Executive Issues in Supply Management

CAPS Research and A.T. Kearney work together to produce joint research reports, dating back to 1998. This research series explores critical executive issues in supply management and includes actionable recommendations for turning research findings into business opportunities.

A.T. Kearney adds extensive consulting expertise to CAPS Research objective: discover and disseminate strategic supply management knowledge and best practices – with a global perspective. See also CAPS Research.

2010 Research report

Value Focused Supply: Linking Supply to Competitive Business Strategies

Competitive sourcing remains a powerful tool for many categories of spend. But in today’s business environment, market conditions require — and senior executives demand — that supply management organizations deliver more than just cost reduction. Finding ways to generate more value from supply markets and supply relationships is becoming supply management’s new mission.

In response to these new challenges for supply management, CAPS Research and A.T. Kearney teamed up to conduct research with 15 leading companies to discover how they are achieving overall value improvement for strategic purchases. In-depth interviews were conducted with key individuals at these companies to gain insights into selected value-focused purchase categories and overall company and supply strategies.

Value Focused Supply strategy
At its core, Value Focused Supply is an approach for creating and implementing longer term strategies for key purchase categories and their suppliers that go far beyond traditional sourcing. By linking supply to competitive business strategies, the goal is to increase the attractiveness and competitiveness of the company’s end products and services, thereby increasing value for both customers and the company.

Research findings
Based on our analysis across the participating companies, a few observations stand out:

1. VFS strategies are based on mapping customer needs and what they most value, then aligning and applying company and supplier resources to create value for customers. These strategies are frequently evaluated in terms of meeting overall business unit and/or product line goals and financial return on investment
2. Highly capable supply and other functional personnel, including executives, were typically engaged in VFS strategy creation and deployment. The complexity of these strategies required creative and talented people who could influence other key decision makers to commit resources and support the strategy
3. These VFS strategies require a holistic set of measures and incentives to evaluate success that are significantly related to the success of the business versus traditional price improvement measures and typical performance expectations of supply
4. The role of supply varied from strong leader to participant in VFS strategy development and execution. It was obvious that supply could not create and lead all efforts but should play an “appropriate” and influential role based on the situation

Value Focused Supply (VFS) strategies will provide the next breakthrough opportunity for companies to create and capture value from their most strategic purchases. These VFS strategies go far beyond the price/cost reduction of traditional competitive sourcing. Already, leading companies are clearly demonstrating the power of this more comprehensive approach.
Full Report // Supply Chain Management Perspective

Past reports

Succeeding in a Dynamic World: Supply Management in the Decade Ahead (2007)
This research indicates that supply managers are concerned about a variety of forces that will impact company and supply management strategies, including the impact of China, India and other large developing countries on the competitive landscape.

Outsourcing Strategically for Sustainable Competitive Advantage (2005)
CAPS Research and A.T. Kearney undertook a research study to understand the trends in outsourcing, how outsourcing decisions are made, and most importantly, how companies can be more successful in achieving their goals for outsourcing.

Media highlights

Breakthrough Strategy — Leading-Edge Companies Are Turning to a Value Focused Supply Strategy to Move Beyond Just Cost Savings
October | November 2010 — Inside Supply Management
Linking supply to competitive business strategies allows a company to increase the attractiveness of the company’s end products and services, thus increasing value for both customers and the company.

Contact

John Blascovich, Partner in the New York office and Americas lead for Supply Chain
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Thomas Slaight, Partner in the New York office
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