The late John Wooden focused on fundamentals. In much the same way, any business seeking success in the procurement management environment should address the fundamentals first. Those fundamentals include understanding the need for reliability, reinforcing accountability, recognizing core competencies, defining a successful logistics strategy, and managing risk.
1. Understanding the Need for Reliability
Almost every business will point to a “customer first” strategy. However, placing customers first without understanding their needs and preferences can lead a business down a series of rabbit holes. A true “customer first” strategy speaks to attaining reliability and accountability at all levels of the service chain and with different customer segments. Supply chain businesses achieve reliability by cultivating customer relationships and assessing customer expectations about performance and quality. Recognizing those expectations when working through normal cycles and promotions can solidify relationships.
2. Reinforcing Accountability
Procurement management accountability builds from having processes and quality controls that meet or surpass customer expectations. For example, a customer may require documented procedures, work instructions, and process flows that define specific activities. Meeting quality expectations may involve meeting international and national standards such as ISO 9001. Accountability may also involve a regular review of the effectiveness and efficiency of systems and conforming to audit recommendations for continuous improvement.
3. Recognizing Competencies
Once a business has assessed customer expectations for reliability and has ensured accountability, the business can consider the alignment between core competencies. Basic questions about the interactions of unique values, skills, processes, and technologies integral to business operations should point to advantages for customers. In terms of the supply chain, the emphasis on core competencies should surpass customer expectations on service capabilities. For example, a study of core competencies may show that a supply chain business provides higher quality, cost-effective services by outsourcing some aspects of the supply chain.
4. Defining a Successful Logistics Strategy
Each of the previous three steps — reliability, accountability, and core competencies — contributes to a successful logistics strategy. Every part of transportation, storage, and services of inbound, outbound, internal, and external movements from the source to the customer corresponds with values that intersect for the customer and the business. Ensuring a competitive advantage for customers requires benchmarking areas such as warehousing, inventory control, handling and packaging, order management, and network development against the requirements and preferences given by customers. With benchmarks and associated key performance indicators in place, a small or mid-sized business can establish long-term collaboration, lower costs, and build financial strength.
5. Managing and Mitigating Risk
Every supply chain business faces the unknown of disruptive events. Whether natural or man-influenced, disruptive events can paralyze a supply chain and ruin carefully nurtured customer relationships. Working through disruptive events requires the consistent and continued identification of risks and the impact on procurement management.
Risk management considers the positive or negative impacts of assuming risks and studies the supply chain to determine the presence of vulnerable points. In some instances, methods used to enhance the flexibility of a supply chain introduce risk. Mapping and quantifying supply chain movement exposes processes and dependencies that cause risk. Risk mitigation finds solutions for those problems and provides time for a business to recover from a disruption.