Procurement and Supply-Chain Leaders: Top Five Issues

By Patricia Van Arnum - DCAT Editorial Director

October 22, 2019

What are the key issues facing procurement and supply-chain leaders? From digital transformations to talent development to risk mitigation, DCAT Value Chain Insights provides perspective from thought leaders.

Providing perspective is Robert Handfield, PhD, Executive Director of the Supply Chain Resource Cooperative & Bank of America University Distinguished Professor of Operations and Supply Chain Management, North Carolina State University. Dr. Handfield will be hosting an upcoming Procurement Leadership program in early December.

For pharmaceutical procurement leaders, what would you identify as the five top/pressing issues impacting supply chains—overall or specific to pharmaceutical supply chains?

Handfield: 1. Digital transformation of supply chains. Understanding how to lead a digital transformation of their supply chain, including serialization, collaborative planning with suppliers, and managing efficiency of transactions. Along with this is the issue of data governance, and how to improve the quality of data in the supply chain.

2. Managing supply-chain risk. The number of drug shortages is going up, and it is often tied to generics, but this is an issue that impacts the entire industry. We all need to understand how disruptions in our supply chains can impact the final customer.

3. Developing talent. We need to think about how to get the best people into our supply-chain organizations, how to keep them, and how to develop them.

4. Working internally with key stakeholders to drive business value. Procurement leaders need to think not just in terms of cost, but in terms of how to influence stakeholders to engage in sourcing efforts, and how to establish a business case that appeals to these stakeholders in terms of other components of value, including technology, delivery reliability, quality, and financial working capital.

5. Increased global pressures. Preparing for the new era of global trade wars and tariffs, government regulation, and increasing pressure on our global supply chains. It is no secret that the life sciences are being targeted by governments, and we need to think about how to become more resilient in the face of these issues.

You co-authored a book, The LIVING Supply Chain: The Evolving Imperative of Operating in Real Time, to address the changes that have occurred and are still unfolding at various organizations that are involved in building real-time supply chains. What do you see as the “new rules of supply-chain management” and their application overall or in specific industries, such as the pharmaceutical industry?

RobertHandfield Circle

Robert Handfield, PhD
Executive Director, Supply Chain Resource Cooperative and Professor, Operations and Supply Chain Management,

North Carolina State University

Handfield: The changes we are writing about in the book, The LIVING Supply Chain are not just about technology—they are about true evolution in a biological sense. In fact, many of the changes have been captured in a set of statements we have called the “Rules of LIVING Supply Chains.” This was the thinking that led us to explore how digitization can be exploited to drive competitive value. We arrived at the conclusion that the intelligent piece of the real-time supply chain needs to be combined with a number of other cultural values within the organization. From there, it extends an upstream and downstream collaboration in the supply-chain network.

A good acronym that captures these concepts is “LIVING,” and is the basis for this book.

Live. Do you have a real-time (LIVE) view of your information?

Intelligent. Are you able to connect the essential leverage points in your network through the Cloud, mobile and other mediums that provides a platform for analytics? Can you track the DNA of your supply chain at a part number level globally? Can the system evolve to link to the objects in your supply chain?

Velocity. Is your entire enterprise and network focused on moving assets faster than ever before in its history?

Interactive. Is there a common governance structure that defines how observations are translated into issues, monitored, validated and translated into specific actions and responses?

Networked. Is your multi-enterprise supply chain networked in such a manner that a common and aligned view of business priorities and actions is aligned with trusting relationships common to everyone?

Good. Is your network truly good, with a common cultural understanding that transcends borders and seeks to establish good relationships as long-term assets that drive growth and transparency anywhere in the world?

These new rules are aligned with many of the rules that dictate how species, humans and genetics have evolved. They represent a natural evolution rather than a radical one. They are occurring because the world of global trade has reached the limits of its growth without re-shaping the way it operates. Welcome to the LIVING supply chain that operates in real time.

What role do you see for advanced analytics and other digital tools, such as artificial intelligence and blockchain, in procurement and supply management? What do you see as both the opportunities and challenges?

Handfield: The organizational scope of procurement analytics has shifted from efficiency of internal organizations to information interfaces with suppliers as the importance of outsourcing increased. In addition, the wide introduction of IT-enabled digital communication between organizations lowered transaction costs by integrating supply chain in the information domain. Moreover, sourcing organizations increasingly adopted centralized sourcing strategies, thereby raising the importance of data analytics in sourcing. Since both outsourcing and centralized sourcing are primarily conducted to reduce costs, procurement analytics is expected to provide groundwork that assists managers with decision-making within alternative sets (e.g., visualization and decision support).

The advanced temporal scope of procurement analytics will move beyond current events to real-time data. This scope overcomes the weakness of procurement analytics based on historical data; after all, there is always a gap between past and present patterns of observations. The increase in computing power (e.g., cloud computing) has compressed the required time for data processing and gave rise to the birth of real-time data analytics. However, as the volume of data grows, simultaneity of observation and analysis become a requirement, but exposes the risk of trade-offs between the reliability and depth of information with data- processing speed.

The most sophisticated temporal scope of procurement analytics deals with upcoming events. This approach provides a solution to the key limitation of the aforementioned temporal scopes: when taking managerial actions based on past and current observations, managers cannot eliminate a lead time between the observations and the actions. Predicting upcoming events not only reduces risk and uncertainty that managers perceive during business operations, but also narrows the time-window between the observations and the actions. Thus, this approach helps increase the responsiveness of a supply chain and secure competitive advantage by preemption of related resources. After all, the primary purpose of addressing upcoming events is to shorten the lead time to the action. The intelligence of procurement analytics needs to consider alternative sets and determine the optimal choice within the sets. We may see more of this in the future.

Can you provide some specific examples on current or potential applications within or outside the pharma industry?

Handfield: Some key examples include being able to consider future demand-planning activities, potential risks in the supply chain that may hinder shipments, cold-chain logistics to monitor the handling conditions of key shipments, and identification of transportation disruptions that may impact clinical trials or customer deliveries. In a risky world, organizations need to be able to monitor their products, especially with the infusion of increasing counterfeit products entering the supply chain. As we move toward greater localization, identification of second sources and moving away from single sources is a key opportunity that must be supported by analytics and what-if scenarios.

Driving analytics is a function of starting with a business problem or issue, and driving data integration around the issue into a data lake. It requires leadership and vision, and the ability of individuals to carry out that vision and drive to essential key performance indicators that can lead to management insight. Procurement needs to be able to establish a business case using real data, to drive change with key decision-makers. This is especially true for business functions such as finance, engineering, and scientists who rely on data to make decisions.

How do you see procurement and/or supply-chain organizations evolving both in terms of talent required, functions, or organizational design over the next five years? What do procurement/supply chain leaders need to be mindful of and adapt to?

Handfield: To be successful at driving change, procurement leadership means you have to be able to influence key business stakeholders, and hitch your program to their priorities and business objectives. In doing so, you will be able to work more closely with them, and develop a range of options that provide these business partners specific solution-based outcomes to their challenges. Purchasing influence is a theme of a new book chapter that I co-wrote with Tom Nash of the American Red Cross, which will be coming out next year. Influence involves first understanding how to communicate effectively to stakeholders, to listen and understand what is important to them, while recognizing that there are significant differences in their priorities and yours that need to be successfully aligned. Many business leaders think purchasing only cares about reducing price, and if you aren’t able to dissuade them of this notion, you won’t be successful.

To that end, the Supply Chain Resource Cooperative (SCRC) at North Carolina State University will be hosting a procurement leadership conference in December (December 9–13, 2019). As the SCRC Executive Director, can you provide some key take-aways expected from the program?

Handfield: We have designed our Procurement Leadership program with the goal of unpacking this concept as the target. Participants will conduct a pre-workshop self-assessment that will help them to understand their organization’s profile in terms of purchasing capabilities and priorities, as well as the individual’s relative influence within their organization. This then leads to an understanding of how to assess business priorities, and how to harness purchasing objectives to these priorities. We’ve designed a highly interactive program aimed at senior practitioners with a need to deliver significant improvements to their organizations. Based on Kotter’s 8-Stage Change Model, the program focuses on situational and self-evaluation leading to discussions that result in insights and ideas for improvement. Delegates will present their ideas in plenary each day, receiving feedback from their peers culminating with direct feedback at an individual level from a group of visiting experts in their respective fields. We will also be hosting a number of guest speakers, including Howard Richman, who has been in procurement roles at Mars, Merck, and now Citrix, Renee Ure, Vice President for Global Supply Chain at Lenovo, Amy Rumford, Vice President of Supply Chain at Advanced Auto Parts, Brad Kirkman, a world-recognized expert on team leadership and author of the book 3D Team Leadership, as well as a number of other former supply- chain leaders who will be sharing their thoughts with the delegates through one-on-one discussions.

We have also stacked the program with a number of current updates on topics that are critical for purchasing leaders to be aware of, and offer opportunities for you to engage with others in the field to share thoughts, brainstorm new ideas, and learn from one another through discussion of these topics. Some of these include getting started on a digital transformation of your business and what it means for procurement; navigating the new scenario of global trade wars and tariffs, addressing the increased demands for sustainability, transparency, and compliance within global supply chains, and how to support and nurture diversity within your procurement organization. All of these topics are ones I’ve been involved in, and will be leading the discussion on.

People learn through communication with mentors and experts. It’s something that I’ve learned to benefit from throughout my career, and I am excited about creating similar experiences for procurement leaders everywhere.

Further information about the program, which will be December 9 to 13 in Raleigh, North Carolina, may be found here, including how to register.