Transforming Sourcing and Supplier Management to Support Profitable Revenue Growth
December 16, 2014
With manufacturing CEOs intensely focused on creating profitable revenue growth for their shareholders, it is time for sourcing and supplier management teams to assess the alignment of their traditional responsibilities and strategies with this critical objective. While these teams must continue to improve supplier costs, ensure quality, and minimize risk, it is essential that they go beyond these customary goals and demonstrate an equally strong focus on revenue generation. A recent study by Directworks compared sourcing and supplier management professionals' top-priorities for 2015 to their assessment of the biggest challenges facing their company next year. The results show a clear disconnect. Cost management and quality are the top two priorities of the sourcing and supplier management teams. But these same respondents named revenue and cost management as the biggest challenges facing their company. And practically no one cited revenue growth as a sourcing and supplier management priority, presumably leaving this responsibility for other functional teams to support. Successful sourcing and supplier management teams will close this perceived "priorities gap" and demonstrate their value through greater contributions to profitable revenue growth. They will build and maintain a reliable component supply chain that supports innovation, provides greater speed-to-market, and enhances cost competitiveness. Here are two concepts to consider when developing strategies to support profitable revenue growth:
- Understand what is important to the customer and make smarter supply decisions
- Ensure the cost-competitiveness and reliability of the supply chain in new markets
- Collaborating with suppliers to leverage their regional knowledge of customer needs, market issues, and trends.
- Assessing the capabilities and performance of suppliers in the region to ensure that a reliable, cost-competitive supply chain can be built and maintained.
- Evaluating the availability and talent of local resources to support regional sourcing.
- Understanding the logistics and transportation options and their impact on total cost.
- Coordinating with demand planning, assessing the capacity of suppliers, and determining if the supply chain will be able to support expected growth.
- Gaining the necessary visibility into the multi-tier supply chain to meet compliance requirements and manage risk.
- Understanding all regulatory, compliance, and tax obligations related to a potential new market and the margin impact of enhanced regulatory oversight.