The Future of Sourcing – Business Partner to Business Leader

Sourcing evolved from transaction management to category management sometime in the 1990s. This had a significant impact on the way corporate leadership viewed sourcing professionals. Sourcing moved from an organization that finalized pricing into an organization that provided experience on the dynamics of supply market and helped companies drive value through the total cost of ownership. To make this transition, companies hired MBAs with an ability to comprehend functional strategies and use supply markets to support them.

Evolution of Sourcing / Procurement Organization

Sourcing Evolution ver1

What’s next?

Logically, the next evolution will probably see sourcing professionals directly contributing to business strategy — moving from being a cost center to becoming an essential part of the business very similar to its marketing or R&D organizations. For want of a better term, I am calling the next evolution as Sourcing 3.0. A sourcing team’s contribution to company strategy will be through developing and managing strategic suppliers who will drive business outcomes like increased revenue, reduced dangers or decreased price in a business level. Strategic providers can execute a variety of role for a company. They have a considerable effect on business outcomes. Traditionally, these providers were considered out of scope for sourcing organizations since they needed different skills and toolkits than currently exist, and companies preferred to manage them directly.
CPOs recognize strategic suppliers as an opportunity area but emphasize the issues with insufficient toolkits and abilities in their company to effectively engage these providers.

What are these different skills and toolkits?

Working with strategic providers needs two essential skillsets — a collaborative mindset and an analytics-based approach. This differs from the approach used for category management where market / competitive forces drive efficiency.
As an example, among the tools we’ve employed is the “Should Cost” modeling. We’ve used the “Should Cost” models across many industries and corporations where we readily shared the information with the strategic suppliers. This approach demands financial and analytical experience in addition to the commercial expertise typically needed from a buyer in a strategic sourcing organization. Additionally, it requires “influencing skills” to treat suppliers as real business partners. These multi-year relationships need careful ongoing relationship management by linking performance to business goals.

Example of a toolkit – “Should Cost” modeling

 

Sourcing organizations have been developing cost models. It’s critical for strategic suppliers as understanding the underlying costs can identify opportunities for outcome improvements.

This concept is sometimes confusing to our clients as they believe the objective of cost modeling is to decrease costs, and they don’t understand the linkage between the improvement of result or service. Cost modeling is a tool that can also identify areas where cost could be added or redirected so as to improve service or quality of the product in addition to making the operation more efficient.

Below is an example of a should cost modeling. A technical call center contract at a Pharmaceutical company required that the provider maintain infrastructure at a particular location with a set of stringent technical requirements. The requirements changed significantly over time due to changing business environment; however, both firms struggled to figure out how best to redefine their relationship.
Should Cost modeling showed significant potential for service improvement by spending more on agents who attend the phone and less on overhead areas like program management and administration. The change in the contract was also a win for the provider as they now have greater flexibility in establishing the infrastructure and location.

Restructuring of Strategic Call Center contract through Should Cost Modeling

Call Center Cost Model ver1

How then do we affect change?

Creating these new capabilities could be the change agent which will evolve sourcing organizations from a cost center to becoming an integral part of the business enterprise. This resembles the category management expertise that led to the evolution of the procurement organization to a strategic sourcing organization in the late 1990s and early 2000s.

About Author:

Bob Johansen
Distinguished Fellow / Institute for the Future

There’s no use building a bridge if your customers don’t want to go there. This book shows you new ways to prioritize your customers. How can you use engage with changing customer needs—not just push old products at new needs? How can you win by helping your customers win?

Milind Yedkar
General Manager, Asia Pacific & Japan, Cloud Client Computing / Dell

Suman Sarkar’s ‘Customer Driven Disruption’ is not just another book preaching customer focus to business executives. Rather than restrict himself to homilies, Suman lays down five strategies that can help bring the ‘C’ into business planning. He illustrates each strategy with a rationale backed by numbers and specific steps to bring it to life with examples from across industries. The book ends with a set of guiding questions that can be used by thoughtful executives either by themselves or in a team setting to develop an action plan for their organizations.

Praveen Madan

This book disrupts disruption! It redefines what causes disruption and what you can do about it. It accomplishes this with an elegant paradigm shift that’s profound and yet simple. Suman’s conclusions are based on powerful insights from research, case studies of leading companies, and decades of business experience. You will never think of disruption in the same way again.

Crystal Kadakia
Founder & Principal Consultant / Invati Consulting

Suman Sarkar redirects the focus back to what made your business a business: it's customers. With many case studies and concise takeaways, this book is a handy guide to shaking up your innovation strategy.

Jeanne Bliss
President / CustomerBliss

Suman Sarkar is a strategist after my heart—like me, he believes that real change and innovation come from customers’ actual needs and wants, not from researchers in lab coats. Customers WILL tell you how to make your business thrive and win the future--if you learn how to listen. This book explains how to open your ears.

John A. Goodman

Sarkar puts forth new, actionable definitions of customer focus, personalization, and quality along with a roadmap that your team can use think creatively and be more willing to take intelligent risks.

Renee Evenson
Author of nine books

This is an excellent, thought-provoking book that offers clear strategies enabling you to understand buying patterns and generational expectations. Customer-Driven Disruption will inspire you to effectively plan for and stay ahead of your competition by focusing on your customers and what they want.

Steve Curtin
Author of Delight Your Customers / Steve Curtin, LLC

In Customer Driven Disruption, Sarkar shows that technology isn’t the real driver of disruption, and he unveils many more surprises that will challenge your assumptions and prepare you and your organization to stay ahead.

Henrik Thorén
Vice President, Group Sourcing North East Asia / Ericsson

The book is very inspirational for anyone working with Sourcing and Supply Chain. Sourcing and Supply Chain is not always a top priority in many companies, but this book shows some really good examples of how this can make or break a company. There are also some very good concrete examples of what and how to do which inspires you to challenge your own thinking.

Henrik Thorén
Vice President, Group Sourcing North East Asia / Ericsson

The book is very inspirational for anyone working with Sourcing and Supply Chain.

Dr. Christopher Burke
Dept of Information, Risk, and Operations Management / McCombs School of Business, The University of Texas at Austin

Excellent book. Well developed and hitting some excellent new and futile SC topics.

Suman Sarkar

Suman’s mission is to help clients achieve a competitive edge in the marketplace. With more than 20 years of international consulting experience, Suman has a proven track record delivering an innovative and strategic approach with outstanding results.

Martin Christopher
Emeritus Professor of Marketing & Logistics / Cranfield School of Management, UK

Successful companies in every industrial sector have long recognized that competitive advantage comes not just from the products or services that they offer but from the supply chains that support them.  In this easy-to-read and insightful book, the author explores the opportunities that exist for improving profitability through supply chain excellence and provides practical guidance on how to achieve the goal.

P. Venkatram
Vice President, APAC Planning and Logistics Head / LEGO

This book is indeed thought-provoking for supply chain practitioners as well as for business leaders. Suman Sarkar’s guided multi-step approach focuses on simplification without ignoring business complexity. It will help companies reform their supply chains to enable a healthier business.

David Dreyfus
Assistant Professor, Department of Supply Chain Management / Rutgers Business School

As someone who teaches supply chain management, I was very interested in this book. Overall, I enjoyed the book. It was a good, quick read that offers advice, wisdom, examples that you can import into your own business or job. Suman describes in detail some of the great projects he has gotten to be a part of during his career. The book offers a lot of great advice, which could help you and/or your organization avoids some mistakes. The book leans towards the marketing side of the business a bit. I like that there are actionable ideas presented.

Atul Tripathi
Senior Director, Global Value Innovation / Pepsico

The Supply Chain Revolution is a brilliant, clear, and simple guide for corporate executives who want to transform their supply chain. I have never seen such a clear and actionable plan for taking supply chain management to the next level. Supply chains have become more complex in the last three decades as a result of globalization, the increasing pace of innovation, and competitive intensity. Suman Sarkar explains how best-in-class companies debottleneck their supply chains by drawing from his own experience transforming supply chains both from inside a company and from outside as a consultant.

Raj Kamalapur
Assistant Professor, Department of Management and Marketing / College of Business, Angelo State University

This book has done an excellent job in explaining many important areas of supply chain like customer segmentation, customer service, demand planning, alliance management, inventory management, streamlining supply chain, fixing bottlenecks in supply chain, managing store investment, enhancing marketing efficiency, facilities outsourcing, sourcing excellence, supplier selection, relationship management and many other areas. One area that could have received more attention in this book is in the area of logistics. Overall this is an excellent book to read and enhance your knowledge in the area of supply chain and sourcing.

Xianghui (Richard) Peng
Assistant Professor of Operations Management / Eastern Washington University

The Supply Chain Revolution identifies and explains many supply chain challenges that frustrate executives most. It delivers corresponding practice-proofed approaches to respond the challenges. The fruitful hands-on industry practices throughout the book provide significant value for organizations to transform their supply chain. This book is a great resource for executives and senior supply chain professionals to use for self-learning or training, and for MBA students with a concentration in supply chain management to complementarily use in class.

Satish Jain
Director, Supply Chain optimization / Scotts Miracle-Gro Company

Suman Sarkar does a great job in explaining the practical solutions to common supply chain problems. He delivers an engaging balance between strategic perspectives and operational issues that make for an interesting read.

Yogesh Gupta
Vice President Global Operations / Cargill Business Services

Suman Sarkar does an excellent job of demystifying supply chain concepts and presents a logical framework to unlock tremendous value across the organization value chain. The fact that Sarkar has been a “hands-on” practitioner himself allows him to showcase solutions that will resonate well with supply chain managers /leaders across the industry spectrum. Well done, Suman . . . . eagerly awaiting future insights.

Mary Anne Gale
Retired VP of Supply Chain / Procter & Gamble

A wonderful book for supply chain and business leaders. He has presented examples that tell the story of the fundamentals in a memorable way.  It demonstrates the value of supply chain in delivering bursts results.  I highly recommend him to anyone leading a supply chain.

Ramesh Krish
VP Supply Chain and Head of Procurement / Presbyterian Healthcare Services

The Supply Chain Revolution provides a lucid commentary of some of the most basic supply chain challenges frustrating senior management across different industries. Adopting a methodical approach to inventory tracking, product fulfillment, and channel distribution will help yield significant value in cash flow and reduce inventory obsolescence costs.

Ramesh Krish
VP Supply Chain and Head of Procurement / Presbyterian Healthcare Services

The Supply Chain Revolution provides a lucid commentary on some of the most basic supply chain challenges...

David Dreyfus
Assistant Professor, Department of Supply Chain Management / Rutgers Business School

The book was a good, quick read that offers advice, wisdom, examples that you can import into your own business or job. 

Yogesh Gupta
Vice President Global Operations / Cargill Business Services

Suman Sarkar does an excellent job of demystifying supply chain concepts...

Mary Anne Gale
Retired VP of Supply Chain / Procter & Gamble

A wonderful book for supply chain and business leaders

P. Venkatram
Vice President, APAC Planning and Logistics Head / LEGO

Thought-provoking book for supply chain practitioners as well as business leaders.

Richard Connelly
Former Budget leader, Energy Director / Defense Logistics Agency (Department of Defense, USA)

The Ideal Supply Chain Primer for the Time-Pressed CEO or Gov­ernment Executive

Atul Tripathi
Senior Director, Global Value Innovation / Pepsico

Brilliant, Clear and Simple Explanation of Supply Chain Transformation

Richard Connelly
Former Budget leader, Energy Director / Defense Logistics Agency (Department of Defense, USA)

The Ideal Supply Chain Primer for the Time-Pressed CEO or Gov­ernment Executive In clear, concise language Suman Sakar de-mystifies the complexities of supply chain management. The key to his process is simplification. In a world of business books full of buzz words and unnecessary complications, this is a refreshing approach. Sakar breaks supply chain management into its component pieces and succinctly lays out the relationships. If you are getting foggy, conflicting advice from staff and suppliers, as I frequently did in a career managing large organizations, you will find this short read welcome clarification.

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