Supply Management: Supply Managers Into New Shoes

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Supply managers, formerly known as procurement chiefs, are the new managers to watch. Until recently, they spent much of their time-and their careers-tied to warehouse, and their primary concern was to reduce costs. Then companies in a range of industries started waking up to the fact that supply managers were well-positioned to play a more strategic role, to help drive innovation and to think outside the traditional four walls of the warehouse. Instead of sticking to their original function-purchasing what the company needed at the lowest cost-supply management leaders now enable their companies to become more agile competitors. As a result, they're finding themselves on the fast track to the executive suite.

Today, not only do companies expect supply management to save money-our experience finds most companies can save an average 8-12% in overall procurement costs, and in categories such as hotels and telecom up to 40%-but they also expect supply managers to deliver shorter cycle times, help with product innovation, enhance the quality of products or business outcomes and even play a part in revenue generation. Whereas, in the past, they purchased pencils, now they are instrumental in securing a range of services, including outsourced business processes and information technology.

In a recent Bain&Company survey of 156 supply experts conducted, more than 90% said they had been tasked with new and broader responsibilities in the last three years. It's not too hard to see why: In an era of geo-political risks of supply-chain disruption, increasingly constrained natural resources, and the exploding importance of information technology and global services, supply management has become mission critical. Even as little as five years ago, such a possibility seemed remote. In 2001, for instance, Sloan Management Review published an article titled Strategic Purchasing Remains an Oxymoron.

But, all that is changing. Today, supply managers are expanding their influence within their organizations, and the ones who deliver results are also moving up in status. An institute for supply management survey shows that more than a third of Fortune 1000 companies have recently placed manufacturing, which is a key training ground for CEOs, under supply-management executives. Previously, corporate leaders rose from marketing, finance and production. Now they're being bred in supply management.

Consider Chrysler's President, Tom Stallkamp, who used supply-management savvy to transform the car maker's cost position into an asset that proved irresistible to acquirer Daimler-Benz. Stallkamp, who went from being a Ford buyer to vice chairman of DaimlerChrysler, later went on to become CEO and chairman of MSX International.

Likewise, when the former chief procurement officer (CPO) at Waste Management, Bradley J. Holcomb, was hired as senior vice president of Global Materials and Supply by Royal Group Technologies, his mandate became not just to reduce procurement costs, but also to lead key businesses-deciding whether they are a core capability and competitive enough. As a result of Holcomb's analysis, Royal has divested several businesses. Holcomb also leads Royal's China strategy, where his experience in outsourcing and global supply is vital.