To achieve significant improvements in value generation through practising lean supply, it is argued it is necessary to share sensitive information on a justified and selective basis, in both directions. This means that the customer must balance the risk taken by the supplier, by sharing information on its own commercial, technical and operating processes, in order to expect the same in return. Without such balanced risk, the supplier will be forced to apply risk premia, possibly making the relationship inefficient.
Professor Richard Lamming
Operating in increasingly competitive markets, stringent internal cost management will become critical. It will be necessary to identify and protect core competencies, while seeking to outsource non-core activity that can be bought in more economically, or to engage specialist expertise or resources not available in-house. This will lead to the development of innovative trading relationships with critical and preferred suppliers that have specific expertise and operate to world class standards and performance indicators.
These relationships will range from simple partnerships to complex multi-source alliances and consortia. Risk / reward models will be applied to link payment to the achievement of core organisational objectives. The very concept of core activity will be revisited and refined to ensure that all exportable costs are taken outside the business.
With the ever increasing pressure of competition and the need for effective cost management, some organisations may be unable to fund development for all their core activity and will look for development partners. The historical boundaries between the supplier and the client, and the internal relationships between procurement, finance, R&D, inventory management and sales will be redefined to create a co-ordinated and commercially aware team pursuing common business goals.
However, relying too heavily on bought-in skills, to the extent that core capability is undermined, may present a real threat to business stability and long term viability. Therefore complex supply market relationships must remain anchored within sound commercial arrangements underpinned by highly operative procurement. Appropriate indicators and management information systems will be essential to control the scope of the dependency.
Transactional, often resource-intensive, purchasing activity will continue to meet ad hoc needs, but its strategic impact and resource implications will be managed largely by using e-procurement tools and outsourcing. Integrating procurement into the broader arena of demand management will ensure that it retains a strategic role in regulating supply market dynamics, so that the overall value chain strategy continues to meet core business objectives and business strategy benefits from supply perspectives.
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