Dr. Robert Handfield is the Bank of America University Distinguished Professor of Supply Chain Management at NC State, and is the Executive Director of the Supply Chain Resource Cooperative (SCRC). Considered a renowned expert supply chain management and procurement, Handfield prepares supply chain MBA students at NC State for a successful career in the field, and works closely with over 20 corporate partners as a consultant and as a facilitator for student practicum projects. Through the SCRC, Handfield also delivers professional development programs for supply chain professionals, including his upcoming Procurement Leadership program. In this interview, Handfield shares some of his insights on the current landscape of supply chain management and procurement, and discusses ways in which students and professionals can better prepare for a successful career in these areas.ASK ROB LinkedIn Email
I typically see Procurement as a subset of supply chain management (SCM).
Supply Chain Management is the active management of supply chain activities to maximize customer value and achieve sustainable competitive advantage. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective & efficient ways possible. Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.
The concept of Supply Chain Management (SCM) is based on two core ideas:
1. The first is that practically every product that reaches an end-user represents the cumulative effort of multiple organizations. These organizations are referred to collectively as the supply chain.
2. The second idea is that while supply chains have existed for a long time, most organizations have only paid attention to what was happening within their “four walls.” Few businesses understood, much less managed, the entire chain of activities that ultimately delivered products to the final customer. The result was disjointed and often ineffective supply chains.
The organizations that make up the supply chain are “linked” together through physical flows and information flows.
Physical flows involve the transformation, movement, and storage of goods and materials. They are the most visible piece of the supply chain. But just as important are information flows.
Information flows allow the various supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of goods and materials up and down the supply chain.
Purchasing is primarily concerned with the inbound side of product and service flows, which then forms part of the overall flow of goods and services in the end to end supply chain.
More and more organizations have moved to global sourcing, that is, they have outsourced production to countries all over the world. As tariffs and trade protection has arisen, it now becomes more difficult to understand whether such moves, made on the basis of lower cost, still have the benefits associated with them. This complicated circus of how to handle in-bound material continues on an on-going basis, supported by sophisticated analyses of shifts tariffs, countervailing duties, and anti-dumping legislation. Companies may perform “what-if” scenarios to come up with creative solutions, which also extends to thinking about where to locate the supply. Several executives I have spoken with have been fairly adamant that the products they were buying, whether it was manufactured products or apparel, would never move back to the United States, and nor should they, given the low wages associated with these production settings.
China is in the same boat as the U.S. in many respects, as they are also seeing how many of their low-cost labor industries are moving to Vietnam and other countries. (Trump’s address to the UN a few weeks ago that China is
no longer a developing country was, in my opinion, a valid point!) But to manage the complicated dance of global trade, organizations are recognizing that they need good systems, good visibility, and transparency into the supply chain. Once you layer on the need to monitor and comply with regulations, understanding where your raw materials are grown, mined or assembled, to comply with conflict mineral laws, environmental requirements, labor laws, product safety requirements, etc. becomes very complicated indeed. It is now becoming IMPERATIVE that organizations seek to have visibility beyond the first tier of their suppliers, to understand the country of origin of their materials, and how to generate options for navigating a slew of different tariffs, countervailing charges, and anti-dumping fees.
I don’t really believe these tools will become useful in the near future for making these types of decisions. In fact, I believe there is a lot of hype around these tools, and that the real issue will involve a concept called data governance. This involves understanding where our data is, the condition of that data, and how we manage and govern the use of data for business decision-making.
“Data Governance” is the exercise of authority and control (planning, monitoring, and enforcement) over the management of data assets. The basic components of data governance ensure the split of accountability and responsibility related to data thus empowering better decision making while using data from disparate data sources and methods. Data governance provides a system of decision rights and accountabilities for the information-related processes, executed according to agreed-upon models which describe who can take what actions with what information, and when, under what circumstances, using what methods.
One of our recent studies, sponsored by IBM, and also co-sponsored by the Chartered Institute for Purchasing and Supply (in the UK), the International Association of Commercial and Contract Management, and our SCRC partners, suggested that only 37% of companies in our sample actually had someone that is formally assigned with managing data in their supply chain. There is a higher prevalence in software, healthcare, financial services, but sectors such as construction, agriculture, professional services, retail and government have the lowest levels of data governance. By and large, the study suggests that most organizations are still characterized by siloed data, a lack of data standards and a lack of skills, making data governance a significant challenge.
Other data from the survey also supported the idea that people are awash in data, and are struggling to find the data they need to make decisions on a day-to-day basis. This raises the issue of Decision Latency: How confident are you in the data that supports your decisions, and how often are decisions made based on no data? Our results suggested that only 15% of respondents feel their systems have the capability to provide the level of trusted data they need to make decisions! Further, the study suggested that over 25% of managers spend more than 2 hours of their data trying to FIND the data they need to make decisions! This is an incredible statistic and suggests that the ability for managers to quickly access the data they need is problematic, as it often resides in multiple systems, and may not be in a format they need to access it. Don’t believe me? Think of how long it takes to prepare an end of a quarter summary report on key supply chain KPI’s. Many managers we spoke with the note it can take upwards of two weeks, often involving entire teams of analysts.
I think continuous learning is now a pre-requisite for executives to continue to progress in their evolution of professional development. One of the most important skills is the continued evolution of analytical capabilities, as well as the ability to influence.
Supply chain leaders need to better sell the value of procurement to the organization. And when I say value, I mean more than just cost savings, or the infamous “purchase price avoidance” metric. Because at the end of the day, many business leaders won’t dismiss cost savings, but may not view them as really important when it comes to other considerations that matter more to them such as customer value, legal and regulatory compliance, competitive performance, on-time delivery digital solutions, or life-saving medicines.
To be successful at driving change, supply chain leadership means you have to be able to influence these stakeholders and hitch your program to their priorities and business objectives. In doing so, you will be able to work more closely with them and develop a range of options that provide these business partners specific solution-based outcomes to their challenges. Purchasing influence is a theme of a new book chapter that I co-wrote with Tom Nash of the American Red Cross, and which will be coming out next year. Influence involves first understanding how to communicate effectively to stakeholders, to listen and understand what is important to them, while recognizing that there are significant differences in their priorities and yours that need to be successfully aligned. Many business leaders think purchasing only cares about reducing price, and if you aren’t able to dissuade them of this notion, you won’t be successful.
We have designed our Procurement Leadership program with the goal of unpacking this concept as the target. Participants will conduct a pre-workshop self-assessment that will help them to understand their organization’s profile in terms of purchasing capabilities and priorities, as well as the individual’s relative influence within their organization. This then leads to an understanding of how to assess business priorities, and how to harness purchasing objectives to these priorities.
Careers can lead to many different areas of supply chain management. For instance, we have packed our leadership program with current updates on topics that are critical for supply chain leaders to be aware of, and offer opportunities for you to engage with others in the field to share thoughts, brainstorm new ideas and learn from one another through discussion of these topics. Some of these include getting started on a digital transformation of your business and what it means for the supply chain; navigating the new scenario of global trade wars and tariffs, addressing the increased demands for sustainability, transparency, and compliance within global supply chains, and how to support and nurture diversity within your procurement organization.
Also, developing skills in data analytics will be key. Many CPO’s and CSCO’s today complain about being overwhelmed with the amount of internal and external data they are being asked to analyze to create improved supply chain outcomes. The volume and velocity of data streaming at us are increasing exponentially, with an often-quoted statistic that 90% of the data in the world has been generated in the last five years. Data is arriving in many different formats, including structured data (conventional letters and numbers in cells and rows) as well as unstructured data (media, text, photos, videos, voice mails, etc.). Executives are trying to make sense of this complex mass of digital output from their businesses, customers, and suppliers, and struggling to understand how to convert this information into driven decision making (DDDM) outcomes within their supply chains.
One, the ability to learn. By this, I mean a natural sense of curiosity, and willingness to pursue and learn more about a topic is a critical skill that is required. Two, the ability to communicate effectively. This is key to success and is a skill that constantly needs to be honed. And three, humility. I look for people that are naturally humble, as this is an important quality to be a leader and to be able to be effective in today’s global ecosystem.
As I said, continue to learn! Don’t ever believe you know all there is to know, and always be willing to listen to others and learn from them!
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