Profit from the Source, Transforming Your Business by Putting Suppliers at the Core, by Christian Schuh, Wolfgang Schnelbacher, Alenka Triplat, and Daniel Weise, Harvard Business Review Press, 2022

When thought leaders look at manufacturing ops, supply management and purchasing do not always hit top priority.  Other areas like teams and kaizen have dominated management thinking.... until Covid.  The worldwide pandemic network suddenly brought terror to anyone dependent on suppliers for raw materials and components.  The uncertainty could not be programmed into simple push/pull planning routines, and we learned that it was impossible to expedite every single component.  A typical car manufacturer maintains a Bill of Material covering thousands of parts from hundreds of suppliers, many of whom, like Honda's, are located within driving distance; with others, however, the components could be a world away.  Certainly the crisis elevated the importance of strategic and localized supply management.  In Powered by Honda and Breakthrough Partnering, we looked at examples of companies that have succeeded by forming flexible and responsive supplier networks and holding procurement at the very top of their strategic thinking/org chart.  These companies, including Honda and its suppliers, built a team-based structure in which partners made long-term commitments, and it worked.  

Boston Consulting Group thought leaders Schuh, Schnelbacher, Triplat and Weise echo the immediate importance of high level strategic sourcing.  In fact, they say that this segment of business management controls more than half of a company's budget, as well as controlling the corporate financial health and destiny because as we have learned, supply chain failures affect everything inside - costs, employees, culture - and outside - market share, brand loyalty, and of course the financials.

Despite procurement's critical strategic role, however, we know that many organizations still position procurement management below other corporate functions, thereby excluding them from highest strategic input and decision-making.  Shockingly, the authors quote this very telling stat:  A proprietary BCG survey found that only 35% of the 150 top companies in the Standard & Poors 500 have a Chief Purchasing Officer (CPO) (or equivalent - in the leadership team, despite the cost dollars and production flows they are responsible for.

But what if that stat were to change, and we saw CPOs ranked in the top of all corporate execs on the org chart?  What would it take to elevate?

Here the authors offer ten practical principles for exploiting an advanced procurement capability:

1.  Start at the top by making suppliers and the procurement function leadership imperatives.

2.  Treat suppliers as friends by forging new, close relationships with most important, if not all, suppliers.

3.  Empower procurement by putting the procurement team at the heart of the product life cycle - from the idea stage on.

4.  Go Bionic by creating a procurement function that is human AND digital.

5.  Cut costs - fast.  

6.  Dream big together by pooling R & D resources with suppliers.

7.  Settle for perfection by supplier collaboration to eliminate all errors.

8.  Share your tomorrows by looking ahead and partnering to advance environmental, social and governance stanrds

9.  Get quicker together.

10.  Anticipate the inevitable.

Filled with supporting research and corporate examples, Profit from the Source offers more strategic thinking around the entire approach to suppliers.  Readers will be pleased to  see how the authors look at GM's historic turnaround, as well as other automotive producers' redesign of production and the supply base.  Other leaders mentioned as good examples include Tim Cook at Apple, ALV, OVC in Germany, even Elon Musk at SpaceX and Tesla.  

Patricia E. Moody

FORTUNE magazine  "Pioneering Woman in Mfg" 

IndustryWeek IdeaXchange Xpert

A Mill Girl at Blue Heron Journal, on-line resource for business thought-leaders and decision-makers,  patriciaemoody@gmail.com