supply management as a core capability (smcc)

Supply Management as a Core Competency(SMCC)

Jan 2010 (rev 1)

Welcome to Purchasing Practice

Copyright Corporate Purchasing Practice Inc

We are passionate about helping you realise the powerful benefits to be gained by developing key capabilities in supply management (SM).

So passionate we believe SM must become a core capabilityIn all organisations.

Purchasing Practice is a specialist niche consultancy specialising in procurement -Procurement is all we do.

As a supporter of open innovation in SM we present our thoughts on what is involvedin advancing Supply Management as a core competence and invite interested parties to share their views to develop this theme.

Thanking you in advance,

David HenshallFounderPurchasing PracticeBuilding Capability in Procurement & Supplywww.purchasingpractice.com

Aligning Business & Supply Management (SM) Strategy

Business Strategy

Branding & Reputation

Revenue Growth

Organisation Structure

Product Differentiation

SM Strategy

CSR

CRM & SRM

Cost Optimisation

Innovation

Customers & Stakeholders

Supply Market CapabilitiesSCM


Integrating Supply & Demand Side Plans is Critical to Delivery of the Business Plan

Supply Management as a Core Competency(SMCC):SMCC is a key enabler of the management of risk from threats and the exploitation of opportunities in a company’s external environment.


PrimaryBusiness

Competency

Primary Value Chain

Organize Resources to

exploit

FinancesStructurePlanning & controlTechnology

Tangible Resource

PeopleInnovationReputation

In -Tangible Resource

Core business competency = strategic capability

Sustain competitive advantage

Sales &Marketing

Source & Procure

Convert(Add Value)

ServiceDelivery

+

+

Supply Management as a Core Competency(SMCC): A core competency must be invested in to build capability


PrimaryBusiness

Competency

Build Supply ManagementCapabilities

PlanningCategory ManagementStrategic sourcingOpportunity AssessmentContracts ManagementSupplier relationship MgtP2P

FollowerCapabilities

Leadership Cost Management Collaboration Innovation Risk Management HR & Talent Mgt

Leader Capabilities

Market Making Maximise Opportunity Balance Risk Cost Optimisation Entrepreneurial Core Agility Market Sensing Brand & Reputation Mgt

Innovator Capabilities

Sustain competitive advantage

Sales &Marketing

Source & Procure

Convert(Add Value)

ServiceDelivery

Core business competency = strategic capability

SMCC and Capability MaturityThe more Highly Developed SM Competency is the More Strategic Value is Gained


Strategic

Sourcing

Category

Management

Supplier

Relationship

Management

Demand

Management

Value

Management

Cost Down

MarketMaking

Value

Market

Management

Cost Out

Cu

sto

mer

& S

up

plie

r

Fo

cu

s

Pro

cess &

Beh

avio

ur

Fo

cu

s

Cate

go

ry

Fo

cu

s

Sta

ge 1

Sta

ge 2

Sta

ge 3

Cost Optimised –

Differentiated Product

CollaborativeStrategies

LeverageStrategies

Ca

pa

bili

ty

SMCC at the Market Management Level:

Market Making

Opportunities

Drive

Growth


SMCC Is at its Optimal State when Procurement Develops its Entrepreneurial Core O

pti

mis

e C

ost

Balance Risk

Maxim

ise O

pp

ortu

nities

Sensing & Responding

Innovate

EntrepreneurialCore

The Entrepreneurial Core Collects & Disseminates External Information to Formulate Strategies to Capture New Business Opportunities


8

SMCC Becomes a Primary Business Process in the New Business Value Chain

Business StrategyDelivery

Pri

mar

yB

usi

ne

ss P

roce

sse

sSe

con

dar

y B

usi

ne

ss P

roce

sse

s

Sales & MarketingProcurement & SC

Supply ChainPlanning

Convert(Add Value)

ServiceDelivery

Value Chain Strategy

Information Technology

Finance & Accounting

Human Resources

Strategic Responding

External Sensing

Enab

lers

The Value Chain has evolved - modern businesses are much less vertically integrated and continue to outsource more and more and SM has become a core competency:

SMCC + Entrepreneurial Core = Deep External Market Understanding

Product Strategy

& Marketing

Plan

CategoryPlans

+/-Impacts

+/-Impacts

Demand MarketForces

Supply MarketForces

Opportunities & RiskOpportunities & Risk

Sensing & RespondingSensing & Responding

Procurement& SCM

Sales & Marketing

Knowledge Management

Framework

Copyright: Corporate Purchasing Practice Inc ©


External Forces Need to be Monitored, Filtered, Processed & Acted Upon:

The ability to respond to external forces faster and more effectively than competitors delivers a clear competitive advantage – Category & Marketing Plans Provide the Link to Business Strategy Delivery

The New Competency Driven Value Chain Must Evolve & Respond to External Forces


CompetitorActivity

Cu

stom

er

Activity

Sup

plie

rA

ctiv

ity

SubstituteProducts

Strategic competencies in this less vertically integrated environment are significantly different:

Po

litic

alA

ctiv

ity

EnvironmentalConcerns &

Events

Social

Tren

ds

TechnologicalDevelopments

Integrating Supply & Demand Side Plans


External Sensing is Translated into Responses via Category & Marketing Plans:

Supply Environment Forces+/- Impact on

Extern

al Factors

= Op

po

rtun

ities o

r Thre

ats

Product

Promotion

Price

Place

Maximise Opportunities

OptimiseCost

Balance Risk

Capture Innovation

= Op

po

rtun

ities o

r Thre

ats

Extern

al Factors

CompanyEnvironment

CulturalForces

Internal Factors = Strengths & Weaknesses

Internal Factors = Strengths & Weaknesses

Mic

ro-e

nvir

on

men

tM

icro

-env

iro

nm

ent

Mac

ro-e

nvi

ron

men

t

Demand Environment Forces +/- Impact on

Procurement

CompanySuppliersInnovation

Policy

Sales & Marketing

CompanyCustomersCompetition

Policy

Supply Market

Demand Market

Marketing Plan

Category Plans


SMCC Supports Business Strategy OptimisationOrganising and defining what will be done as part of any Strategy Optimisation programme

Strategy Evaluation

Cost Optimisation

ProductDifferentiation

Process Re-engineering

Outsourcing

Strategic Sourcing

Investments

Internal View

Competitor View

Best in Class View

Investor View

Strategy Optimisation

Setting Targets

Prioritising Initiatives

Resources, Governance, Alignment

SupportingOrganisation

Ba

selin

e

Marketing Evaluation

Category Evaluation

Marketing Plan

Category Plans

SMCC Requires World Class Organisation and Capabilities:

Vision & Leadership

Market

Making

Opportunities

Drive

Growth

ProcessesSourcing

Management

Supplier

Relationship

Management

Operational

Purchasing

Management

Standards &

Tools

Performance

Measures

Knowledge

Managemente-enabled

Performance

MeasurementCompliance

Contract &

Supplier

Management

Continuous

Improvement

& Innovation

HR Management

Organizational

AlignmentStructure

Policies &

Procedures

Roles &

Responsibilities


Purchasing Practice Model of Procurement Excellence

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supply management as a core capability (smcc)

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