Is Supply Chain Management a Core Competency for your employer (ask that during an interview)? https://lnkd.in/euh2rFdU and https://lnkd.in/gtacAh_e. If you work in SCM, don’t you want to work for a company that has a core competency in SCM?
Reads…
How should orgs use competitive bidding?
https://lnkd.in/gS9vCRQ6
Assume a supplier estimates the following costs on an RFQ
https://lnkd.in/gxFBz3_U
ROI & Your Core Competency (i.e., SCM?)
https://lnkd.in/euh2rFdU
To stay competitive, companies are forced to outsource commodities & focus on core competency
https://lnkd.in/g-DHtt8X
The primary elements for sourcing a partner
https://lnkd.in/ga2xtDsi
What does it mean to be hollow? Sourcing Strategy matters!
https://lnkd.in/gHB-nzeJ
The most reprinted article in HBR: The “Core Competence”
https://lnkd.in/gDsHme-r
You have every legal right to say you want a “cost breakdown”
https://lnkd.in/gygd5bzs
Procurement 101: Explanation on Commodities
https://lnkd.in/g_nEgvhJ
How do companies outsource strategically?
https://lnkd.in/gevbRKEq
Advanced Contract Mgmt: https://lnkd.in/gcpHEEvw
How SCM managers “prepare” to negotiate price increases. https://lnkd.in/gVrdpuer
Supplier Cost Breakdowns and How To Negotiate Price Increases: https://lnkd.in/gp5naJxE
https://lnkd.in/gGRaKtVK
https://lnkd.in/gMuhMNf6
https://lnkd.in/gQZ7HfWb
https://lnkd.in/gvCpr6T5
https://lnkd.in/gPVMbWd6
https://lnkd.in/g6qdMvcS
https://lnkd.in/gwFjDfx7
https://lnkd.in/g494sxYr
https://lnkd.in/g6Uxkuby
Break-even calculation (see page 20 of slide show):
https://lnkd.in/gDr7DhJx
In 1990 C.K. Prahalad & G. Hamel published The Core Competence of the Corporation that to this day is one of the most reprinted articles in the history of the Harvard Business Review (HBR). It keeps getting reprinted because its premise is still very relevant (perhaps more so today). This core competency article argues that every organization needs to focus all of its scarce, limited, & valuable resources (manpower, machines, money, management, and material – the 5Ms) on being the best at one specific thing (your core competency). The idea is that if you try to be a huge diversified conglomerate that attempts to be the best at everything, then you will eventually underperform at everything because you will have to spread your resources out too thinly across too many areas.
If someone does something better, faster, and cheaper than anyone else in the world (their core competency), then wouldn’t everyone go to them for it? Think of it this way – Why wouldn’t you outsource your “non-“ core competencies to someone that can do it better, faster, and cheaper than you (because it’s their core competency)? That then leaves you with resources which can be directed towards your core competency (assuming you know what it is). But, isn’t developing a core competency putting all of your eggs in one basket? Answer – no. See 3M & Honda examples at: https://lnkd.in/euh2rFdU.
Final Thoughts
Here is a final thought before you read the HBR article again. SCM has evolved into a core competency for several firms, especially manufacturing firms that deal with global competition, saturated markets, & thin margins. These firms outsource everything & SCM has to be a core competency, otherwise they fail. Think about it. These firms outsource everything and they often do it w/ the same suppliers that their competitors use.
The auto industry is a very good example of that. Who wins in that situation? Answer: The company that manages their suppliers the best. SCM has allowed them to widen margins & increase asset turnover rates, and that translates into a higher return on investment (ROI = PM x ATR). Recently OEMs & larger Tier I suppliers have started to further review all of their functional areas (like purchasing, operations, & logistics mgmt) and partner with services firms to support part of their supply chain operations. Companies are finding certain processes, such as supplier identification & qualification can be more efficiently executed outside their organization, freeing up value time to focus on other internal supply chain core competencies such as contract negotiations.
Here is the Core Competency paper with my notes (from decades ago!)…https://lnkd.in/eHNrckdK
More material:
https://lnkd.in/g-DHtt8X
A few students out there have asked: How can SCM impact the bottom line? No other major has a greater impact on what goes into the ROI calculation. That is why you will likely be immediately bonus eligible & your highest ranking functional area leader will have a VP in front of their name. For handout on ROI:
https://lnkd.in/gcpbi2Tk
Watch these 3 parts:
https://lnkd.in/g2BC9YHn
https://lnkd.in/gfchx-9d
https://lnkd.in/gn-97v_B
Explanation:
Remember, ROI = profit margin * asset turnover rate (ATR). ATR = sales/total assets and total assets = current assets + fixed assets, and current assets = inventory + accounts receivable + cash. I keep telling my students if they can widen margins and/or increase ATR, then ROI will go up. So, if you can reduce your total assets without changing sales and/or increasing sales, then ATR goes up. For example, reduce your inventory and your ATR will go up and ROI will go up. If you can do more with less, then your ATR will go up. No other major has a greater impact on what goes into the ROI calculation.
Companies right now are outsourcing not only their direct & indirect material needs, but also entire functional areas to other companies that have core competencies in these functional areas. For example, companies are outsourcing logistics/transportation/distribution management to 3PLs & 4PLS because these 3PLs & 4PLS can do it better, faster, & cheaper – it is their core competency. Are companies outsourcing purchasing/procurement/sourcing? Yes – to BPOs (Business Process Outsourcing firms), especially for indirect (e.g., MRO, printers, toilet paper, travel, advertising, etc.) and even direct. Are companies outsourcing manufacturing/production/operations? Yes – to manufacturing subcontractors like Jabil Circuit. Jabil can build circuit boards for industries such as aerospace, automotive, computer hardware, etc. Companies that outsource to Jabil do not have the economies of scale that Jabil attains by consolidating customer volumes across many industries.
A strategic outsourcing strategy requires a deeper level of supply partner involvement as it not only includes outsourcing direct and indirect material needs, but also entire functional areas and core processes requiring strong skills sets &a core competency in SCM to succeed.
For more sourcing strategy, see:
https://www.simecurkovic.com/2021/04/29/how-should-companies-use-competitive-bidding-think-long-term/
Video lectures:
https://lnkd.in/g2YuH4Ty
https://lnkd.in/g5Gppj_5
https://lnkd.in/gtKnNdkz
My notes…
https://lnkd.in/gtCy_rBs
In some industries like high tech (i.e., Texas Instruments, Hewlitt Packard, Honeywell, Intel, Apple, etc.), their product life cycles are so short that they cannot afford or do not want to make the capital investment that Jabil can and does for circuit boards. Companies like Nike, Mattell Toys, Dell, etc., do not actually even build anything themselves and they outsource everything to manufacturing subcontractors.
Reads…
How should companies use competitive bidding?
https://lnkd.in/gS9vCRQ6
Assume a supplier estimates the following costs on an RFQ
https://lnkd.in/gxFBz3_U
ROI and Your Core Competency (i.e., SCM?)
https://lnkd.in/euh2rFdU
To stay competitive, companies are forced to outsource commodities and focus on their core competency
https://lnkd.in/g-DHtt8X
The primary elements for sourcing a supply partner
https://lnkd.in/ga2xtDsi
What does it mean to be hollow? Sourcing Strategy matters!
https://lnkd.in/gHB-nzeJ
The most reprinted article in the Harvard Business Review: The “Core Competence” Article
https://lnkd.in/gDsHme-r
You have every legal right to say you want a “cost breakdown”
https://lnkd.in/gygd5bzs
Procurement 101: Explanation on Commodities
https://lnkd.in/g_nEgvhJ
How do companies outsource strategically?
https://lnkd.in/gevbRKEq
POs & Advanced Contract Mgmt: https://lnkd.in/gcpHEEvw
How SCM managers “prepare” to negotiate price increases. https://lnkd.in/gVrdpuer
Hundreds of SCM Blogs…
https://lnkd.in/e5zG6sZ
https://lnkd.in/g9_XQdaG
Recent observations & career advice (videos/podcasts):