From time-to-time the Supply Chain Matters blog features book reviews which we believe would be of value and a learning asset to our extended global supply chain management community of readers.

In this particular posting, we share our review of: Profit From The Source- Transforming Your Business By Putting Suppliers at the Core. The book is authored  by- Christian Schuh, Wolfgang Schnellbacher, Alenka Triplat, Daniel Weise, each of whom are Boston Consulting Group Partners, Managing Directors and thought leaders.

This book primarily targets a senior management audience but can provide supply chain and other functional leaders important learning and organizational approaches. Book- Profit From Source

The premise of this book is that the procurement function is a deeply misunderstood corporate capability, with CEO executives spending too little time thinking about or being actively involved in how their companies spend more than half of typical spending budgets. Obviously, some of this has changed with the experiences that have occurred over the last two plus years as a result of a global pandemic, severe global wide supplier and transportation disruptions. The question however, is whether such attention is tactical or strategic in nature.

 

 

Book Content

This book’s content is organized into three broad parts:

How You Need to Change, specifically addresses making your suppliers and the procurement function as leadership imperatives. One of the statements is: “In many companies, if not most, procurement is an unglamorous, unloved part of the business. When the boss offers someone a job in procurement. They know they’re on the fast track to nowhere.” A Harvard Business Review study is cited which indicates that CEO’s spend just one percent of their time with suppliers, while typically more than a half of cost of goods is spent on suppliers. Of late, C-Suite executives have dedicated a lot of time on supply chain challenges and how to get them resolved.

The book advocates that procurement, by virtue of the fact that it “owns” the corporate relationship with suppliers, should be positioned at the heart of the company, especially now, as the role has become more tougher and more demanding. The authors provide an all too familiar counterargument that as soon as some form of normalcy returns, all of the anxiety related to supply chain fades, as former views return and there is no perceived need for transformation.

How Your Company Needs to Change advocates that relationships between buyer and supplier are essentially a transactional “tug of war” with one side extracting as much margin as possible from the supplier. The supplier, in turn, often sets artificially high starting prices and seeks to support the allusion that the buyer is getting a good  deal. In essence, procurement professionals are goaled and compensated for squeezing suppliers as contrasted with collaborating with suppliers on common needs and product innovation strategies.

The authors advocate for making procurement more personal, to categorize and target key suppliers with more constructive executive level relationships in what is outlined as a performance/potential approach.

What this reviewer found to be a key takeaway for readers to consider, were compelling arguments that for manufacturing or services-based companies, procurement should be given overall responsibility for the entire product lifecycle development process, from idea creation to post-production. A complete chapter is dedicated to this notion with the premise that through each phase, goals to either lower costs and ensure competitive advantage, innovation, product quality and risk reduction can be better achieved.

The authors advocate that business leaders need to oversee a transformation of the procurement function because for most companies, the function is not prepared for this more elevated role. Cited are specific case studies related to Apple, Tesla and many other firms.

How Your Company’s Ecosystem Needs to Change acknowledges that the pressure on CEO’s to cut costs is existential and never goes away, including the recent Covid-19 pandemic, and now, a dramatic and often swift post pandemic decline for certain products. The challenge outlined in the book is that the way procurement leaders are positioned process and organizational wide to deliver such cost savings is often damaging for companies. By the time either senior management or procurement get involved, costs are already imprinted on products leaving little room for cutting without consequences. The notion is collaborating with as opposed to competing against suppliers and their self-interests.

There is reinforcement that the chief procurement officer should be provided leadership for the entire product development process so that costs are not: “crystallized too early and that the procurement team can develop mutually beneficial relationships with the most important suppliers.”  Further advocated is the creation of nimble cross-functional teams that provide different perspectives and corporate interests in a company’s product-development processes.

The authors provide pointers regarding how CPO’s can reconfigure their procurement processes including leveraging software automation tools to oversee routine administrative functions and allowing existing teams to both reskill into more strategic and tactical needs. Needs for supply chain sustainability objectives are outlined along with considering the redesign of supply chains in order to instill more agility or resilience to customer and market needs. Other BSC case studies are cited in efforts of supply chain redesign including Inditex, Ocean Victory Corporation and the U.S. Army.

There is section provided on how to create a world-class risk-monitoring organization or what to do when the unexpected actually happens.

A section focused on product and process innovation cites the unprecedented global-wide development of Covid-19 vaccines which the authors viewed as the: “power of a sophisticated corporate procurement capability to deliver transformative change.”

 

Added Thoughts

The authors position this book as helping to form the foundation of any major business transformation, which is not necessarily cookie-cutter in approach. It is a book that can assist senior executives in understanding the strategic importance of the procurement function as not just a continuous generator of cost savings but rather “creating a bionic procurement function that combines the virtues of digital technology and human creativity” in providing a more proactive support in business strategy needs and outcomes. Thus, we recommend placing the book on your reading list.

We would venture that not all of our readers will agree with some of the concepts or approaches outlined. For instance, what roles do other senior supply chain planning or fulfillment leaders need to demonstrate in supporting internal and external trading partner, services providers and extended supply chain network transformative needs. None the less, take the time to assess what this book provides in observations, insights and recommendations.

From this Editor’s lens, transformation has industry, business, product technology and organizational uniqueness, and indeed there are no cookie-cutter menus. Some believe, and some companies are already elevating the voice and presence of supply chain to the C-Suite level. Whether that is procurement or other supply chain focused, is the notion of the desired skills needed by such leaders. That includes leaders with  deep understanding of the business, of products and technology, of needed work team diversity and of the power of teams.

This book is available either through  Harvard Business Review Press or on Amazon.

 

Bob Ferrari

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