Seven rules of supply chain management

Tom Linton, Chief Procurement and Supply Chain Officer at Flextronics, at this year’s World Procurement Congress (WPC) highlighted the 7 new rules of supply chain management:

Rule 1 – Digital vs. analog

Analog has developed into a digital world which is predominately based on the internet. The information leveraged from devices connected to the internet is not static and behaves in real-time.

Rule 2 – Cash vs. cost

GDP across the world is mostly in single digits meaning organisational revenues are not growing quickly enough to mitigate increasing costs elsewhere such as labour costs, especially in once low-cost regions. Procurement are working hard on cost reduction and will continue to do so however, the function needs to examine the organisational balance sheet as it can be full of cash, such as in high inventory level. This cash can be turned into gold as speed to market can be improved through real time information.

Rule 3 – Flow vs. friction

To be more agile and faster procurement need the systems and business processes in place to flow better, allowing the supply chain to flow more effectively.

Rule 4 – Predictive vs. reactive

Everyone wants to become predictive especially with regards to supply chain management but it is difficult to achieve. However, harnessing intelligent real-time data can help procurement become more predictive and ultimately make better decisions and mitigate potential risks.

Rule 5 – Real time vs. batch

Batch based system are common across all industries however they only inform businesses yesterday’s news, when what is happening now is extremely important and real-time data can provide this information.

Rule 6 – Transparent vs. multi-tier

Achieving transparency within the supply chain is crucial, values of a company should be shared down the entire supply chain to do this procurement must not only manage their suppliers but also influence them.

Rule 7 – Cognitive vs. transactional

Ten years from now the procurement function will move to machine-to-machine sourcing, these technologies are emerging right now therefore procurement need to be willing to change and adapt to succeed. Utilising cognitive technologies will also make it increasingly possible to automate business processes and reduce labour costs.

So what will cognitive procurement mean for buyers? Linton concluded “cognitive procurement means we will need fewer people”. Scary stuff, perhaps, but these efficiencies sit with procurement and the possibilities of them to become business leaders is immense.