A rapidly changing marketplace is forcing suppliers and their clients to work more closely than ever before. And it's forcing supply-chain managers to do their jobs in a whole new way.
Traditionally, these managers have been little more than purchasing officers. They dealt with a relatively small group of familiar suppliers, and had few overall goals beyond squeezing out as many price cuts as possible.
Now, as companies globalize and outsourcing spreads, supply-chain managers must make decisions involving networks of partners in far-flung corners of the world. Meanwhile, a fierce competitive marketplace is driving companies to collaborate with suppliers to help them develop products more quickly and reduce waste in the supply chain. Technology is also pushing suppliers and clients closer, making it easier to keep tabs on orders and share information.
A Vital Link
- Standard Practice: Traditionally, supply-chain managers have been little more than purchasing officers— dealing with a handful of familiar suppliers and doing little strategic planning.
- Growing Complications: As outsourcing spreads and companies globalize, these managers must deal with suppliers around the world—and often must work closely with them to help design new products and eliminate waste in the supply chain.
- New Approach: Supply-chain managers must develop a new set of skills to meet these challenges, such as immersing themselves in technology, learning the nuances of vital markets around the world and figuring out the best ways to build crucial relationships inside and outside their companies.
All of which means supply-chain managers are shouldering a lot more responsibility—and need a new set of skills. To figure out what those new skills are, we held focus groups with top executives from 41 companies. In these discussions, several key themes emerged.
Specifically, supply-chain managers must be able to handle increasingly complex and critical technology. They must know how to source jobs globally, and be familiar with the ins and outs of various markets. They must have strong management skills, to handle everything from building relationships with suppliers to creating in-house teams to solve problems. And they must be trained in making crucial strategic decisions, such as when to turn to suppliers for help in lowering the total cost of a product.
Here's a closer look at those necessary skills and what they mean to an organization.
MANAGING TECHNOLOGY
In the past, supply-chain management was seen as a silo—a job cut off from the rest of the organization. Now technology is putting supply-chain managers at the hub of many crucial company processes, and managers must understand that technology and be able to implement it effectively.
Inventory-control software, for instance, is a common tool for supply-chain managers, allowing them to track parts and products as they move from suppliers to company warehouses and beyond. But the information that software gathers ends up being used by many departments inside the company. So the supply-chain manager must be able to integrate the inventory software with the rest of the company's computer systems. Moreover, as companies collaborate more closely with suppliers, supply-chain managers are often responsible for making sure their computer systems communicate properly with their partners' hardware.
For an idea of how important supply technology has become, consider the auto industry. Since the North American Free Trade Agreement took effect in 1994, supply chains have stretched north and south of the U.S. border. Auto makers have adopted a host of technologies—everything from bar codes to Global Positioning System tools—that allow them and their suppliers to track shipments.
The car makers' planners and supply-chain managers use the tracking information to keep production running smoothly. But a host of other groups inside the companies also rely on the data. Marketing and sales staffs, for instance, find the tracking information vital for customer service, since they can check schedules and provide more accurate assessments of delivery dates.
FINDING SUPPLIERS GLOBALLY
Over the past decade, swarms of companies have turned to offshore suppliers, lured by big price savings and new technologies that let them easily stay in contact with their remote partners. In this new environment, supply-chain managers must be able to source materials, components and services on a global basis. And that requires a broad skill set that many managers simply don't have right now. Managers must develop deep "market intelligence" about global suppliers, regional market conditions, factors that drive cost and supply-and-demand dynamics—and they must be able to communicate all that to key stakeholders in the company.
Managers must know, for example, the differences in legal and economic environments and trade practices in different countries, and they must have the ability to communicate across cultural barriers. Or, if they can't do all that themselves, they must hire people who can do the job for them. For instance, many managers are hiring Chinese students who get M.B.A.s in the U.S. to return home and negotiate deals with key suppliers. A number of consulting companies have also sprung up to supply this global market intelligence.
Dr. Giunipero is professor of marketing and supply-chain management at Florida State University's College of Business. Dr. Handfield is Bank of America university distinguished professor of supply-chain management at North Carolina State University's College of Management and director of the Supply Chain Resource Cooperative. Mr. Johansen is a doctoral student at Florida State University's College of Business. They can be reached at smrfeedback@mit.edu.
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