proxy that to a third party.’
‘Development is based on relationships, and it’s tough to develop relationships through a third
party.’
• ‘It is a very critical aspect of the strategic issue for a company. You don’t want an outsider
making that decision.’
•
‘The process of evaluating a supplier falls into the long-term technology road map. You cannot
outsource that.’
Structural purchasing organizations will not be eliminated.
• ‘There will always be a core nucleus procurement group.’
•
‘Structural procurement will not change, but the people who make up the organization will and
so will their responsibilities.’
Tactical purchasing will become increasingly automated, and selected purchase commodities will
be outsourced.
• ‘I think you are going to see the majority of your tactical procurement organization disappear
over the next five to 10 years.’
•
‘Suppliers are more integrated into your business and often take over some of the tactical roles
as part of that - not exclusively, but as part of that - and so also outsourcing some of the noncritical areas.’
Purchasing head-counts will diminish somewhat, reflecting changes in the work toward more
strategic activities, with a reduction in tactical personnel.
• ‘There are going to be more strategic purchasing people than tactical.’
•
‘In the past, we’ve had a buyer at each site all over the world who was a part of that team and
launched orders separately, and we don’t do that anymore.’
There will be an increase in buying consortia or third-party purchasing.
‘We are currently doing half of our purchasing through consortium buying.’
(6) Purchasing Strategy Development
It is likely that there will be increasing linkages between supply chain and business
unit/company-wide strategy as supply chain strategies become more focused and
formalized, and as firms look for innovative sources of competitive advantage. As supply
chain management becomes more advanced, cost, technology, quality, and time drivers
throughout the supply chain will become better identified. Performance of the supply chain
will be measured more effectively, and executive performance will be linked to both internal
and external supply chain performance.
To facilitate the integration of cross-enterprise supply chains, strategic purchasing
personnel will be required to further develop strategic alliances with key supplier partners
and key customers. Part of this work will drive toward full pull systems being deployed with
reduced cycle times resulting in models where payments to suppliers throughout the supply
chain are more closely linked to actual work performed or usage.
Insourcing/outsourcing decisions will be regularly made as part of the strategic sourcing
process. A single cross-functional executive group will establish what work will be done
internally and what will be done externally. This will be a regular fact-driven decision
process.
Increasingly, time spent in purchasing/supply chain activities will be viewed as a very
positive source of experience for future CEOs. A few companies will see an elevated
procurement relationship, while others will broaden to incorporate more of an alliance base.
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10-year forecast
Supply chain strategy will increasingly influence but not drive corporate strategy.
• ‘We have adopted the supply chain management concept and it works very well, but it does not
drive corporate strategy.’
Purchasing personnel will spend considerable time on supplier alliance development.
• ‘They will spend their time on alliance developing and other key things.’
• ‘A shrinking supply base will make each partnership very important.’
It is unlikely that CEOs will need purchasing managerial experience, that there will be a new office
of strategic relationship that reports directly to the CEO, or that supplier payments will be tied
directly to the flow of finished products and services.
• ‘We are going toward less reports to the CEO.’
•
‘The business unit manager will report to the CEO and the business unit manager will be
responsible for all aspects of the business unit.’
However:
• ‘At our firm, the whole relationship issue will be elevated to a higher level.’
(7) Demand-Pull Purchasing
Most firms were skeptical that demand-pull systems would ever be fully implemented. The
difference is that, where suppliers are becoming more integrated and involved throughout
the chain, the Internet is going to provide information. The systems are going to be pullbased in the future. Some forward-thinking firms actually predicted that this would occur on
a limited basis within a limited number of firms. Some said that they are presently investing
enormous sums, applying demand-pull purchasing philosophies to provide a seamless
relationship between suppliers and buyers. They are trying to become more sophisticated
with their customers on a part-number-by-part-number basis around the world. This will
feed back into their systems and feed back to their suppliers as well. The main challenge
will be getting systems across key supply chain members to work together. These systems
will be enabled by enterprise-based software and Internet technology.
10-year forecast
Demand-pull systems will use Internet/World Wide Web technology.
• ‘It’s not only pulling from the supply base, it’s pulling information from a customer base.’
The Internet/World Wide Web will be the front end for proprietary information systems.
• ‘I’m going to manage this database with all this information that the end customer needs. I will
build a database. I’ll put it up. But the suppliers have to take the responsibility for the cost of the
responsibility for putting the data in there. And then the customer can get it and my business
system will tie to that.’
(8) Relationship Management
There will be an increasing focus on relationship management with suppliers and
customers because of increasing global competitiveness, limited resources, and the need
for a global reach while maintaining flexibility. In certain industries, there will be firms that
are customers, suppliers, and competitors to each other. If concerns about reciprocity can
be eliminated, customer/supplier relationship management activities most likely will be
combined into one office to ensure alignment of relationships. This office will most likely
report high in the organization.
The focus on relationship management will require that all elements of relationship
management, including trust building, communications, joint efforts, and planning and
fostering interdependency, will be increasingly studied and managed to achieve competitive
advantage.
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The relationship group will develop strategy, coordinate internal activities and processes,
and further establish bilateral work channels and two-way and multiple enterprise
communication methods.
Transaction processing will be minimized, with considerable tactical/non-core competency
purchasing-related activities outsourced to full-service third parties. These relationships will
also be managed as key, but not necessarily strategic, relationships.
A highly competent purchasing professional group will continue to drive performance with
external suppliers to achieve competitive goals. Analysis of the supply base and
coordinating highly skilled cross-functional teams will be critical activities. A highly
competent strategic purchasing group, with little bureaucracy, win continue to be integral to
the success of most firms, especially in manufacturing.
Relationship management will change, but the distinction between supplier and customer
relationships will remain.
10-year forecast
Supplier/customer relationship management could be combined in one office or aligned to
leverage relationship management knowledge. However, concerns exist regarding demand/supply
priorities and which will dominate.
• ‘You have to manage the holistic view of a relationship as opposed to just one bucket called
sales and one bucket called procurement.’
•
‘Eventually ... it’s a difficult issue combining supplier and customer relationships.’
•
‘Alignment, yes, but not under one office. There is certain expertise at both ends of the supply
chain.’
•
‘Yes, if you’re smart you are going to strategically look at these relationships, instead of
haphazardly letting them happen.’
Cross-enterprise relationship management increasingly will have a senior-executive focus at the
highest organizational levels - with a slow migration. However, reporting does not have to be
directly to the CEO.
• ‘It’s essential for the success of the corporation to have that level of involvement to be able to
understand the market at both ends.’
•
‘More complex agreements and relationships make it necessary for more involvement at the
executive level.’
•
‘Yes, especially global companies ... otherwise one does not take advantage of synergies and
size.’
Non-strategic suppliers will continue to be managed closely, however, the management will likely
focus on transaction elimination, outsourcing to full-service suppliers, and automation of the buy.
• ‘There are too many dollars involved ... can’t forget millions of dollars of transactions.’
•
‘The need to manage a whole range and series of transactions will not go away because they
have an impact on the business.’
•
‘No, they will always be actively managed ... if you said, ‘let goods flow in and the money flow
out’ you’d be out of business.’
Skilled, specialized temporary personnel will support strategic purchasing personnel.
• ‘There are already some hired guns out there ... we’ve even done it once and it worked pretty
well.’
•
‘Low-level people - yes. But, when you get into the higher levels, in our industry, if they don’t
have a real good knowledge of the culture of the company and even the industry, they’re lost.’
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(9) Performance Measurement
Supply chains will have a common set of core performance measures tied directly to
individual companies’ strategic and business unit performance. Some type of common
performance metrics will need to be established in particular for supply chains in specific
industries. Common performance measures will be tied to strategic business measures.
Benchmarks are going to change. As supply chains are developed, new supply chain
benchmarks will need to be developed and then tied to particular corporate goals. Profit
measures will not be routinely shared in the supply chain. Integrated information systems
will facilitate the reporting and use of these measures. The core measures will be
augmented by measures specific to buyer-supplier situations. Market price changes at the
final customer level will be transmitted quickly up the supply chain and will be a key driver
of performance. Performance metrics other than costs will continue to be difficult to define.
10-year forecast
Common performance metrics will be established in some supply chains and some industries.
• ‘We do it with first-tier suppliers and strongly encourage first-tier suppliers to pass it on down
the chain.’
•
‘It doesn’t add value for me to develop an evaluation. If everyone in my same industry develops
an evaluation methodology, we are all duplicating efforts.’
•
‘Our customers have taught us that it is going to be low-cost procurement, but that doesn’t
mean at the expense of not having the lowest price. Because the lowest price is driving that low
cost back up the pipeline. And the higher up that pipeline you can achieve a cost advantage,
the more profound it is on the end product.’
Price paid will continue to be an important measure of performance.
• ‘I work for a company that is obsessed with costs. In order for the company to be competitive, I
have to buy better than our major competitor.’
(10) Process Uncoupling
Firms will evaluate their insourcing/outsourcing decisions through systematic decision
processes. This assessment will require determination of core competencies in all stages of
technology development; in product/process/service design and development; and in
manufacturing/operations, logistics, and service. There will most likely be a decoupling of
processes when it is demonstrated that competing firms possess superior capabilities that
leave no chance of ‘catching up’. Firms will be required to outsource processes when
competitors are achieving superior performance -which implies decoupling of processes.
Process uncoupling will result in increasing the number of firms in some supply chains.
10-year forecast
High-tech industries with changing technologies are likely to uncouple technology,
design/development, and final customer order fulfillment to enhance flexibility.
• ‘Yes, the semiconductor industry is an illustrative model. And l can picture it moving into other
industries.’
•
‘The faster technology changes, the more likely it is to happen.’
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(11) Global Supplier Development
Global supplier development will prove critical to foreign market penetration. The
development of world-class suppliers in emerging markets is happening and will intensify in
the future. Firms are likely to continue to ask existing world-class suppliers to grow with
them as the firms expand, and to ask them to develop manufacturing capabilities in foreign
markets. Although there is still some pressure for local content suppliers, this pressure is
slowly but steadily decreasing. When local content requires the development of a new
supplier, the trend is to ask an existing strategic supplier to create a joint venture with a
local firm. An emerging strategic issue is managing these joint-venture relationships.
10-year forecast
Companies will develop world-class suppliers in emerging markets.
• ‘That’s a real important issue for us, from a strategic standpoint, that we’re having a lot of
trouble finding capable suppliers. So we’re doing two things: we’re going to our strategic
suppliers and saying, ‘Would you help us go over there,’ and we’re linking them up with local
smaller suppliers that either we find or they tell us about.’
Internet/World Wide Web technology will become the interface for supply chain management.
• ‘We’re interfacing now through dedicated lines and through third-party networks. You can do
that through the Internet just as well. I see no limitation between whether it’s a push or pull
system that is unique to whether it’s Internet or not.’
(12) Third-Party Purchasing
Companies will buy most non-tactical products and services under master contracts. Same
contracts will be negotiated by consortiums that have leverage and buying expertise. Other
contracts will be with third-party companies that also have leverage and buying expertise.
All transactions, releasing, receiving, and accounting will be performed electronically over a
secured Internet-like network. Users will select products/materials/services directly from
online databases maintained by suppliers or consortiums. All the accounting systems will
be tied together and accounts settled automatically.
10-year forecast
There is considerable disagreement on the future use of consortiums.
• ‘Every company has buys for which they do not have enough volume to gain major leverage.’
• ‘We are currently doing half of our buying through consortiums.’
However:
• ‘It seems to work for small companies, but big companies already have enough clout.’
• ‘Competitive analysis becomes too easy if everyone knows what you are paying.’
Third-party purchases of non-strategic items will increase.
• ‘It makes sense to focus on strategic sourcing and outsource the tactical.’
•
‘It will be very helpful to reducing the total cost of the supply chain.’
(13) Virtual Supply Chain
The creation of virtual supply chains is a secondary trend that will continue over the next 10
years. Mergers are becoming increasingly difficult. Companies need to be able to enter into
short-term alliances without the legal entanglements of mergers or long-term contracts.
Individual corporate resources will be stretched thin as companies continue to invest in
opportunities in developing global economies.
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10-year forecast
Companies win create virtual legal organizations focused on specific customers/ markets. As
market-driven opportunities arise, companies will join together and commit resources to exploit
these temporal opportunities. The virtual organization of resources will dissolve as the product or
market or competitive opportunity changes.
Risk sharing, reward sharing, resource contribution, and a basis for ending the relationship win be
established by participating companies.
Groupings of ‘systems suppliers’ will join together to coordinate the completion of the final
product/service bundle under a joint risk/reward sharing agreement. Resources and assets will be
contributed jointly under the direction of a supply chain captain and a coordinating team.
(14) Source Development
Supply chain integration will continue to develop, although the progress will be slow and
difficult. Integrated information systems will facilitate the process, but the rapid change in
technology and marketplaces will make supply chains difficult to integrate. Leveraging
purchases across a supply chain will also prove difficult. New supply chains will be
developed to exploit ever-increasing global opportunities even where needed sources of
supply do not exist. Buying and supplying firms will join together not only in joint ventures
but in other non-contractual arrangements to develop the needed sources. The benefits of
source development are clear, but the difficulty in establishing the sources seems daunting.
10-year forecast
Disagreement exists on the development of new competitors for major suppliers.
• ‘Although we are strong supporters of strategic relationships, we are also strong supporters of
competition.’
•
‘We have tremendous technological innovation going on. Not developing competitive sourcing
is hiding your head in the sand.’
• ‘As we become more global, we are going to have to develop new suppliers.’
However:
• ‘We can’t afford the five- to six-year training period that it takes to get a supplier up to speed.’
•
‘Our goal is to have a long-term working relationship with our key suppliers.’
• ‘It is a very painful and time-consuming exercise.’
Integration of supply chains has great benefits for the supply chain members -leveraging the
buying power of the supply chain and integrating the business system -but will be extremely
difficult to accomplish.
• ‘It’s a way to extend strategic cost advantage to each member of the supply chain.’
•
‘It will give our company the top competitive edge within our industry.’
•
‘It seems like a natural progression from supplier alliances to supply chain management.’
(15) Competitive bidding and Negotiations
Competitive bidding will continue to be used to ascertain market prices and award
business. Many companies will take bids for non-strategic items. However, many of these
items will have been outsourced, so third-party buyers or consortiums will conduct the
bidding. Governments will continue to use bidding for much of their purchasing. Purchasing
will continue to negotiate with suppliers, independent of labor and customer negotiations.
Negotiation will become more intensive due to greater price and cost visibility.
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10-year forecast
Competitive bidding will continue to be used for strategic and tactical buys by certain companies
and governments.
• ‘Even with long-term contracts, you need to validate the price in the marketplace.’
•
‘In the electronics industry, it is very difficult to know what the price should be without
competitive bidding.’
•
‘Competitive bidding will be used only for those items that l could care less who l buy them
from.’
(16) Strategic Supplier Alliances
Global competition will require a continuing focus on core competencies but, concurrently,
an expansion of access (internal and external) to product and process technologies. In
addition, firms will probably continue to outsource manufacturing, operations, services,
logistics, design, and development on a selective basis. Therefore, the success of many
firms will depend on their ability to clearly establish external resources and competency
needs and to develop two-way business and technical exchanges that benefit both parties.
Continuing needs for flexibility and asset management will require that firms establish
alliances to maximize leverage and synergy of resources.
10-year forecast
Strategic supplier alliances will grow in importance and number.
• ‘Yes, more and longer-term ... global competition will not allow one to remain independent in a
supply chain.’
• ‘To maintain competitiveness ... you have to be one of the leaders, not one of the followers.’
Strategic supplier alliances will provide the basis for competitive advantage.
• ‘Some suppliers are starting to select those companies with which they will do business, so if
you have a critical commodity, you need to align yourself with a supplier to assure service,
supply, etc.’
•
‘In manufacturing industries ... suppliers have more expertise in engineering in order for value
engineering and value analysis to work, alliances are necessary.’
(17) Negotiation Strategy
Negotiation strategy is continuing to move toward win-win relationships. Companies are
looking at total cost as a criterion, and strong win-win relationship building is a must in
order to lower total costs. This trend will continue and expand as evolving supply chain
benchmarks allow firms to measure supply chain performance. This does not mean that
negotiation will become less important. On the contrary, negotiations will become more
complex and sophisticated and rely less on emotions.
10-year forecast
Negotiations will not become more heated or competitive.
• ‘Negotiations do not seem as heated because the emphasis is on relationships. However,
negotiations are no less important.’
Win-win negotiations will not end.
• ‘If you’re not successful, then the supplier is not successful - so it’s either win-win or lose-lose.’
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(18) Complexity Management
Supply chains will form upstream and downstream from dominant companies. These
companies will dominate because of their size, technology leadership, or distribution
system, among other reasons. These companies will influence sourcing decisions and
resource sharing throughout the supply chain. Management of supply chains will be
complex and require much relationship management. Joining and leaving the supply chain
will become more difficult and complex actions. Companies will continue to source
strategically. Complexity management will intensify, creating new challenges for
procurement professionals.
10-year forecast
Dominant companies in a supply chain will influence sourcing decisions of first-, second-, and
third-tier suppliers. The dominant company may be the largest or the technology leader.
• ‘We influence the second- and third-tier buyers because we can use our leverage to buy at
better prices.’
• ‘We are now picking second- and third-tier suppliers.’
As companies in a supply chain share resources to their mutual benefit, the complexity of the
relationships will increase.
• ‘The difficulty lies in ending the relationship.’
•
‘A supplier that has millions of dollars of our equipment is using that equipment to gain
concessions from us.’
Conclusions
The 18 industry trends, and perhaps many more not yet discovered, reflect an endless
quest for a finish line that does not exist. Only continuous improvement is considered a
sustainable philosophy today. Technological innovation and rationalization through
integration and simplificauon throughout the supply chain dominate these issues. The
details seem less important, but the reality of these issues is already upon us.
Appropriate responses to the purchasing executives’ 18 issues, to a great extent, will
depend on organizational and contextual considerations that were not explicitly addressed
in this project - for example, large versus small firms or manufacturing versus nonmanufacturing industries. It should also be emphasized that the main objective of this study
was not to develop prescriptive strategies for coping with current or emerging trends, but to
identify such trends and to understand their implications.
Purchasing and supply management has been viewed differently by different organizations.
Some organizations have viewed purchasing and supply management as infrastructure
while others have viewed it as part of the value chain relating to material and service flow.
These differing perspectives are gradually being superseded by the realization that
purchasing and supply management affects much more than the material flow along the
value chain. This new view is compatible with future macro-environmental trends. These
trends have cast the role and importance of purchasing and supply management in sharper
focus than ever. Purchasing and supply management executives will have a key role to
play in ‘educating’ other functions in the organization as to the strategic importance of
purchasing and supply management. A strategic view of purchasing and supply
management, however, demands that it be linked to the supply chain and the customer,
leading to the extension of the ‘reach’ of purchasing and supply management an the way
from suppliers through the internal value chain of the firm, to the market, and on to the
customer.
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In addition to the traditional cost focus, purchasing and supply management will
increasingly stress ‘product focus’ through such initiatives as strategic cost management
and strategic sourcing; ‘process focus’ through inter-organizational integration necessitated
by electronic interchange of product and manufacturing process data; ‘market focus’
through benchmarking and helping the marketing of a firm’s products through global
supplier development and customer satisfaction initiatives; and ‘customer focus’ through
purchasing strategy development and the virtual supply chain.
In organizations of the future, world-class operations will require world-class supply
management and suppliers. Developing sustainable competitive advantage depends on
developing competencies that are not easily duplicated by competitors. Supply
management in world-class organizations win evolve into such a competency. Purchasing
and supply management will deviate from its traditional role as gatekeeper for all
communications with suppliers. Interfaces to customers and suppliers will become more
porous in the future, and thus facilitate direct communication between suppliers and other
functions within the organization through the use of electronic commerce technology.
Management of extended supply chains will imply greater reliance on information
technology, compatibility of planning and information systems, and greater need for
strategic sourcing and supply management. Purchasing and supply management
professionals will require greater ‘general management’ (i.e., interdisciplinary) training than
they have had in the past.
Organizations are restructuring themselves along ‘key business processes’ that extend
from suppliers across functional boundaries into a firm’s customer base. This view of a
business enterprise ‘stacks’ the supply chains leading to the vertical distribution of
functional specialists among the value chains. If this trend continues, purchasing and
supply management expertise will reside in each of the distinct value chains leading to a
‘fragmentation’ of purchasing and supply management skills and expertise. Working in this
environment will require different patterns of interaction and subscribing to different norms
of behavior than what purchasing and supply management staff may be used to.
To function effectively, purchasing and supply management goals will have to be more
closely aligned with the strategic goals of the firm relative to specific value chains. The staff
training will have to emphasize teaming and project management skills. Purchasing and
supply management personnel will be called upon to operate successfully under potentially
different priorities as they move from one supply chain to another. This implies that
purchasing and supply management staff will be more business strategy-oriented than
purchasing and supply management-oriented. Purchasing and supply management will be
expected to respond more quickly to demands of the market and the customer than under
the traditional functional structure.
Supply chain performance evaluation will be more closely linked to business objectives business growth, profitability, market share, and customer satisfaction for the entire chain.
The impetus for this trend stems from the integration of supply chains and the increasingly
important role to be played by supplier alliance partners in the future. As key suppliers are
integrated into the supply chain, and as the entire chain is more closely linked to markets
and customers, the ensuing strategic role of purchasing and supply management will
dictate that performance evaluations be more closely linked to business goals of the entire
supply chain. Supply chain management performance will be more closely linked to
‘external objectives’ and ‘corporate-wide objectives.’
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Future Research
Forecasting and planning are never-ending processes. Competitors enter and exit, laws
and regulations change, new technologies emerge, unexpected events occur, and
strategies succeed and fail. Forecasts must be recast and plans must be changed. The
forecasts in this report will ultimately be less than perfect. They will need periodic updating
to reflect new knowledge and past actions. The intent of the sponsors is to update the
forecasts on a regular basis to keep them useful and relevant to purchasing and supply
professionals. It is also an intent of the sponsors to expand the scope of the data collection
and forecasts to a global basis, thus better reflecting the reality of the world in which we
live.
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Appendix 1: purchasing executive survey and results
Section 1 - purchasing/supply strategy
Mean*
Std dev
1.68
0.65
A. Supplier relationship management will be combined with customer
relationship management and elevated to senior executive responsibility
for the relationships that have strategic importance.
2.03
1.03
B. An office of strategic relationships will report to the CEO.
2.68
1.14
C. Most other supply base relationships will consist primarily of transactionlevel interactions and will not need to be actively managed.
3.45
1.21
1.55
0.63
A. Corporate strategy will be driven by supply chain strategy, as
competition between firms becomes competition between supply chains.
2.29
1.01
B. Supply chain partner selection will be critical to competitive positioning.
1.53
0.69
3. The dominant companies in supply chains will influence the sourcing
decisions throughout the supply chain.
1.89
0.73
A. Dominant company sourcing influence will be exercised at the
product/service design and development stage.
1.83
0.70
1. Cross-enterprise relationship management will have executive focus and
leadership at the highest organizational level.
2. Clearly developed supply chain plans will be an integral part of company
and SBU strategic plans.
* Scale:
1 = Highly likely
3 = Neutral
5 = Highly unlikely
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code: STR-INKST-art-008-bl
Section 2 - purchasing/supply organization
Mean*
Std dev
1.77
0.77
2.10
1.18
3.31
1.20
A. Supply market analysis will be combined with customer market analysis
into an office of ‘external market analysis and development.’
3.02
1.04
B. Supplier evaluation and supplier development activities will be
outsourced.
3.64
1.06
C. Supplier negotiations will be combined with customer and labor
negotiations.
3.84
0.95
6. Purchasing will become ‘virtually’ integrated across companies throughout
the supply chain in order to extend the leverage of each individual supply
chain member and gain strategic cost advantage for the entire chain.
2.07
0.87
A. Within an organization, purchasing will be fully ‘coordinated’ across
business units, neither centralized nor decentralized, but rather with
business unit or product line or competency center reporting
relationships.
2.18
1.04
3.07
1.10
2.91
1.04
8. For purchases involving rapidly changing technology, services, marketing
services, and fulfillment (i.e., manufacturing and distribution) services to
allow maximum flexibility within the supply chain.
2.42
0.99
9. Strategic purchasing competency centers will be staffed by a combination
of highly sophisticated technical and entrepreneurial business executives.
1.92
0.86
1.82
0.81
4. Companies in a supply chain will share resources.
A. Sharing resources will create more complexity in business relationships.
5. Structured procurement organizations will dissolve, with duties shifted to
other areas of the business, outsourced, or eliminated.
7. Companies will create ‘virtual legal organizations’ focused on specific
markets/customers with all supply chain activities conducted by
loaned/shared personnel.
A. Risk sharing, reward apportionment, resource contributions, and a basis
for ending the ‘virtual legal organization’ will be established by
participating companies.
A. Competency centers will focus on where and how suppliers can be best
utilized in the supply chain to gain competitive advantage.
* Scale:
1 = Highly likely
3 = Neutral
5 = Highly unlikely
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Section 3 - strategic sourcing
Mean*
Std dev
10. Strategic alliances with suppliers will increase in number and importance.
1.46
0.64
A. Purchasing professionals will spend most of their time on alliance
development.
1.89
0.86
11. The dominant companies in supply chains will manage costs strategically
through cost sharing agreements and cost-targeting benchmarks across the
entire supply chain.
1.86
0.82
A. Cost changes will be measured on their total impact across the supply
chain.
1.71
0.72
B. ‘Should-cost’ models will be used as a basis of payment and productivity
improvements for all supply chain partners.
2.26
0.90
C. The cost structures of all companies in the supply chain will be audited
by the supply chain.
2.52
0.99
4.01
0.97
A. Negotiation tactics will become far more heated and competitive.
3.53
1.17
B. Industrial espionage will be used to identify suppliers.
4.04
0.96
13. Strategic sourcing on the part of individual companies will become less
prevalent.
3.92
0.99
14. Strategic sourcing will be the primary basis upon which
insourcing/outsourcing decisions will be made.
2.13
0.90
2.55
1.01
15. Strategic sourcing decisions will be based on assessments, current and
future, of capability, performance, agreement to performance targets,
technology leadership, and cost leadership.
1.58
0.71
16. Companies will develop ‘swat’ teams that apply sophisticated sourcing
processes to purchased products/services.
1.99
0.83
17. Competitive bidding will be used only for low-value tactical items.
2.86
1.18
12. ‘Win-win’ negotiations will end.
A. Insourcing/outsourcing decisions will be made cooperatively by the
companies in the supply chain.
* Scale:
1 = Highly likely
3 = Neutral
5 = Highly unlikely
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Section 4 - supplier/management development
Mean*
Std dev
18. Companies will develop new competitors for their major suppliers in order to
gain further supply market competitive advantage.
2.69
1.17
19. Companies will develop world-class suppliers in emerging markets.
1.75
0.74
20. Companies will create supply strategies to achieve cost and technological
advantages.
1.42
0.53
21. Buyers and suppliers will engage in mutual development activities with joint
planning and investment.
1.55
0.67
2.16
0.93
22. Supply bases will be precisely evaluated and managed both as individual
companies and as clusters of companies working together for individual
company and supply chain advantage.
2.04
0.79
A. Supplier assessment and evaluation will become more detailed and
precise.
1.70
0.74
A. The internal operations of all supply chain companies will be evaluated
on a common basis in order to determine where best to perform each
operation.
* Scale:
1 = Highly likely
3 = Neutral
5 = Highly unlikely
pag.: 20 van 22
code: STR-INKST-art-008-bl
Section 5 - day-to-day purchasing
Mean*
Std dev
3.33
1.21
A. Systems for low strategic value purchases will emphasize ‘electronic
efficiency’ between customers and suppliers, stressing order-volume
concentration and direct purchasing.
1.52
0.62
24. The Internet/World Wide Web (WWW) will be used as the backbone for
electronic procurement.
1.82
0.91
A. The Internet/WWW will be used for purchasing transactions (order
tracking, funds transfer, receipt acknowledgment, etc.).
1.82
0.93
B. Companies will use the Internet/WWW as a ‘front-end’ into their
proprietary systems.
1.90
0.87
25. Tactical purchasing will be fully automated and outsourced, with lower-level
supply chain personnel responsible for the physical flow of
products/services.
2.29
1.04
26. Full ‘pull systems’ for products/services will be implemented.
2.09
0.92
A. These pull systems will use Internet/WWW capabilities.
2.13
0.90
B. Purchasing will have little or no involvement in the pull-based systems.
3.38
1.13
23. The majority of purchasing activities will disappear from the company.
* Scale:
1 = Highly likely
3 = Neutral
5 = Highly unlikely
pag.: 21 van 22
code: STR-INKST-art-008-bl
Section 6 - information management
Mean*
Std dev
27. Suppliers’ payments throughout the value chain will be tied to the flow of
goods. Suppliers will be paid only when the end-of-chain customer buys the
goods/services, but then payment will be electronic and instantaneous.
2.50
1.21
28. Internet/WWW technology will be used as a common interface between all
supply chain computers and MIS systems.
2.07
0.96
29. Supply chain information transfers will be structured using uniform coding
schemes and standard data transmission formats.
2.01
0.95
30. Decision-support systems will be applied to all purchases to determine the
total cost/value impact of sourcing decisions.
2.03
0.86
31. Supply chain coordination will be based on enterprise systems such as
Baan and SAP.
2.31
1.02
* Scale:
1 = Highly likely
3 = Neutral
5 = Highly unlikely
pag.: 22 van 22
code: STR-INKST-art-008-bl
Section 7 - performance measurement
Mean*
Std dev
32. Common purchasing performance metrics, e.g., cost, quality, inventory, and
cycle time, will be jointly established among companies in a supply chain.
1.89
0.70
A. The common purchasing metrics will be directly linked to product line
and/or strategic business unit financial measurements.
1.99
0.82
33. Purchasing executive compensation packages will be linked to
accomplishments involving overall supply chain goals.
1.86
0.79
34. A portion of all supplier payments will be linked to performance measures
evaluating the suppliers’ attainment of overall supply chain goals.
2.23
0.95
35. Companies will greatly reduce the number of purchasing personnel.
2.65
1.03
2.80
1.10
36. Purchasing will be a highly desirable career.
2.12
0.92
37. Purchasing managerial experience will be an important requirement to
becoming a CEO.
2.76
1.11
A. Strategic purchasing personnel will be supported by highly skilled
temporary personnel with unique knowledge and skills.
* Scale:
1 = Highly likely
3 = Neutral
5 = Highly unlikely