Supply Chain Management As a Game Changer

Supply chain professionals, eager to keep up with the latest trends in the market would do well to attend the ISM (Institute of Supply Chain Management) annual conference. Coupled with a large trade show, attendees can see the latest services being offered to supply chain organizations, as well as the most recent trends in the procurement world.

This year’s annual convention was held last week in Indianapolis, May 16-17. Several workshops were very compelling. One in particular that provided great insight for procurement executives was a panel discussion chaired by Howard Levy, Global Sourcing VP of Zimmer Biomet titled, Transformation Superchargers – What Private Equity Expects From Sourcing Leaders.

ISM Frank Mobus

The panel brought together executives from investment companies that have been taking companies private: Blackstone Group, Apollo Global Management and Centerbridge Partners. Contrary to popular belief, these investment companies’ usual goal is not to flip the newly bought outfit to realize a small fortune by making deep cuts in the work force. Instead, their goal is often more far-reaching. Namely, they hold onto the organizations for five to seven years so they can institute “deep value creation”.

Just like water seeks the low land, investment companies are searching for the areas that offer the most fertile opportunities for value creation. But they pointed out, since investors have become increasingly demanding and savvy, the key is not to achieve short-term cost reductions but “long-term sustainable value” through instituting best practices in value creation.

The panel was unanimous in agreeing that supply chain efficiencies often offer the best potential for achieving the kind of cost savings that drive up the organization’s value, sometimes accounting for up to 40% of the company’s enhanced value. They went so far as to say that procurement accounts for “game changing strategic importance” in today’s world of business.

Their conclusion is very much in keeping with what we at Mobus have seen: every business organization, no matter whether private or public, has enormous opportunities to add value by radically improving their performance in the transaction process, especially in how they negotiate agreements with their suppliers, and with their customers.