Agility and sustainable sourcing are SCM'S new focus areas

By: Ndabeni Bagosi

Leading and forward-thinking organisations rely on the agility of their supply chains for sustainability. Traditionally, the focus of supply chain has been on compliance and cost cutting. However, increasing competition, changing customer needs and a changing economic environment are challenging organisations to think beyond costs.

Increasingly, Chief Procurement Officers are required to provide solutions on how they can contribute to organisations' agility, safety, cost reduction and environment compliance (sustainable procurement).

This includes but is not limited to:
• Rethinking supply chain management (SCM) strategies
• Synchronising SCM strategies with customer needs
• Partnering with strategic service providers to lead innovation
• Identifying short- and long-term cost containment solutions
• Deploying technologies such as e-commerce, e-procurement, e-auction, Enterprise Resource Planning (ERP) and Automated Requvest for Quotations (ARQ)

David Jacoby in his book The Guide to Supply Chain Management (2009) cites, as an example, how Dell became a leader in personal computers in 1985 by leveraging their supply chain and selling directly to customers. Their strategy included the co-location of suppliers for just-in-time delivery, and direct up-selling and cross-selling through a highly-trained 'inside' sales force that responded to customers who entered their website and handled their questions.

Similarly, through the evolution of supply chain strategies, manufacturers in the steel and consumer goods industries were also dealt a blow by competitors who focused on sourcing from low-cost countries and established anchor distribution centres for retailers such as Walmart and Boston Warehouse.

The above examples illustrate how organisations can leverage SCM to be more competitive. It can be further argued that SCM is a strategic and value-adding function to achieve agility and cost containment. If SCM leaders ensure that SCM strategies are embedded as a continuous improvement culture, then this will lead to high-performance organisations and operational excellence.

SUSTAINABLE SOURCING

Sustainable sourcing means meeting the business needs of today, without compromising the ability of future generations to meet their business needs. South African organisations are still grappling with how to develop and implement sustainable sourcing strategies. In fact, in many instances, sustainable sourcing is not seen as a business imperative.

For effective implementation of sustainable sourcing organisations must develop sound overarching policies. These policies must be aligned with corporate objectives and strategies, and top management must ensure that policies are implemented as a business imperative. The effect of sustainable sourcing should be measured in agreed categories of business.

Furthermore, a measurable commitment to sustainable sourcing should be an evaluation criterion for awarding business to service providers.

Sustainable sourcing is about extracting value through contract lifespan by establishing metrics with clear objectives, argues Jean-Louis Moreau, Vice President of Global Sourcing at CAE, in Supply Management journal (2014). He further points to the fact that leading organisations incorporate sustainable sourcing in their short- and long-term strategies.

Supply chain officers must, therefore, lead sustainable sourcing and make it part of collective objectives. As SCM evolves in South Africa, companies must seize the opportunity by integrating sustainable sourcing strategies into corporate objectives.

FINANCIAL IMPACT OF SCM

The impact of optimised SCM is well documented by scholars and commentators:

• Improved revenue increases the top line
• Reduced costs create savings that increase profit margins/profits
• Improved asset-capital utilisation reduces assets, which improves economic value add

Consulting firm Boston Strategies International estimated that companies could save between 4-7% by sourcing from low-cost countries. Using ARQ and implementing long-term agreements and e-auctions can yield around 3-5% savings.

In conclusion, implementing best SCM practices and leveraging SCM as a beyond-cost-cutting enabler can affect national competitiveness as SCM would then connect the nodes in a trading system, adding synergistic value.

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