I had the opportunity this summer to attend SAP Ariba LIVE, an event focused on e-procurement and supply chain management. Now you might be saying to yourself, “What does HR have to do with supply chain?” The answer is – a lot.
First of all, as human resources professionals, we are responsible for helping the organization find talent. That includes supply chain management professionals. Second, when it comes finding talent, many organizations are increasing their use of external workers (i.e. freelancers, contractors, and consultants). HR has a role in this process. It’s simply not a “hire the cheapest” person. Companies have to find the right contractor, just like they have to find the right employees.
Finally, I’ve said before that organizations are focused on performance. Part of that conversation has to do with how products and services get to market. That’s supply chain. And human resources professionals who want to make the connection between talent management and business results might want to spend some time learning more about supply chain management and its relationship to talent management. To help us understand more, I spoke with Leah Knight, senior director of supply chain marketing at SAP Ariba.
Leah, before we dive into specifics about what supply chain involves, let’s talk about the “Why?” Why should human resources professionals be knowledgeable about supply chain?
[Knight] Supply chain is a growing and rapidly evolving field. Gartner has done some research on the supply chain of the future and anticipates that there may be a shortage of qualified supply chain staff because of this skill set evolution. Technology skills are becoming increasingly important in this field, and human resources may be called upon to find professionals in a discipline where they are difficult to find.
Consider over the past 5 to 10 years how supply chain technology, especially integrated business planning, has changed the role of the supply chain planner from doing number crunching on Microsoft Excel to today’s supply chain planner, who uses software with highly sophisticated mathematical algorithms that help to build their production plans – across regions, factories, product lines, and a complex web of suppliers, logistics partners, and contract manufacturers.
Please also consider how supplier collaboration technologies have led to a similar shift in skill set: from manual collaboration – e.g., asking a supplier over the phone or email whether s/he can commit to a forecast – to now using automated collaboration tools that leverage Web services, XML, Cloud technologies, AI, machine learning, and mobile.
I expect that the HR function will become more important to the supply chain as their need for technologically savvy professionals continues to grow.
Just to make sure that everyone is on the same page, tell us what supply chain management involves? And how does it relate to procurement or purchasing?
[Knight] There are typically two components to supply chain management:
First, the supply chain function owns the management of goods and services in support of production, the related flow of these goods, and the supporting information. This responsibility includes managing raw materials, work-in-process, and finished goods as they flow from supplier or distribution center to various manufacturing locations across the globe. It also includes contract manufacturing, tolling, co-packing, and/or logistical services; and returns.
Supply chain professionals typically concern themselves with long-term planning (e.g., forecasts of a 6 month or more time horizon for these goods); mid-range and near-term execution of inventory programs (e.g., consigned inventory, supplier-managed inventory); quality of supply, work in progress (WIP) and finished goods; delivery; replenishment of customer warehouses; etc. The typical key performance indicators (KPIs) include:
- Customer service (measured in terms of on-time/in-full deliveries, stockouts, revenue upside),
- Working capital / inventory efficiency (measured inventory turns, days inventory, inventory aging, etc.),
- Inventory and finished goods quality, and
Next is the supply chain / direct sourcing area. It’s also known as ‘commodity management’, ‘buyers’, or ‘direct procurement’ in some industries. This area owns the sourcing and contracting of raw materials, components, assemblies and related services (such as contract manufacturing, tolling, co-packing, and logistics services). These suppliers and services are needed to design, produce, and deliver their final products.
Supply chain professionals also make a build versus buy decision – that is, deciding whether it is more effective to engage a contract manufacturer or supplier for components, rather than building the components themselves. The typical KPIs are:
- Cost of materials (including whether they achieve annual or quarterly cost reduction targets),
- Cycle time (e.g., the time required to complete a source-to-contract process),
- Team productivity,
- Supplier quality, and
- Supplier risk.
During SAP Ariba LIVE, I learned how Cirque du Soleil is using an integrated dashboard for its supply chain needs, which included talent. Can you share with readers how supply chain technology is impacting HR today?
[Knight] Supply chain technology requires an evolution in skill sets for supply chain professionals. Cloud technologies are requiring an interesting further shift, because many supply chain professionals are embracing Cloud technologies in order to bypass the queues, long lead times and/or competing projects in their IT departments. Cloud technologies can be selected directly by the supply chain department, but this requires an added level of technology evaluation and selection, and ongoing collaboration with technology vendors that once may have been the purview of IT, rather than supply chain.
Last question. I want to shift our conversation from the recruitment and development of supply chain professionals to another aspect of talent. One of the discussions I heard during the conference was about human trafficking and the need for organizations to understand more about their talent sources. How can supply chain and HR professionals work together to make sure that they are using ethical sources?
[Knight] Supply chain/sourcing professionals own the selection of sources, which means they have a significant and lasting impact into their organizations’ use of ethical, sustainable, and diverse sources. One opportunity is to ensure that they do a thorough supplier qualification process that includes such factors as sustainability, ethical business and social practices, and diverse or inclusive business practices. And then to ensure that only suppliers that are qualified are allowed to participate in sourcing/supply chain opportunities.
But in my experience, a one-time check is not enough. Ongoing monitoring is very important, especially in our global, disaggregated supply chains, where a supplier of a supplier can lead to unethical or non-sustainable practices in anyone’s supply chain.
I want to extend a huge thanks to Leah and the SAP Ariba team for giving me the opportunity to learn more about supply chain management. If you want to learn more about how supply chain management brings value to the business, check out the SAP Ariba Resources Page on their website.
Given the challenges in today’s talent market, I only see the increased need for HR and suppliers to partner. The time to start building those relationships is now.
Image captured by Sharlyn Lauby while exploring the streets of Key West, FL11