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Project SCALE: Innovation in Agri-Food Supply Chain Logistics
The following is a visual summary of the recent Project SCALE Conference “Innovation in Agri-Food Supply Chain Logistics” held at Cranfield University on 19th March.
Future of Procurement
Client or sponsors: Chartered Institute of Purchasing and Supply
Time period: November 2011, one year
Academics involved:
Dr Soroosh Saghiri, Dr Carlos Mena
Organisations need to be prepared for the future and ready to reshape their internal operations and external relationships. The procurement function in organisations also needs to cope with the fast-changing business climate, where sources of supply and demand are increasingly volatile. This may include, but is not limited to, securing reliable sources of material, developing adequate purchasing and supply management talents and capabilities and employing advanced technologies.
Procurement and supply management are being influenced by many factors as well. Procurement in the future will continue to face constant changes in industry. Changes may occur in consumer behaviour, relationships with suppliers, information flows and material flows. Future relationships with suppliers may need new types of contracts and business models, where material and information flows will perform in redesigned supply networks. External forces will affect future procurement too. Ecological trends, demographic trends, new technologies, and economic trends will make the future of procurement and supply management significantly different from its past.
The purpose of this research was to gain a better understanding of the future of procurement and supply management as a professional discipline.
The central question addressed by this research is:
“What will be the main focus, activities and challenges of procurement and supply management over the next 5 -10 years?”
This research was conducted at the Cranfield/CIPS Centre for Strategic Procurement and Supply Management. The Delphi technique was employed to collect and analyse the predictions of a sizeable group of procurement experts about the future of procurement and supply management. The predictions have been collected in a multi-round web-based survey, where predictions were made for two time horizons: 3-5 years and 6-10 years.
This study reveals that procurement and supply management will be a major driving force in organisations in future. The role of procurement will be more strategic and its scope will be wider. In the future procurement will not just focus on cutting cost, but also on enhancing value to the final customer and protecting the organisation from external risks.
In the future the procurement profession will play an increasingly strategic role in organisations. Procurement decisions have a significant impact on performance, not only in terms of cost reduction, but also on revenue generation and risk management. Increasingly, procurement professionals will be involved in business process improvement efforts across the supply base, with a greater contribution to measured objectives and their performance frequently reported to the organisation’s top management. At the same time, the role and seniority of procurement will be developed and matured in multiple levels.
This Delphi study also indicates that in the medium-term future, the main focus of procurement will be on establishing robust processes within its functional area, while in the long-term future, it will expand its scope towards strategic level decisions within the organisation and across the supply chain.
The final outcomes of the Delphi study revealed 70 predictions for the future of procurement. Based on the similarities and relevance in the subject of the predictions, they were synthesised into 9 content areas: Transparency/Information Sharing/E-Business, Sourcing/Supply Base Design, Procurement contribution to key processes & performance, Contract management, Supplier Relationship Management, Supplier Evaluation, Selection and Development, Innovation, Procurement skills and talent, Procurement standing in the organisation.
Details of the research outcomes and the relevant analyses can be found in the full report of this study.
About the Strategic Procurement and Supply Forum
The overall mission of the forum is to address current and upcoming business challenges from the procurement perspective and provide a forum for exploration and debate. The network will include procurement, purchasing and supply managers from across sectors and industries, creating rich conversations and encouraging knowledge-sharing from diverse perspectives. Depth of content will be provided via on-going research into areas of particular interest to our members.
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Building relationships to manage carbon emissions
Andrea Abrahams, General Director, talks about the carbon management programme, BP Target Neutral, which works to the framework of reduce, replace and neutralise. Andrea also gives an example of where offsetting is a part of the carbon management strategy.
Advanced information solutions in procurement management
Harshal Gore, Membership Services Manager at GS1 outlines how retailers and suppliers have been struggling with product information management within the Supply Chain. Where trust may have previously been an issue with regards to sharing data, the availability and importance of consumer information is now driving a change of approach in order that consumer needs can be met.
Driving supply chain innovation
Andrew Haworth, Supply Chain Director explains how Balfour Beatty’s Innovation Programme is an important strategic business initiative. From a Supply Chain perspective, their Open Innovation Programme is about engaging with innovation at the grass roots of the supply chain and investing in technology solutions which enable collaborative working across the supply chain. They have also invested in the creation of a Supply Chain Solutions team who are dedicated to working consistently with the Supply Chain and relevant project teams within Balfour Beatty.
Approaches to managing global sourcing risk
Summary of a research paper by Carlos Mena, Senior Lecturer at Cranfield School of Management.
Most companies do not have a structured supply chain risk management and mitigation system. This paper proposes a way forward.
Global sourcing can bring many benefits to organisations, but it can also expose them to a number of risks as supply networks become longer and more complex, involving more partners.
Risk in supply chains is a critical issue since companies, which are unable to manage it are likely to suffer in terms of performance. Poorly managed risks can lead to inaccurate forecasting, lower product quality, decrease in turnover and share price, loss of reputation, poor relationships with the other members of the supply chain and conflict amongst the organisation’s stakeholders. To eliminate, or at least mitigate these effects, companies need to adopt supply chain risk management strategies.
The research reported here focuses on one specific type of risk, called supply risk i.e. risk associated with the sourcing of products by a particular firm. While this type of risk has received some recent attention in the literature, there is still a limited understanding about how supply risks should be assessed when making global sourcing decisions. Furthermore, once global sourcing is in place, how do companies mitigate the associated risks?
The researchers used a multiple case study approach, which involved 15 UK companies involved in global sourcing in seven different industries to understand how managers assess global sourcing risks across the entire supply chain and what actions they take to mitigate those risks. Managers directly involved in the global sourcing decision were interviewed and patterns in their responses were analyzed across the different industries.
The study revealed that most companies do not have a structured supply chain risk management and mitigation system. Although managers interviewed in this study were aware of many of the risks of global sourcing and were, directly or indirectly, referring to the risk mitigation strategies proposed in this study i.e. network re-engineering, collaboration, agility and a risk management culture, they were not implementing them systematically and holistically. Nevertheless they do use a number of informal approaches to cope with risk.
Additionally, the research showed a high variability of practices between firms, indicating a wide gap between the top performers and the laggards. This suggests that there are still many opportunities for firms to improve their approach to making global sourcing decisions. Organisations could use the framework proposed in this study to review their current strategies for managing global sourcing risk and to devise future strategies that are more comprehensive and robust.
The paper proposes that a multidisciplinary approach is required when dealing with global sourcing risks and presents a classification of risks covering four categories: supply risk, process and control risks, environmental and sustainability risks, and demand risks. The study also proposes four generic strategies for managing global sourcing risk: network reengineering, collaboration, agility and a risk management culture.
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Christopher, M., Mena, C., Khan, O. & Yurt, O. (2011) Approaches to Managing Global Sourcing Risk, Supply Chain Management: An International Journal, vol. 16, no. 2, pp. 67-81
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