Why the best get better in sourcing
Late last week, I took a call with Tim Albinson, CEO of Aravo. Aravo manages, supplements and enhances supplier information.
Tim and I discussed the types of firms that adopt better supply chain practices and technologies. While we spoke, I sketched out several 2X2 matrices that illustrated some of the points we made. One of these looked at the different types of spending organizations and how they buy.
We discussed:
- Why do the best sourcing & supply chain organizations use the best technologies, best practices and get the best business returns while so many firms have difficulty getting even the basics of sourcing right? - Why so many firms struggle with picking the right suppliers at the right time? - Why decentralized firms are so political and inefficient when it comes to sourcing? - Which industries are doing well in today’s economy particularly when it comes to sourcing?
The Few True Users of Supply Chain and Sourcing Tech
The brief answers to some of these issues are:
- The best firms are the best because they make the pursuit of improvements a mission/competence of the firm. Sadly, too many firms are too complacent with innovation, risk taking and becoming an industry leader to do much to advance their sourcing and supply chain activities.
- Supplier decisions are often default decisions at firms and these decisions are rarely changed/challenged unless some significant external event forces the issue (e.g., bankruptcy of a supplier).
- Decentralized firms can have efficient supply chains and sourcing activities while still coordinating some buying between business units. The reason inefficiencies occur has more to do with politics, power and other human factors. If more buyers were logical, rational entities, we’d see far less inefficiency in the supply chain. People, not technology, are often the problem in getting better practices and technologies deployed in sourcing and supply chain matters.
- Traditional sourcing and supply chain technologies work best in industry sectors that are experiencing typical changes. When atypical change occurs (e.g., bankruptcy of two large auto companies in the U.S.), some technologies will be of absolute importance or necessity while others are not needed at all (e.g., do you need a sourcing solution when a particular commodity is extremely scarce?).