Supply Strategt Implementation - Current State and Future Opportunities

Supply Strategy Implementation:
Current State and

Future Opportunities 2009
Robert M. Monczka, Ph.D.

Director-Strategic Sourcing and
Supply Chain Strategy Research
CAPS Research, and
Distinguished Research Professor of
Supply Chain Management
W. P. Carey School of Business
Arizona State University
Kenneth J. Petersen, Ph.D.

Professor, and First Community Bank Faculty Fellow
Colorado State University, and
Visiting Senior Fellow
Manchester Business School
CAPS Research
December, 2009
Supply Strategy Implementation:
Current State and Future Opportunities
Robert M. Monczka, Ph.D.

Director-Strategic Sourcing and
Supply Chain Strategy Research
CAPS Research, and
Distinguished Research Professor of
Supply Chain Management
W. P. Carey School of Business
Arizona State University
Kenneth J. Petersen, Ph.D.

Professor, and First Community Bank Faculty Fellow Colorado State University, and
Visiting Senior Fellow
Manchester Business School
CAPS Research
December, 2009
Copyright 2009 Institute for Supply Management

and W. P. Carey School of Business at Arizona State University.
All rights reserved.
Contents may not be reproduced in whole or in part without the express permission of CAPS Research.
Acknowledgements
The lead researchers for this study would like to acknowledge and thank the
following individuals for their contributions to this effort.
Kathleen A. Chester of the Institute for Supply Management (ISM) provided

general administrative support and draft report development to the research
team.
Debbie Maciejewski of CAPS Research managed the solicitation process for the
Web survey and administered the ongoing communications with survey
respondents.
Steve Koch, Director of Information Technology Services at CAPS Research,

developed the database and Web-based assessment application and provided
data analysis and reporting tools.
Tammy Schwerman, Senior Technical Analyst at CAPS Research, supported

the design and testing of the Web-based assessment application and reporting
tools.
Gregory R. Gay, Research Associate, reviewed and analyzed qualitative

assessment responses related to obstacles to implementation of supply
strategies.
ISBN 0-945968-78-7
2 Supply Strategy Implementation: Current State and Future Opportunities 2009

Author Biographies
Robert M. Monczka, Ph.D., is Director of Strategic Sourcing and Supply Chain

Strategy Research at CAPS Research. He is also Distinguished Research Professor of
Supply Chain Management at Arizona State Universitys W. P. Carey School of
Business. Dr. Monczka focuses on sourcing and supply strategy development and
implementation, and provides leadership of major supply strategy research
initiatives at CAPS Research. He has authored more than 100 articles and books and
has consulted with numerous Fortune 500 firms.
Kenneth J. Petersen, Ph.D., is Professor of Supply Chain Management and First

Community Bank Faculty Fellow at Colorado State University and Visiting Senior
Fellow at Manchester Business School in Manchester, England. He has authored
more than 50 articles, reports and book chapters and has consulted with numerous
firms in strategic sourcing and supply management.
CAPS Research 3
Table of Contents
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Author Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Index of Figures and Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Research Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Changes: 2009 vs. 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Guidance for Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Chapter 1: Introduction and Research Approach . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transforming Purchasing/Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
What Will the Next 10 Years Look Like? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
CAPS Executive Assessment of Supply (EAS): Development and Objectives . . 11
Supply Strategies Included in EAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
EAS and Value-Add to Company Competitiveness . . . . . . . . . . . . . . . . . . . . . . 12
Research Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Respondent Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Overall Research Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Report Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Chapter 2: Supply Strategies: Importance, Implementation and Gaps . . . . . . . . . . 17
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Overall EAS Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Supply Strategy Importance Ratings and Rankings . . . . . . . . . . . . . . . . . . . . . . 19
Supply Strategy Implementation Ratings and Rankings . . . . . . . . . . . . . . . . . . 20
Supply Strategy Gap Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Overall Importance/Implementation Gap Analysis . . . . . . . . . . . . . . . . . . . . . . 22
Comparison Between High and Low Implementation Firms . . . . . . . . . . . . . . 23
Observations: High and Low Implementation Firms . . . . . . . . . . . . . . . . . . . . 24
Conclusions: Current State of Supply Strategies . . . . . . . . . . . . . . . . . . . . . . . . 25
Chapter 3: Industry Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Industry Sector Difference Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Industry Difference Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Average Ratings by Industry Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Chapter 4: Strategy Implementation and Supply Performance . . . . . . . . . . . . . . . . 43
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Supply Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Industry Performance Differences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Correlation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Chapter 5: What Has Changed? 2007 to 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Overall Changes: 2007-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Supply Strategy Changes: Firms Common Between 2009 and 2007 . . . . . . . . 47
Chapter 6: Obstacles to Supply Strategy Implementation. . . . . . . . . . . . . . . . . . . . 52
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Overall Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Selected Obstacles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Chapter 7: Summary and the Path Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Summary: Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
The Path Forward: Supply Transformation 2010 and Beyond . . . . . . . . . . . . . 56
Clear Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Establish Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Resources and Capabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Supply Transformation Process and EAS Application. . . . . . . . . . . . . . . . . . 57
The Decade Ahead: Supply Strategy Imlementation. . . . . . . . . . . . . . . . . . . . 57
Strategy Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Supplier Focused Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Supply/Value Chain Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Concluding Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Appendix One: Supply Strategy Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Appendix Two: Statistical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Appendix Three: Strategy Implementation Obstacles . . . . . . . . . . . . . . . . . . . . . . . 69
CAPS Research 5
Index of Figures and Tables
Figure 1.1 Sourcing and Supply Chain Maturity Table 2.1 Overall Importance Strategy
Model . . . . . . . . . . . . . . . . . . . . . . . 10 Ratings . . . . . . . . . . . . . . . . . . . . . . 20
Figure 1.2 EAS Application . . . . . . . . . . . . . . . 13 Table 2.2 Overall Implementation Strategy

Ratings . . . . . . . . . . . . . . . . . . . . . . 21
Figure 1.3 Responding Company Profile . . . . . 13
Table 2.3 Overall Strategy Ratings Gaps . . 22
Figure 1.4 EAS Participating Industries . . . . . . 14
Table 2.4 Implementation: Highest 25
Figure 1.5 Supply Leadership Model . . . . . . . . 15 Companies vs. Lowest 25
Companies . . . . . . . . . . . . . . . . . . . 24
Figure 2.1 Assessment Example with Rating
Scales . . . . . . . . . . . . . . . . . . . . . . . 18 Table 2.5 Overall Implementation Ratings for
Top/Bottom 25 Firms . . . . . . . . . . . 25
Figure 2.2 Overall 2009 EAS Findings . . . . . . 19
Table 3.1 Strategy Importance Differences by
Figure 2.3 Strategy Segmentation Analysis: Industry . . . . . . . . . . . . . . . . . . . . . 28
Importance/Gap . . . . . . . . . . . . . . . 23
Table 3.2 Strategy Implementation Differences
Figure 7.1 Improving Economic Value-Add by Industry. . . . . . . . . . . . . . . . . . . 28
(EVA) . . . . . . . . . . . . . . . . . . . . . . . 56
Table 3.3 Average Ratings by Industry
Figure 7.2 Building Blocks for Supply Sector . . . . . . . . . . . . . . . . . . . . . . . 29
Transformation . . . . . . . . . . . . . . . . 57
Table 3.4 Implementation Ratings for Top/
Figure 7.3 Strategic Supply Strategy Priorities Bottom Firms by Industry Sector
& Capabilities Assessment for 23 Strategies . . . . . . . . . . . . . . . 29
Framework . . . . . . . . . . . . . . . . . . . 58
Table 3.5 Top 6 Strategy Gaps by Industry
Figure 7.4 Supply Strategy Transformation Sector . . . . . . . . . . . . . . . . . . . . . . . 29
Process . . . . . . . . . . . . . . . . . . . . . . 59
Table 3.6 Discrete Manufacturing Importance
Figure 7.5 Critical Supply Strategies: 2010 Strategy Rankings/Ratings. . . . . . . . 30
and Beyond . . . . . . . . . . . . . . . . . . 60
Table 3.7 Discrete Manufacturing
Implementation Strategy Rankings/
Ratings . . . . . . . . . . . . . . . . . . . . . . 31

Table 3.8 Discrete Manufacturing Strategy Gap Table 4.4 Performance Improvement: Overall
Rankings/Ratings . . . . . . . . . . . . . . 32 and by Industry Sector . . . . . . . . . . 46
Table 3.9 Implementation: Highest 10 Discrete Table 5.1 Comparison of 2007/2009

Manufacturing Companies vs. Implementation/Importance Gaps . 48
Lowest 10 Discrete Manufacturing
Companies . . . . . . . . . . . . . . . . . . . 33 Table 5.2 Differences in Overall
Implementation Between 2007
Table 3.10 Discrete Manufacturing: and 2009 . . . . . . . . . . . . . . . . . . . . 49
Implementation Ratings for
Top/Bottom 10 Firms . . . . . . . . . . . 34 Table 5.3 Difference in Overall Importance
Between 2007 and 2009. . . . . . . . . 50
Table 3.11 Process Manufacturing Importance
Strategy Rankings/Ratings. . . . . . . . 34 Table 5.4 Importance, Implementation & Gap
Strategy Ratings for Companies
Table 3.12 Process Manufacturing Participating in BOTH 2007 &
Implementation Strategy Rankings/ 2009 . . . . . . . . . . . . . . . . . . . . . . . . 51
Ratings . . . . . . . . . . . . . . . . . . . . . . 35
Table 6.1 Summary of Obstacle Responses
Table 3.13 Process Manufacturing Strategy Gap by Supply Strategy . . . . . . . . . . . . . 54
Rankings/Ratings . . . . . . . . . . . . . . 36
Table 3.14 Implementation: Highest 10 Process

Manufacturing Companies vs.
Lowest 10 Process Manufacturing
Companies . . . . . . . . . . . . . . . . . . . 37
Table 3.15 Process Manufacturing

Implementation Rankings/Ratings
for Top/Bottom 10 Firms . . . . . . . . 38
Table 3.16 Service Importance Strategy

Table 3.17 Service Implementation Strategy

Table 3.18 Service Strategy Gap Rankings/

Ratings . . . . . . . . . . . . . . . . . . . . . 40
Table 3.19 Implementation: Highest 10

Service Companies vs. Lowest 10
Service Companies . . . . . . . . . . . . . 41
Table 3.20 Service Implementation Ranking/

Ratings for Top/Bottom 10 Firms . . 42
Table 4.1 Supply Performance Results

(2007, 2009) . . . . . . . . . . . . . . . . . 43
Table 4.2 Performance Ratings (2007 and

2009) . . . . . . . . . . . . . . . . . . . . . . . 44
Table 4.3 Actual Performance: Overall and by

Industry Sector . . . . . . . . . . . . . . . . 45
CAPS Research 7
Executive Summary
Research Background organizations across 26 industries to further develop a

baseline for current and future analyses, which was
Supply management has been undergoing transformation initialized with the 2007 EAS.
from an administrative function to a strategic
contributor to organizational competitiveness over the
past 20 plus years. The success or failure of supply to Key Findings
establish and lead a competitive supply base and work
with other functions can drastically impact a firms The 2009 EAS shows that firms are lagging in
success. In addition, supply positively or negatively implementing supply strategies that they consider
affects cost, assets, and revenue generation, all critical to important to the competitive success of their firms.
the financial performance of the firm. Firms rated the importance of the 23 strategies between
being functionally required to an operational
Currently, the strategic direction of many firms is being necessity to compete. Implementation of the strategies
supported by supply strategies. For example, P&Gs was not complete. For all organizations, supply
click and connect open innovation focus, purchasings strategies were implemented at a limited number of
savings contribution presented to Wall Street analysts by supply locations and were being accepted as best
various companies, General Mills holistic margin practice with initial positive results.
management requiring significant contribution from
supply, globalization of the supply base across In addition, there was a large gap between strategy
industries, increasing collaboration with suppliers and importance and implementation. There was also a large
dramatic efforts by firms during the economic implementation difference between those firms where
downturn to cut costs and gain back raw material price supply strategies were most and least implemented.
increases.
The 10 most important and implemented supply
To continue positive supply transformations, firms strategies were:
worldwide need to regularly assess the degree of
implementation of supply strategies they consider most Vision, Mission and the Strategic Plan
important to the success of their organization. With this Commodity & Supplier Strategy Process
in mind and with the experience gained over the past Strategic Cost Management
10 years in developing, providing and conducting Engagement by Corporate Executives and
supply assessments, CAPS Research executed the Business Unit Leaders
Executive Assessment of Supply (EAS). Human Resource Development
Procurement & Supply Organization Structure &
The primary objective of the 2009 EAS was to Governance
determine the importance organizations worldwide Measurement & Evaluation
place on critical supply strategies, their level of Total Cost of Ownership
implementation and performance results from these Functional & Business Processes, Practices &
strategies. Data about 23 supply strategies and Systems
performance results were collected from 130 supply

Structuring & Maintaining the Supply Base and For firms participating in both the 2009 and 2007
Cross-Functional/Location Teaming EAS, major gap reductions were for strategic
supplier alliances; supplier integration into
These strategies focus on both the building blocks customer order fulfillment; e-sourcing and supply
required to achieve an effective supply organization and chain strategies; collaborative buyer/supplier
strategy, and those specific purchase category and development and continuous improvement;
supplier strategies critical to achieving year-over-year supplier integration into new product
supply performance improvement. However, development; and innovation and accelerated
implementation of these strategies also lags behind their change management.
strategic importance.
The two most significant obstacles to implementation
Overall, the largest gaps between supply strategy were executive engagement and support with resources
importance and implementation were found for and alignment and integration of business; and
commodity/supplier strategy development, strategic cost manufacturing/operations, technology and supply
management, human resource development, strategies.
structuring/maintaining a world-class supply base,
measurement and evaluation, total cost of ownership,
world-class quality, accelerated change management, Guidance for Senior Management
and supplier assessment, measurement and
communication. These strategies should provide an Although supply is becoming more strategic at firms
implementation focus at most firms. worldwide, implementation of critical supply strategies
is still lagging. We also found that strategies that may
Industry sector differences were quite limited. However, take longer to implement and require more resources
the discrete industry sector had a somewhat higher and cross-functional support were not viewed as being
degree of implementation overall than the process and most important, nor were they the most implemented.
service sectors. However, more robust strategies such as standardization
of purchases to reduce complexity and collaboration
Supply performance, on average, showed improvement will likely be very important to the future success of
for key performance areas. Purchase prices were many organizations.
reduced by 4 percent on average; transportation and
logistics costs were reduced by 5.1 percent and total Based on this research, we believe that firms should be
cost of ownership reduced by 4.3 percent. Compared to working two supply buckets concurrently. First, there
2007, price improvements were similar but is need to ensure high implementation and effectiveness
transportation and logistics and total cost of ownership for core strategies such as category and supplier strategy
improved somewhat. Supplier flexibility and development (with risk management), structuring the
responsiveness was also somewhat improved in 2009. supply base, total cost of ownership, strategic cost
management, and people acquisition and development.
These strategies deliver supply performance today.
Changes: 2009 vs. 2007
Second, leading supply organizations and their supply
There was a significant reduction in the overall and business unit leaders need to invest in the long-
gap between strategy importance and term success of the firms by accelerating transformation
implementation, generally indicating a higher of e-systems for supply, supplier integration into both
degree of implementation since 2007. new product development and customer order
fulfillment, standardization of specifications and
The most significant increases in strategy purchases to reduce complexity, supplier innovation
implementation between 2007 and 2009 were for through effective collaboration, and environmentally
strategic cost management; strategic supplier sustainable supply chains. These strategies will be
alliances; total cost of ownership; procurement necessary to deliver future performance improvements.
and supply organization structure and
governance; engagement by corporate executives
and business unit leaders; innovation and
accelerated change management; and structuring
and maintaining the supply base.
CAPS Research 9
Chapter 1: Introduction and Research
Approach
What supply strategies are viewed as most important by function to a critical part of a firms competitive strategy.
supply organizations? To what extent have these This transformation process began with Xerox gaining
strategies been implemented? How do supply strategies insight into new purchasing and supply strategies
relate to supply performance? What supply strategies from its Japanese counterpart, Canon, followed by
are likely to be the focus of future transformations? This transformations in the automotive, appliance,
research provides answers to these questions. electronics, computer and other industry segments
worldwide.
Transforming Purchasing/Supply This transformation can be illustrated by the maturity

model shown in Figure 1.1.
Beginning in the early to mid-1980s, purchasing began
transforming from a back-office transaction dominated This multiyear transformation journey has frequently
been characterized as price-focused. Strategies such as
Figure 1.1
Sourcing and Supply Chain Maturity Model

strategic sourcing, low-cost country sourcing, e-reverse these changes will drive business models and strategies
auctions and supplier consolidation to gain scale to change, and innovation will strongly impact a firms
advantage have had price improvement as a major supply mission goals and performance expectations.
objective. It appears that most firms are in Stage II or
III, with a limited number of firms in Stage IV. In addition, as firms look for ways to improve their
revenue streams, they will likely move up the value
Most firms are at Stage II or III because they were price chain, enrich customer relationships and embrace
focused; may have only recently begun the supply emerging markets. From a cost perspective, the
transformation journey; reflected company and structural cost of conducting the business will have to
functional executive directions focused on shorter-term be addressed and optimized while firms pursue ongoing
improvement objectives; avoided greater difficulty and variable cost reduction. On the balance sheet, more
larger investment required to transform supply efficient and effective use of fixed assets will be
strategies, practices and structures, and supplier required. There will also be a need to increase cash flow.
working relationships across functions and across the These requirements will impact the business models
entire supply chain. and all functionally driven strategies, including supply
management.
In addition, there is anecdotal information that
purchasing and supply transformations may have stalled These drivers have a cascading effect on the supply
in adjusting to the realities of a more complex mission, goals and performance expectations. The above
environment. This slowing of transformations may again research found that more innovation will be required
be caused by narrow price versus value-driven supply from suppliers, there will be an increased need to
objectives, limited e-system integration, and difficulties contribute to revenue generation through effective
in achieving cross-functional integration and company sourcing and supply, there will have to be further risk
re-organizations. Over the past 12 to 18 months, the mitigation in the supply strategies and an expanded cost
severe worldwide economic recession has also slowed management focus. Overall the strategies and processes
supply transformation initiatives. that have worked in the past will require significant
transformation to be effective in a changing world in the
future.
What Will the Next 10 Years Look Like?
Even though the above paragraphs were written in
To achieve continuing progress and movement toward 2007, they still ring true today. Therefore, every supply
Stage IV, supply strategies critical to a firms success organization worldwide must continually examine itself
require identification, establishment of their current and the transformation strategies being employed to
state of importance and definition of a desired state. ensure effective world-class supply organizations over
A resulting transformation strategy must then be the next five, 10 and 15 years. Continuous change and
established with measurement of implementation transformation is required, although not necessarily
progress and results. natural to all organizations. Therefore, supply
organizations must develop a mindset embracing
To position this report in terms of the future change and then develop the processes to drive
competitive environment and resulting desired state, we continuous, and sometimes, breakthrough renewal.
are drawing on Succeeding in a Dynamic World:
Supply Management in the Decade Ahead.1 This report
suggests turbulent times are ahead. Significant forces of CAPS Executive Assessment of Supply (EAS):
change will impact organizations. Some of these forces Development and Objectives
include globalization, changes in worldwide
consumption patterns, demographic changes, regulation The CAPS Executive Assessment of Supply (EAS) was
and activism across countries throughout the world, developed to help firms address the changing world of
and increasing pressure to maintain natural resources supply management. EAS builds on the knowledge
and the environment. In addition, there will be gained in deploying Project 10X at CAPS Research and
significant changes in technology and increasing follows the development of about 350 supply assessment
requirements for innovation. Wildcards which cannot questions based on experience with worldwide firms
be generally predicted will also come into play. All of over the past 10 years. These 350 questions were
Succeeding in a Dynamic World: Supply Management in the Decade Ahead, CAPS Research Report, 2007.
1
CAPS Research 11
modified and reduced so as to provide 23 strategically Cross-Functional/Location Teaming
focused supply strategy questions and one question Measurement & Evaluation
focused on performance. For each of the 24 assessment E-Sourcing & Supply Chain Strategies
questions, specific attributes were included which Human Resource Development
describe leading-edge practices. These attributes provide Engagement by Corporate Executives & Business
the basis for rating the current state of the strategy for Unit Leaders
strategic importance to the firm and degree of Functional & Business Processes, Practices and
implementation. From these ratings, gaps can be Systems
determined between importance and implementation. Innovation & Accelerated Change Management
Sustainable Competitive Performance
Transformation progress also can be measured over time
through comparison between past, current and future Each strategy area includes a definition and critical
assessments. In addition, supply and firm performance attributes which are shown in Appendix One.
questions were also included. An assessment question
example is shown in Chapter 2, including rating scales.
EAS and Value-Add to Company Competitiveness
This Executive Assessment of Supply report also
provides respondents with a capability to compare The value of the EAS is two-fold. First, an industry wide
themselves with other firms. In addition to the report (and separately more detailed data) is provided
information provided in the report, each participating so that you can benchmark your firms transformation
company will receive additional EAS data enabling progress. Second, your firm can determine its current
comparative analysis across the 130 responding state through EAS deployment and establish the go-
companies organized by various industry segments. forward transformation plan to achieve an ideal state.
The ideal state should provide value creation through
enhanced supply strategies. In addition, by applying the
Supply Strategies Included in EAS EAS across strategic business units and key facilities on
a worldwide basis, the firm can establish where change
The following purchasing/supply strategies were is taking place and determine what may have led to
included in the 2009 CAPS Executive Assessment of improvements in performance. Conducting an EAS may
Supply and were meant to be strategically, rather than also be a key element in supply strategy development
tactically, focused. and implementation, and leveling-up the entire supply
organization.
Vision, Mission and the Strategic Plan
Strategic Insourcing/Outsourcing Figure 1.2 illustrates the application of EAS. The
Commodity & Supplier Strategy Process application can be both companywide one response
Structuring & Maintaining the Supply Base per company or tailor-made conducted across
Supplier Assessment, Measurement & multiple business units and supply locations within a
Communications firm. This report is based upon the worldwide
Supplier Integration into New assessment across firms, which includes only one
Product/Process/Service Development response per firm (i.e. where multiple responses were
Supplier Integration into Customer Order received, they were averaged into one response for the
Fulfillment purpose of this report).
Strategic Supplier Alliances
Collaborative Buyer/Supplier Development &
Continuous Improvement Research Approach
Establishing World-class Supplier Quality
Global Sourcing & Supply Strategy Approximately 926 companies were asked to participate
Strategic Cost Management in the 2009 EAS study. Companies solicited to
Total Cost of Ownership participate were CAPS Research Donor Companies,
Standardization of Systems, Components & selected members of the Institute of Supply
Processes vs. Creation of Unique Designs & Management and firms that have participated in prior
Specifications CAPS Research projects. The request to participate in
Environmentally Sustainable Supply Chain EAS was generally sent to supply management
Management executives. Once a company agreed to participate,
Procurement & Supply Organization Structure & information about accessing a Web-based EAS tool was
Governance e-mailed to participants.

Figure 1.2
EAS Application
Data collection took place between January and May The current state of supply strategy importance and
2009. implementation is based on the 130 companies
responding to the CAPS Executive Assessment of
Supply. Thirty percent of respondents were from the
Respondent Profile discrete manufacturing industry, 35 percent of
respondents were from the process manufacturing
Completed assessments were received from 130 industry, and 35 percent of respondents were from the
companies (approximately 14 percent of those who service industry.
were originally asked to participate).
Figure 1.3
Responding Company Profile
CAPS Research 13
The respondent profile was: business unit/division view. Just more than 5
percent of respondents represented a geographic
Twenty-six industries were included as shown in view.
Figure 1.4.
About 67 percent of the responses reflected
Sixty-one percent of the firms had sales of more responsibility for both direct and indirect
than $5 billion. Twenty-four percent had sales purchases, with direct and indirect approximately
between $1 billion and $5 billion. The remaining equal.
15 percent of firms had sales less than $1 billion.
The annual direct and indirect spend of these Overall Research Framework
firms were:
Figure 1.5 shows the overall Supply Leadership Model
Annual Spend Direct Indirect driving supply transformation and the critical strategy
Greater than $5 billion 24% 15% areas around which the EAS was developed.
$1 billion to $5 billion 40% 38%
Less than $1 billion 36% 47% Report Organization
A little more than 76 percent of respondents The remainder of the report includes:
represented a companywide view, while slightly
more than 17 percent represented a strategic Chapter 2 Supply Strategies: Importance,
Implementation and Gaps
Figure 1.4
EAS Participating Industries

Figure 1.5
Supply Leadership Model
Introduction Conclusions
Commodity & Supplier Strategy Process Example Industry Performance Differences
Question Correlation Analysis
Overall EAS Findings
Supply Strategy Importance Ratings and Rankings Chapter 5 What Has Changed? 2007-2009
Supply Strategy Implementation Ratings and Introduction
Rankings Overall Changes: 2007-2009
Supply Strategy Gap Analysis Supply Strategy Changes: Firms Common
Overall Importance/Implementation Gap Analysis Between 2009 and 2007
Comparison Between High and Low
Implementation Firms Chapter 6 Obstacles to Supply Strategy
Observations: High and Low Implementation Implementation
Firms Introduction
Conclusions: Current State of Supply Strategies Overall Findings
Conclusions
Chapter 3 Industry Analysis Selected Obstacles
Introduction
Industry Sector Difference Findings Chapter 7 Summary and The Path Forward
Industry Difference Conclusions Introduction
Average Ratings by Industry Sectors Summary: Key Findings
The Path Forward: Supply Transformation 2010
Chapter 4 Strategy Implementation and Supply and Beyond
Performance The Decade Ahead: Supply Strategy
Introduction Implementation
Supply Performance Strategy Enhancement
CAPS Research 15
Supplier Focused Strategies
Supply/Value Chain Integration
Concluding Comments
Appendices
Appendix One Supply Strategy Definitions and
World-class Attributes
Appendix Two Statistical Analysis
Appendix Three Selected Strategy
Implementation Obstacles

Chapter 2: Supply Strategies:
Importance, Implementation and Gaps
Introduction implementation and importance. A gap is the difference

in ratings between importance and implementation for a
Supply and other executives regularly raise the specific strategy.
question, How are we doing compared to other leading
firms? This report provides some answers. The data The following overall 2009 findings are most
collected from 130 worldwide firms provides insights interesting:
into the current state of importance, implementation
and gaps for 23 critical-to-success supply strategies. In 1. Importance ratings are at least 1.5 higher than
addition, this chapter includes discussion of the strategy implementation at both the high and low ends.
ratings and rankings for the highest and lowest rated However, the highest implementation rating is
firms. only slightly greater than the lowest importance
rating. The range of ratings for importance and
An assessment question example and rating scale is implementation are similar.
shown in Figure 2.1 to assist in the interpretation of the
findings. In this example, the strategy being examined is 2. The gap range is large, from a low of -1.35 to a
Commodity & Supplier Strategy Process. The high of -2.38 between implementation and
definition for this strategy is: importance.
A commodity and supplier strategy process is a 3. Average importance, implementation and gap
written, systematic plan to achieve both short- ratings were 7.57 (high importance), 5.68
and long-term commodity/purchase family goals (moderate implementation) and 1.89 (major gap),
over at least a one- to three-year horizon. respectively.
Strategies are developed for the important
commodities/categories. Elements include supply When compared to the 2007 data, the following
base structuring, sourcing, contracting, supplier observations are important:
development, product/process design/specifications
characteristics and value chain considerations. 1. Average importance in 2009 is similar (but
The strategy combines various elements into an slightly less) than 2007.
executable plan with timelines, accountabilities
and measurable performance expectations. The 2. Average implementation is greater by .46, which
view includes the total supply chain or network. demonstrates considerably greater
implementation.
3. The average gap has been reduced by a

Overall EAS Findings
considerable amount.
Figure 2.2 shows the range of average ratings across all
A number of conclusions can be drawn from the overall
companies for the 23 supply strategies for Importance,
data. First, we are seeing a greater degree of supply
Implementation and the resulting Gaps between
CAPS Research 17
Figure 2.1
Assessment Example with Rating Scales

Figure 2.2
Overall 2009 EAS Findings
strategy implementation in 2009 than in 2007 with a The overall average strategy ratings range around
resulting reduction in the gap between importance and High/Critical (operational necessity; required for
implementation (both as a product of decreasing operational effectiveness; necessary to gain market
importance of some strategies and increased leadership; achieves competitive viability a
implementation of the same or other strategies.) Second, necessary consideration to compete)
even though the average gap is being reduced, it and
overall implementation is far lower than the The top six rated strategies all focus on the initial
corresponding importance as can be seen by rating building blocks of an effective supply function
ranges and averages. (enablers) and/or are critical to achieving cost
improvement.
In addition, firms probably rated supply strategies more
highly on Importance because many strategies can be Vision, Mission and the Strategic Plan
strategically important to the success of the firm. Commodity & Supplier Strategy Process
However, Implementation may lag because a firm is just Strategic Cost Management
beginning or is partially along its transformation Engagement by Corporate Executives &
journey; resources have been limited in support of the Business Unit Leaders
transformations, especially in difficult economic times; Human Resource Development
some strategies are not the focus of the implementation; Procurement & Supply Organization Structure
and strategies which are being implemented have taken & Governance
considerable time and resources to complete.
In addition, these top six highest rated strategies
all revolve around supply management leadership,
Supply Strategy Importance Ratings and and building appropriate governance and strategy
to carry out the supply vision, mission and
Rankings strategic plan; which is rated highest of all
strategies. Clearly having the best possible human
Table 2.1 provides insight into the overall ratings and resource talent is an enabler to success in all 23
rankings for the 23 strategy areas by importance. In supply strategy areas.
addition, a difference in the average rating score of more
than .43 between strategies is statistically significant. The six lowest rated strategies require engagement
For example, the group of seven strategies most highly of executives and key persons working
rated is significantly different than the nine lowest rated collaboratively across functions. These strategies
strategies. See Appendix Two for description of are frequently more difficult because more
methodology used to determine statistical significance. functions need to be aligned to achieve
measurable results.
A number of observations can be drawn from the
importance ratings, including:
CAPS Research 19
Table 2.1
Overall Importance Strategy Ratings
Strategy Area Implementation

Vision, Mission and the Strategic Plan 8.32
Commodity & Supplier Strategy Process 8.29
Strategic Cost Management 8.19
Engagement by Corporate Executives & Business Unit Leaders 8.19
Human Resource Development 8.10
Procurement & Supply Organization Structure & Governance 8.07
Measurement & Evaluation 7.93
Structuring & Maintaining the Supply Base 7.87
Total Cost of Ownership 7.79
Functional & Business Processes, Practices and Systems 7.62
Cross-Functional/Location Teaming 7.53
Supplier Assessment, Measurement & Communications 7.51
Establishing World-Class Supplier Quality 7.47
Innovation & Accelerated Change Management 7.45
Strategic Supplier Alliances 7.40
Global Sourcing & Supply Strategy 7.38
Supplier Integration into New Product/Process/Service Development 7.24
Collaborative Buyer/Supplier Development & Continuous Improvement 7.20
Standardization of Systems, Components & Processes vs. Creation of
Unique Designs & Specifications 7.13
E-Sourcing & Supply Chain Strategies 7.13
Strategic Insourcing/Outsourcing 7.02
Environmentally Sustainable Supply Chain Management 6.96
Supplier Integration into Customer Order Fulfillment 6.41
Average Importance 7.57
Collaborative Buyer/Supplier Development & For example, the 10 most implemented strategies are
Continuous Improvement significantly different than the eight least implemented
Standardization of Systems, Components & strategies. In addition, vision, mission and the strategic
Processes vs. Creation of Unique Designs & plan, and engagement by corporate executives and
Specifications business unit leaders have a higher degree of
E-Sourcing & Supply Chain Strategies implementation than every other strategy except
Strategic Insourcing/Outsourcing procurement and supply organization structure and
Environmentally Sustainable Supply Chain governance.
Management
Supplier Integration into Customer Order A number of observations can be drawn from the
Fulfillment implementation ratings, including:
The overall average strategy ratings range from

Supply Strategy Implementation Ratings and Moderate to somewhat less than Extensive,
which suggests limited implementation.
Rankings
The top 10 implemented strategies were primarily
Table 2.2 provides insights into the overall ratings and focused on establishing the foundation for
rankings for the 23 strategy areas by degree of effective supply strategies, and commodity and
implementation. A difference in average rating greater supplier strategy development, and were
than .36 means that one strategy is significantly somewhat aligned with the importance rankings.
different than another. See Appendix Two for
description of methodology used to determine statistical The lower-implemented strategies generally focus
significance. around strategies requiring significant investment

Table 2.2
Overall Implementation Strategy Ratings
Strategy Area Importance

Vision, Mission and the Strategic Plan 6.78
Engagement by Corporate Executives & Business Unit Leaders 6.77
Procurement & Supply Organization Structure & Governance 6.55
Commodity & Supplier Strategy Process 6.22
Strategic Cost Management 6.12
Functional & Business Processes, Practices and Systems 6.04
Measurement & Evaluation 5.98
Human Resource Development 5.97
Cross-Functional/Location Teaming 5.96
Total Cost of Ownership 5.95
Structuring & Maintaining the Supply Base 5.71
Strategic Insourcing/Outsourcing 5.67
Strategic Supplier Alliances 5.64
Global Sourcing & Supply Strategy 5.63
Establishing World-class Supplier Quality 5.37
Innovation & Accelerated Change Management 5.32
Collaborative Buyer/Supplier Development & Continuous Improvement 5.13
Supplier Assessment, Measurement & Communications 5.12
E-Sourcing & Supply Chain Strategies 5.08
Supplier Integration into New Product/Process/Service Development 5.07
Unique Designs & Specifications 5.06
Supplier Integration into Customer Order Fulfillment 4.52
Average Implementation 5.68
or those that require truly cross-functional On average, the overall gaps across all 23 strategy areas
implementation, and are similar to the strategies were between -1.35 and -2.38 (negative numbers reflect
rated lowest in importance. greater importance than implementation).
Strategies associated with extended supply chains, The rankings for all gaps are shown in Table 2.3.
aligning and linking organizations, and achieving
collaboration with suppliers were moderately The largest gaps were for:
implemented. Other cross-functional and cross-
enterprise strategies also lagged in Supplier Assessment, Measurement &
implementation. Communications (7.51/5.12)*
Supplier Integration into New
Environmentally sustainable supply chain Product/Process/Service Development (7.24/5.07)
management was substantially less implemented, Structuring & Maintaining the Supply Base
probably due to the significant financial and cost- (7.87/5.71)
reduction pressures firms were under due to the Innovation & Accelerated Change Management
economic downturn as well as the fact that it is a (7.45/5.32)
relative newcomer to the set of available supply Human Resource Development (8.10/5.97)
strategies. Establishing World-Class Supplier Quality
(7.47/5.37)
Supply Strategy Gap Analysis The smallest gaps were for:
The ratings data were also analyzed to determine the Functional & Business Processes, Practices and
gaps between strategy importance and implementation. Systems (7.62/6.04)
CAPS Research 21
Table 2.3
Overall Strategy Ratings Gaps
Strategy Area Gap

Supplier Assessment, Measurement & Communications -2.38
Supplier Integration into New Product/Process/Service Development -2.17
Structuring & Maintaining the Supply Base -2.16
Innovation & Accelerated Change Management -2.14
Human Resource Development -2.13
Establishing World-class Supplier Quality -2.10
Collaborative Buyer/Supplier Development & Continuous Improvement -2.07
Strategic Cost Management -2.07
Unique Designs & Specifications -2.07
Commodity & Supplier Strategy Process -2.07
E-Sourcing & Supply Chain Strategies -2.06
Environmentally Sustainable Supply Chain Management -1.92
Measurement & Evaluation -1.92
Supplier Integration into Customer Order Fulfillment -1.90
Total Cost of Ownership -1.84
Strategic Supplier Alliances -1.76
Global Sourcing & Supply Strategy -1.75
Functional & Business Processes, Practices and Systems -1.58
Cross-Functional/Location Teaming -1.56
Vision, Mission and the Strategic Plan -1.53
Procurement & Supply Organization Structure & Governance -1.52
Engagement by Corporate Executives & Business Unit Leaders -1.42
Strategic Insourcing/Outsourcing -1.35
Average Gap -1.89
Cross-Functional/Location Teaming (7.53/5.96) comparing themselves against all respondents and for
Vision, Mission and the Strategic Plan (8.32/6.78) priority setting.
Governance (8.07/6.55) Figure 2.3 establishes quadrants by taking the median
Engagement by Corporate Executives & Business of importance ratings and midpoint of gap ratings and
Unit Leaders (8.19/6.77) then plots where the strategies fall. From Figure 2.3,
Strategic Insourcing/Outsourcing (7.02/5.67) commodity/supplier strategy development, strategic cost
management, human resource development and
* Note: Numbers in ( ) show the importance and structuring/maintaining a world-class supply base
implementation ratings. clearly fall in quadrant 2 higher importance and
larger gaps. In addition, measurement and evaluation,
The data suggest that the largest gaps were driven by total cost of ownership, world-class quality, accelerated
high-to-critical importance ratings with change management, and supplier assessment,
implementation only achieved to a moderate degree. measurement and communication fall on the margins of
The smallest gaps had ratings approaching extensive quadrant 2. These strategies are a potential
for implementation with importance being high to transformation priority and can be characterized as a
more critical. Priority 1 a must-do focus.
In addition, quadrant 4 in Figure 2.3 shows a number

Overall Importance/Implementation Gap Analysis of strategies that are somewhat lower in importance but
still have larger gaps. They include:
Additional analysis was done to compare the gaps with
importance and implementation to assist firms in Supplier Integration in New Product/Process
Development

Figure 2.3
Strategy Segmentation Analysis: Importance/Gap
Collaborative Buyer/Supplier Development & anticipated benefits is required to establish clear

Continuous Improvement priorities by each firm.
E-sourcing and Supply Chain Systems
Standardization of Systems, Components and Your firms supply strategies by quadrant may not be the
Processes same as the overall set of respondents and should reflect
your firms actual current state. However, applying
These strategies require priority consideration by similar analyses, combined with anticipated benefits and
organizations, depending of their current transformation implementation complexity, can assist in developing
focus and industry competitive requirements. your firms supply strategy implementation path.
Quadrant 1 strategies in Figure 2.3 require a continuing

focus, looking for opportunities to enhance. Depending Comparison Between High and Low
on the firms focus and strategy implementation, the
strategies in quadrant 3 may be currently viewed as Implementation Firms
appropriate and a lower priority.
A comparison was also done comparing the top and
Overall, establishing the supply strategy transformation bottom 25 firms based on implementation ratings to
priority focus at a firm depends upon position on the determine the magnitude of the rating differences and
maturity curve and the anticipated and quantified relative ranking of each strategy between the two groups
benefits from further implementation of a specific of firms. The results are shown in Tables 2.4 and 2.5.
strategy(s) in a specific industry sector. Detailed analysis
of the potential return and the logic supporting
CAPS Research 23
Table 2.4
Implementation: Highest 25 Companies vs. Lowest 25 Companies
Observations: High and Low Implementation supplier integration into new product/process/service
development to 5.1 for vision, mission and strategic
Firms
plan, substantially lower than the top 25.
The implementation range for the top 25 companies
Substantial differences exist for all strategies
was from a high of 8.4 for executive engagement; and
between the highest and lowest companies,
procurement and supply organization structure and
ranging from a difference of 4.9 to 2.9.
governance to a low of 6.4 for e-sourcing and supply
chain strategies. This was considerably higher than
The 25 highest companies have most implemented
the overall range for all companies of 6.78 to 4.52 for
executive engagement; procurement and supply
implementation, as would be expected. The bottom
organization structure and governance; human
25 company implementation range was from 2.7 for
resource development; global sourcing and

Table 2.5
Overall Implementation Ratings for Top/Bottom 25 Firms
Highest 25 Lowest 25
Companies Companies
Rank Average Rank Average
1 8.9 1 2.2
2 8.9 2 2.4
3 8.7 3 2.8
4 8.0 4 2.9
5 7.9 5 3.0
6 7.9 6 3.3
7 7.9 7 3.3
8 7.8 8 3.3
9 7.7 9 3.4
10 7.6 10 3.4
11 7.6 11 3.7
12 7.6 12 3.7
13 7.5 13 3.9
14 7.5 14 4.0
15 7.4 15 4.0
16 7.4 16 4.1
17 7.3 17 4.1
18 7.3 18 4.1
19 7.3 19 4.2
20 7.2 20 4.4
21 7.2 21 4.4
22 7.2 22 4.4
23 7.1 23 4.4
24 7.0 24 4.5
25 7.0 25 4.5
7.6 3.7
supply; and vision, mission and strategic plan. In In addition, further analysis was done comparing
the highest implemented companies, these the highest and lowest 25 firms based on average
strategies have been extensively implemented, implementation ratings for all 23 strategies. The
while at the lowest 25 companies they have results are shown in Table 2.5. The highest
achieved moderate implementation, at best. These ranked firms have an average implementation
differences ranged from 4.7 to 2.9. rating of 7.6 while the lowest ranked firms have
an average of 3.7, indicating significant differences
The largest implementation differences were in strategy implementation. On average, the firms
between supplier integration Into new product with the highest degree of supply strategy
development; global sourcing and supply; implementation are far ahead of their
innovation and accelerated change management; counterparts.
and supplier assessment, measurement and
communication.
Conclusions: Current State of Supply Strategies
For the top and bottom 25 firms, engagement by
executive leaders; vision, mission and the strategic The strategic importance of 23 critical supply strategies
plan; and procurement and supply organization was, on average, rated as High: Operational necessity;
structure and governance were common for both required for operational effectiveness; necessary to gain
groups top-five most implemented strategies. market leadership; achieves competitive viability a
necessary condition to complete. Implementation,
however, was on average between Moderate: Multiple
CAPS Research 25
attributes implemented and becoming accepted as longest view and generally require integration across
effective means of doing business in at least one functions and cross-functional collaboration. These
business unit, sites or organizations and Extensive: strategies may offer the greatest contribution to supply
Most attributes implemented across multiple business value creation during the next one to five years. For
units, sites or organizations; attributes demonstrated as example, a continuing focus on e-supply systems as a
the best way of doing business; results are beginning to critical enabler will be required. Without e-systems to
show improvement in line with plans. The maximum provide important data and a means to communicate
rating for strategic importance is critical and for and collaborate within and across organizations, supply
implementation the maximum is complete. value creation may be limited. Innovation and
accelerated change management also needs to be an
It appears that there is considerable need for firms to integral part of supply transformation efforts.
further implement supply strategies critical to their
companys overall competitiveness than has been This analysis of more than 130 respondents provides
achieved to date. However, the data also suggests that insight into the current state of supply strategy
considerable progress has been made in implementation importance, implementation and gaps. The information
of supply strategies since 2007. also provides the opportunity for firms to compare their
supply strategy ratings against other firms. It also allows
Additional analyses also indicated a number of key firms to deploy EAS worldwide and to measure change
strategies that should be considered as priority areas over time that results from the implementation of
based on combining the magnitude of gaps and the supply transformation strategies.
strategic importance of the strategies. These include:
Category (commodity) and Supplier Strategy

Development
Strategic Cost Management
Human Resource Development
Structuring & Maintaining the Supply Base
Measurement & Evaluation (functional)
Supplier Assessment, Measurement &
Communications
Total Cost of Ownership
World-Class Quality
Accelerated Change Management
Naturally, each firm will have to evaluate its own needs,

its current state and the opportunities to establish
priorities and transformation strategies.
All firms also should consider how they can accelerate

their supply transformation efforts and goal
achievements. By comparing the top and bottom 25
firms, based on implementation, we found large strategy
implementation differences between these two groups,
overall and by strategy area. Lagging implementation,
without a transformation focus and resources could
prove costly to firms over time, given the reported
achievements of various organizations.
Finally, in our opinion, the strategies that are generally

rated less important are relatively harder to implement,
and companies may be focusing on easier to implement
strategies. On the other hand, for some companies, the
relative importance is lower because they have
implemented these strategies and have now moved on
to implementing new higher priority strategies. In
addition, the least implemented strategies require the

Chapter 3: Industry Analysis
Introduction Generally, discrete manufacturing had higher

importance (7 strategies) or implementation (5
This chapter provides findings that show the differences strategies) ratings than process or service as
among three industry sectors discrete manufacturing, shown. However, meaningful conclusions versus
process manufacturing and services. The results are hypothesis would only be conjecture.
organized by industry sector and then by importance,
implementation and gap. In addition, top and bottom Implementation rated lower than importance
10 firm implementation differences by industry sector across all industry sectors.
are also provided.
In addition, statistically significant differences
Specifically, this chapter provides data in the following between industry sectors were not found for any
sequence: of the other supply strategy areas. Even though
1. Industry differences for importance there were absolute differences, they were not
2. Industry differences for implementation found to be statistically significant. However, they
3. Discrete, process and service data for importance, may be of practical interest as you review the
implementation, gaps and top/bottom 10 industry tables.
company ratings
4. Conclusions
Average Ratings by Industry Sectors
Industry Sector Difference Findings The following tables show cross-industry sector
comparisons for average importance, implementation
A few differences in implementation and importance and gap ratings across the 23 supply strategy areas.
were found among discrete, process and service Ratings are then provided by each strategy area. We
industry firms. Those differences by strategy area and organized the following tables by industry sector
by industry sector are shown in Tables 3.1 and 3.2. because readers are most likely to be interested in their
own industry.
Tables 3.3 and 3.4 provide some interesting data:

Industry Difference Conclusions
The discrete industry has an overall higher
average importance rating than either process and
There is a high degree of similarity in strategy
service.
importance ratings between the discrete, process
Implementation of supply strategies is lowest, on
and service sectors.
average, in the service industry sector, which also
has the largest gap.
Discrete manufacturing firms are further along the
The implementation difference between the top
implementation transformation journey and have
and lowest 10 firms across industry sectors is
higher importance ratings.
CAPS Research 27
Table 3.1
Strategy Importance Differences by Industry
Strategy Area Significant Differences*

D>P&S D>P D>S P>S S > D or P
Strategic Insourcing/ X
Outsourcing
Supplier Integration into X
New Product/Process/Service
Development
Supplier Integration Into X
Customer Order Fulfillment
Collaborative Buyer/Supplier X
Development & Continuous
Improvement
Establishing World-Class X
Supplier Quality
Global Sourcing & Supply X
Strategy
Strategic Cost Management X
*Differences significant at the .10 level (see Appendix Two)
D = Discrete industry
P = Process industry
S = Service industry
Table 3.2
Strategy Impementation Differences by Industry
Strategy Area Significant Differences*

D>P&S D>P D>S P>S S > D or P
Vision, Mission & the X
Strategic Plan
Commodity & Supplier X
Strategy Process
Supplier Assessment, X
Measurement &
Communications
Supplier Integration Into X
Customer Order Fulfillment
Establishing World-Class X
Supplier Quality
Measurement & Evaluation X
*Differences significant at the .10 level (see Appendix Two)
D = Discrete industry
P = Process industry
S = Service industry

Table 3.3
Average Ratings by Industry Sector
Industry Sector Importance Implementation Gap

Discrete 7.87 5.89 -1.99
Process 7.42 5.78 -1.64
Service 7.47 5.40 -2.04
Overall 7.57 5.68 -1.89
Table 3.4
Implementation Ratings for Top/Bottom Firms by Industry Sector for 23 Strategies
Industry Sector Top 10 Bottom 10 Difference

Discrete 7.7 4.0 3.7
Process 7.5 4.2 3.3
Service 7.2 3.4 3.8
quite large, indicating there are truly leading and Table 3.5 shows the supply strategies with the biggest
lagging firms within all industries. gaps by industry sector. They were somewhat different
The discrete industry appears to be further along across the industries.
in strategy implementation, at least compared to
service.
Table 3.5
Top 6 Strategy Gaps by Industry Sector
Rank Discrete Process Service

1 Supplier Integration into New Supplier Assessment Supplier Assessment
Product Development (-2.74) Measurement & Measurement &
Communication (-2.46)
Communication (-2.80)
2 Human Resource Standardization (-2.17)
Structure & Maintain Supply
Development (-2.39) Base (-2.56)
3 Innovation & Accelerated Establishing World-Class Strategic Cost Management
Change Mgmt (-2.35) Supplier Quality (-2.04) (-2.42)
4 Strategic Cost Management Supplier Integration into New Innovation & Accelerated
(-2.32) Product Development (-1.93) Change Mgmt (-2.33)
5 Collaborative Buyer/Supplier Environmentally Sustainable Human Resource
(-2.27) Supply Chain Mgmt (-1.91) Development (-2.31)
6 Commodity and Supply Structuring & Maintaining Commodity and Supply
Strategy (-2.26) the Supply Base (-1.91) Strategy (-2.31)
CAPS Research 29
Discrete Manufacturing Ratings/Rankings
Table 3.6
Discrete Manufacturing Importance Strategy Rankings/Ratings
Strategy Area Implementation Importance Gap

Strategic Cost Management 6.27 8.59 -2.32
Establishing World-Class Supplier Quality 6.19 8.35 -2.16
Vision, Mission and the Strategic Plan 6.75 8.34 -1.59
Governance 6.74 8.30 -1.56
Commodity & Supplier Strategy Process 6.04 8.30 -2.26
Measurement & Evaluation 6.38 8.27 -1.89
Human Resource Development 5.79 8.18 -2.39
Engagement by Corporate Executives & Business Unit
Leaders 6.89 8.07 -1.18
Supplier Integration into New Product/Process/Service
Development 5.25 7.98 -2.74
Global Sourcing & Supply Strategy 5.97 7.97 -2.01
Supplier Assessment, Measurement & Communications 6.11 7.92 -1.81
Total Cost of Ownership 5.83 7.88 -2.05
Structuring & Maintaining the Supply Base 5.83 7.82 -1.99
Innovation & Accelerated Change Management 5.44 7.80 -2.35
Collaborative Buyer/Supplier Development & Continuous
Improvement 5.50 7.78 -2.27
Functional & Business Processes, Practices and Systems 6.22 7.75 -1.53
Strategic Supplier Alliances 5.72 7.65 -1.93
Cross-Functional/Location Teaming 5.91 7.62 -1.72
Strategic Insourcing/Outsourcing 5.65 7.59 -1.94
Environmentally Sustainable Supply Chain Management 5.60 7.30 -1.79
E-Sourcing & Supply Chain Strategies 5.13 7.28 -2.15
Supplier Integration into Customer Order Fulfillment 5.10 7.14 -2.04
Standardization of Systems, Components & Processes
vs. Creation of Unique Designs & Specifications 5.08 7.09 -2.01
Average Importance 5.89 7.87 -1.99

Table 3.7
Discrete Manufacturing Implementation Strategy Ranking/Ratings

Leaders 6.89 8.07 -1.18
Governance 6.74 8.30 -1.56
Average Implementation 5.89 7.87 -1.99
CAPS Research 31
Table 3.8
Discrete Manufacturing Strategy Gap Ranking/Ratings

Governance 6.74 8.30 -1.56
Engagement by Corporate Executives & Business
Unit Leaders 6.89 8.07 -1.18
Average Gap 5.89 7.87 -1.99

Table 3.9
Implementation: Highest 10 Discrete Manufacturing Companies
vs. Lowest 10 Discrete Manufacturing Companies
CAPS Research 33
Table 3.10
Discrete Manufacturing: Implementation Ratings for Top/Bottom 10 Firms
Companies Companies
1 8.9 1 2.4
2 8.9 2 2.8
3 7.9 3 3.7
4 7.8 4 3.7
5 7.6 5 3.9
6 7.5 6 4.4
7 7.4 7 4.4
8 7.3 8 4.6
9 7.2 9 4.7
10 7.0 10 4.9
7.7 4.0
Process Manufacturing Ratings/Rankings
Table 3.11
Process Manufacturing Importance Strategy Ranking/Ratings

Leaders 6.83 8.07 -1.24
Governance 6.85 8.00 -1.15

Table 3.12
Process Manufacturing Implementation Strategy Ranking/Ratings

Governance 6.85 8.00 -1.15
Leaders 6.83 8.07 -1.24
CAPS Research 35
Table 3.13
Process Manufacturing Strategy Gap Ranking/Ratings

Leaders 6.83 8.07 -1.24
Governance 6.85 8.00 -1.15
Average Gaps 5.78 7.42 -1.64

Table 3.14
Implementation: Highest 10 Process Manufacturing Companies
vs. Lowest 10 Process Manufacturing Companies
CAPS Research 37
Table 3.15
Process Manufacturing Implementation Ranking/Ratings for Top/Bottom 10 Firms
Companies Companies
1 8.7 1 3.3
2 7.9 2 3.4
3 7.9 3 4.1
4 7.7 4 4.1
5 7.5 5 4.4
6 7.4 6 4.4
7 7.2 7 4.5
8 7.1 8 4.5
9 6.8 9 4.5
10 6.8 10 4.6
7.5 4.2
Service Ratings/Rankings
Table 3.16
Service Importance Strategy Ranking/Ratings

Leaders 6.60 8.42 -1.82
Governance 6.07 7.93 -1.86

Table 3.17
Service Implementation Strategy Ranking/Ratings

Leaders 6.60 8.42 -1.82
Governance 6.07 7.93 -1.86
CAPS Research 39
Table 3.18
Service Strategy Gap Ranking/Ratings

Governance 6.07 7.93 -1.86
Leaders 6.60 8.42 -1.82
Average Gap 5.40 7.47 -2.07

Table 3.19
Implementation: Highest 10 Service Companies vs. Lowest 10 Service Companies
CAPS Research 41
Figure 3.20
Service Implementation Ranking/Ratings for Top/Bottom 10 Firms
Companies Companies
1 8.0 1 2.2
2 7.6 2 2.9
3 7.6 3 3.0
4 7.3 4 3.3
5 7.3 5 3.3
6 7.2 6 3.4
7 7.0 7 4.0
8 7.0 8 4.0
9 6.9 9 4.1
10 6.7 10 4.2
7.3 3.4

Chapter 4: Strategy Implementation
and Supply Performance
Introduction For your most important purchases (80/20 rule)

over the past twelve (12) months, indicate the
What supply performance improvements have firms magnitude of measurable performance
been achieving? Are there apparent relationships improvements and/or business unit contribution
between supply strategy implementation and achieved through sourcing and supply chain
performance? These two questions are the focus of strategies at your business unit.
discussion in Chapter 4.
The 11 performance areas and results are shown in
Table 4.1 and include both 2007 and 2009.
Supply Performance
Each respondent was asked to provide supply Conclusions

performance information for 11 performance areas.
Specifically, they were asked: Supply performance improvements were achieved
in difficult economic times.
Table 4.1
Supply Performance Results (2007, 2009)
CAPS Research 43
Unit purchase price, transportation and logistics logistics cost, and total cost of ownership with
costs and total cost of ownership all improved by slippage in supplier quality and on-time delivery
at least 4 percent over the past 12 months.
In addition, performance rating responses were
Improvements also were achieved in all other requested for 22 performance areas shown in Table 4.2,
performance areas, including supplier payment which also shows rating results for both 2009 and
terms, quality, order cycle times, on-time delivery, 2007. The question asked whether performance stayed
responsiveness, flexibility and achievement of the same, got better or worse. These performance areas
supplier diversity. are organized by three major categories including (1)
overall sourcing and supply chain process
The ranges between maximum improvement and improvements, (2) overall supply value-add, and (3)
worsening were quite large, indicating significant overall relationships and satisfaction. These ratings were
variability between firms and industries. respondent perceptions.
Compared to 2007, 2009 data shows period-to- Overall, we see some improvement across all of the 22
period improvements in the transportation and performance areas. However, on average it does not
Table 4.2
Performance Ratings (2007 and 2009)

appear that major improvements were achieved. The ratings by each performance area overall and for the
biggest improvements (5.0-5.3) were for standardization industry sectors.
of the sourcing process, application of e-systems,
executive satisfaction with supply (although the
improvement rate was slightly less than in 2007), unit Correlation Analysis
purchase price, achieving purchase price/cost objectives,
supplier relationships and client/stakeholder satisfaction Correlation analysis was also conducted among all 23
with supply. supply strategies and performance metrics. The results
were non-conclusive for practical guidance. Although
some correlations at the .10 level were found indicating
Industry Performance Differences a relationship between a strategy area and performance
factor, no meaningful conclusions could be established
In addition, statistical analyses were performed to as cause-effect, or a directional rationale could not be
determine whether there were significant industry sector definitely established.
differences for both the objective and qualitative
performance measures. The results of the analyses
showed few differences between industry sectors and
included:
The discrete industry sector had higher supplier

quality performance than did services.
When rating performance change (qualitatively);

discrete had greater improvement in payment-
terms-to-suppliers than did service, and procure-
to-pay and transportation/logistics transportation
efficiency improvement were greater in the
process than in the service sector.
The process and service sectors both had greater

improvement in minority and women business
spend than did the discrete sector.
Tables 4.3 and 4.4 show the actual reported

performance averages and performance improvement
Table 4.3
Actual Performance: Overall and by Industry Sector
Overall Discrete Process Service

Performance Area (N~92-121) (N~32-36) (N~37-45) (N~32-40)
Unit Purchase Price 4.0% 4.1% 4.5% 3.4%
Transportation & Logistics Costs 5.1% 4.6% 6.0% 4.5%
Total Cost of Ownership 4.3% 2.8% 5.3% 4.4%
Performing to Purchasing Price/Cost
Objectives 4.2% 4.7% 3.3% 4.8%
Inventory Investment Cost for Purchased
Goods 1.7% 2.5% 1.7% 0.5%
Payment Terms With Suppliers (# Days) 3.1 4.0 3.7 1.5
Supplier Quality 2.2% 4.2% 2.0% 0.6%
Supplier Order Delivery Cycle Time 3.2% 2.5% 3.9% 3.0%
Supplier On-Time Delivery 3.1% 4.0% 3.7% 1.5%
Supplier Responsiveness/Flexibility 5.4% 4.9% 7.3% 3.5%
Supplier Diversity 3.8% 1.1% 5.1% 4.8%
CAPS Research 45
Table 4.4
Performance Improvement: Overall and by Industry Sector

Chapter 5: What Has Changed?
2007 to 2009
Introduction Strategic Cost Management

Strategic Supplier Alliances
This chapter highlights differences between the 2007 Total Cost of Ownership
and 2009 EAS responses and includes: Procurement and Supply Organization Structure
and Governance
Overall strategy importance, implementation and Engagement by Corporate Executives and
resulting gap differences Business Unit Leaders
Differences in rank order for importance and Innovation and Accelerated Change Management
implementation ratings Structuring and Maintaining the Supply Base
Differences in performance: actual and
perceptions Overall, it appears that the above strategies were a focus
Differences in ratings by companies who of supply transformation efforts over the past two years.
participated in both the 2007 and 2009 EAS Executive leadership, cost and innovation,
collaboration, and enabling e-system improvements
were the driving themes.
Overall Changes: 2007-2009
In addition Tables 5.2 and 5.3 show difference rankings
of ratings for the 23 strategy areas by implementation
Tables 5.1, 5.2 and 5.3 provide insights about the
and importance. These tables may provide the reader
supply strategy importance, implementation and gap
additional insights.
changes that have occurred between 2007 and 2009.
The decrease in importance ratings may be explained by
The overall gap reduction between 2007 and 2009 was
the relative transformation focus on selected strategies
.53, which is large. The top six gap reductions were for:
and/or different responding companies between 2007
and 2009.
Engagement by Corporate Executives and
Business Unit Leaders (greater engagement)
Total Cost of Ownership (more implementation)
Innovation and Accelerated Change Management Supply Strategh Changes: Firms Common
(more implementation) Between 2009 and 2007
E-sourcing and Supply Change strategies (more
implementation with importance reduction) Analysis was also conducted to determine supply
Strategic Supplier Alliances (major strategy changes for firms that participated in both the
implementation move) 2009 and the 2007 EAS. Thirty-eight companies
Strategic Cost Management (major participated in both assessments. Results are shown in
implementation move) Table 5.4 and are ranked by the largest gap reduction
between 2007 and 2009.
In addition, the most significant increases in strategy
implementation between 2007 and 2009 were for:
CAPS Research 47
Table 5.1
Comparison of 2007/2009 Implementation/Importance Gaps
As can be seen, the top six strategy gap reductions* accelerated change management were common with the
were for the following strategies and undoubtedly were total sample.
a focus of transformation efforts over the past two years:
For five of the 23 strategies, there was both an increase
Strategic Supplier Alliances (.99)* in implementation and a small reduction in importance.
Supplier Integration into Customer Order For collaborative buyer/supplier development we saw
Fulfillment (.87) both an increase in importance and implementation.
E-sourcing and Supply Chain Strategies (.76) The smallest gap reductions were for those supply
Collaborative Buyer/Supplier Development and strategies which were generally rated higher in
Continuous Improvement (.71) importance and had greater implementation for both
Supplier Integration into New Product 2007 and 2009.
Development (.67)
Innovation and Accelerated Change Management Overall it appears that the driver for gap reduction was
(.66) primarily an increase in implementation. For those
strategies with the smallest gap closure from 2007 (even
Four of the six strategies with the biggest gap closure though highly important), the major reason were similar
required more cross-functional focus across the supply reductions in both importance and implementation. The
or value chain (supplier integration into both customer only exception was commodity and supplier strategy
order fulfillment and new product development, process, which increased in both importance and
e-sourcing and supply chain strategies, and buyer/ implementation.
supplier collaboration efforts.) The strategies are more
complex to implement and generally require additional It should be noted that even for the companies
investment, but they may result in significant returns. participating in both 2007 and 2009, we likely had
These four strategies were different from for the overall different respondents. Individual differences may
sample. Strategic supplier alliances, and innovation and explain some of the rating differences. In addition,

Table 5.2
Differences in Overall Implementation Between 2007 and 2009
2007 Implementation
2009 Implementation
Difference: Increased
Implementation
Strategy Area
Strategic Cost Management 5.35 6.12 0.78
Strategic Supplier Alliances 4.92 5.64 0.72
Total Cost of Ownership 5.24 5.95 0.71
Procurement & Supply Organization Structure & Governance 5.84 6.55 0.71
Engagement by Corporate Executives & Business Unit Leaders 6.09 6.77 0.68
Innovation & Accelerated Change Management 4.67 5.32 0.65
Structuring & Maintaining the Supply Base 5.11 5.71 0.60
Commodity & Supplier Strategy Process 5.71 6.22 0.51
Collaborative Buyer/Supplier Development & Continuous Improvement 4.63 5.13 0.50
Supplier Integration into Customer Order Fulfillment 4.07 4.52 0.44
Vision, Mission and the Strategic Plan 6.35 6.78 0.43
Unique Designs & Specifications 4.65 5.06 0.42
Global Sourcing & Supply Strategy 5.23 5.63 0.41
Supplier Integration into New Product/Process/Service Development 4.70 5.07 0.37
Establishing World-Class Supplier Quality 5.03 5.37 0.35
Measurement & Evaluation 5.65 5.98 0.32
E-Sourcing & Supply Chain Strategies 4.77 5.08 0.31
Functional & Business Processes, Practices and Systems 5.79 6.04 0.24
Strategic Insourcing/Outsourcing 5.43 5.67 0.24
Supplier Assessment, Measurement & Communications 4.95 5.12 0.17
Cross-Functional/Location Teaming 5.85 5.96 0.11
Average 5.27 5.68 0.44
implementation is moderate, indicating the journey

continues, probably with greater insights into critical
success factors.
Note: Supply performance comparisons between 2007

and 2009 were not made because the number of
common responses for both 2007 and 2009 were too
small to be meaningful. Overall supply performance
comparisons were discussed in Chapter 4.
Number of firms participating in 2007 and 2009 = 38
CAPS Research 49
Table 5.3
Differences in Overall Importance Between 2007 and 2009

Figure 5.4
Importance, Implementation & Gap Strategy Ratings for Companies Participating in BOTH 2007 & 2009
CAPS Research 51
Chapter 6: Obstacles to Supply
Strategy Implementation
Introduction resources; and alignment and integration of

business, manufacturing, operations, technology
Based on the results of the 2007 EAS, implementation and supply strategies. Both were part of the 75
lagged strategic importance for the 23 supply strategy percent or more of obstacle category responses
areas. Therefore, we wanted to determine the primary for 20 of the 23 supply strategy areas.*
obstacles that were limiting implementation. For each
strategy area in 2009, we included the following open- Organization structure and governance,
ended question: What two primary obstacles are measurement and evaluation, people and culture,
limiting further implementation of your firms (for each and information systems and data availability
of the 23 strategy areas) strategy? were the next most prevalent obstacles. They
negatively impacted 10 to 13 supply strategy
More than 1,000 short-sentence responses were areas.
provided which were judgmentally placed into the
following eight broad obstacle categories after content A limiting economic environment and
review of the individual responses. internal/external communication obstacles
impacted two and four strategy areas, respectively.
1. Lack of Executive Engagement and Support with
Resources It was also interesting to note the obstacle categories
2. Inappropriate Organization and Governance that most negatively impacted various supply strategy
3. Business/Manufacturing/Operations/Technology/ areas, where more than 33 percent of the obstacles
Supply Strategies Not Aligned and Integrated identified by respondents were in one obstacle category.
4. Limiting External Economic Environment Impact They were:
5. People- and Culture-limiting Change
6. Lack of Information Systems and Data Availability Executive Engagement and Support with
7. Internal/External Communications Resources was the major obstacle for:
8. Inadequate Measurement and Evaluation
Collaborative Buyer/Supplier Development
Environmental Sustainability
Cross-Functional/Location Teaming
Overall Findings
Human Resource Development
Based on our content analysis for the 23 supply
Aligned and Integrated Business/Manufacturing/
strategies, we found that:
Operations/Technology/Supply Strategies was the
major obstacle for:
The two most identified obstacle categories
limiting further strategy implementation were lack
Insourcing/Outsourcing Strategy
of executive engagement and support with
*Obstacle categories were considered as major limiters to a strategy area only if the obstacle category was part of the categories making up 75
percent of the total obstacle responses for the strategy.

Supplier Integration into New Product 2. To achieve major innovation and accelerate
Development change, personnel may have to be changed, and
Strategic Cost Management supply and company culture modified for
Standardization significant innovation and change to occur.
In addition, specific obstacles were found to be 3. Lack of appropriate data and information e-system
the primary limiters of a number of supply is still limiting broad-based implementation of
strategies and included: integrated end-to-end supply chain systems,
strategic cost management and total cost of
Organization Structure and Governance obstacles ownership.
(33 percent) limited Functional and Business
Processes, Practices and Systems 4. Supply management should look at the specific
obstacles related to specific supply strategies and
People and Culture obstacles (41 percent) limited then develop tailored and unique versus general
Innovation and Accelerated Change Management approaches to overcoming the implementation
obstacles, as shown above.
E-Information Systems and Data Availability
obstacles limited (a) Supplier Integration into In addition, Table 6.1 provides a summary count of
Customer Order Fulfillment (48 percent), obstacle responses by supply strategy.
(b) Strategic Cost Management (28 percent),
(c) Total Cost of Ownership (38 percent), and
(d) E-Sourcing and Supply Chain Strategies (42 Selected Obstacles
percent)
Appendix Three provides insights into selected specific
obstacles identified by respondents.
Conclusions
Given the qualitative nature of the open-ended

responses, it is difficult to say with certainty what the
exact cause-effect relationship between specific obstacles
and the magnitude of their negative impact on
implementation of the 23 supply strategies assessed.
However the following conclusions are reasonable and
include:
1. Executive engagement and support with resources

combined with business, manufacturing,
operations, technology and supply strategy
alignment is a necessity to implement supply
strategies most critical to overall firm success.
This includes at least those strategies with the
most significant gaps discussed in Chapter 2
which were:
Supplier Assessment, Measurement &

Communications (7.51/5.12)*
Supplier Integration into New Product/Process/
Service Development (7.24/5.07)
Structuring & Maintaining the Supply Base
(7.87/5.71)
Innovation & Accelerated Change Management
(7.45/5.32)
Human Resource Development (8.10/5.97)
Establishing World-Class Supplier Quality
(7.47/5.37)
CAPS Research 53
Table 6.1
Summary of Obstacle Responses by Supply Strategy

Chapter 7: Summary and the Path
Forward
Introduction and strategic plan; engagement (in supply) by corporate

executives and business unit leaders; and procurement
This chapter provides a summary of key findings and and supply organization structure and governance. In
broadly discusses a path forward approach to be addition, the least implemented supply strategies
considered by supply executive for their continuous include those that require significant investment
transformation journey. (e-systems for sourcing and supply chain) and
considerable cross-functional alignment and linkage of
goals, strategies and resources (supplier integration into
new product development and customer order
Summary: Key Findings
fulfillment; standardization of systems, components and
processes versus creation of unique designs, and
Supply organizations are continuing their
environmentally sustainable supply chains).
transformation efforts, showing greater supply strategy
implementation than in 2007 and also a reduction in
In addition, supply management was achieving positive
the gaps between supply strategy importance and
supply performance improvements for 2009.
implementation. However, significant gaps continue to
exist. Even at those firms with the highest degree of
Given these findings and recognition that firms are at
implementation, there are opportunities to further
different stages of maturity, two transformation
enhance supply strategies.
observations are important. First, there is need to
ensure high implementation and effectiveness for core
The largest supply strategy gaps between importance
strategies such as category and supplier strategy
and implementation were for category and supplier
development (with risk management); structuring the
strategy development, strategic cost management,
supply base; total cost of ownership; supplier selection;
human resource development, structuring/maintaining a
strategic cost management, and people acquisition and
world-class supply base, measurement and evaluation,
development. These strategies need to deliver supply
total cost of ownership, world-class quality, accelerated
performance today.
change management, and supplier assessment,
measurement and communication.
Second, leading supply organization and business unit
leaders need to further invest in the long-term success
Similar supply strategies were being implemented at
of their firms by accelerating transformation of
both the most and least implemented 25 firms overall,
e-systems; supplier integration into both new product
and by the top/bottom 10 by the three industry sectors
development and customer order fulfillment;
(discrete, process and service). However, the top firms
standardization of specification and purchasers to
overall and by industry sector were significantly more
reduce complexity; achieving supplier innovation
advanced in implementation, and the differences were
through effective collaboration, and establishing
large.
environmentally sustainable supply chains. These
strategies are necessary to deliver future performance
The research findings also show that the most
improvements.
implemented strategies are critical enablers to world-
class supply strategies. They include the vision, mission
CAPS Research 55
The Path Forward: Supply Transformation 2010 requiring that return-on-investment be determined,
including personnel capacity and capabilities to
and Beyond
implement the transformation. To be effective, clear-cut
goals and how they will be achieved need to be well
Based on the research, the supply transformation
thought out and effectively communicated throughout
journey can be long and perilous. However, our
the firm.
research and prior experience suggest a number of
elements critical to success including (1) clearly
Figure 7.1 illustrates different value contributions that
articulated goals important to the business,
can be made through effective supply management and
(2) transformation priorities, (3) the resources and
transformations.
capabilities to implement significant change, and
(4) a transformation process. Due to the economic crisis
Supply transformation results must focus on the overall
of 2008-2009, priority setting and goal clarity
financial and market contributions to be made to the
(especially related to cost reductions) become more
firm and not be limited by functionally driven
important as resources for transformation may have
objectives. The links between supply transformations
become more limited. In addition, new supply strategies
and revenue, cost and asset improvement must be clear,
may be emerging requiring greater focus.
logical and supported by the CFO.
Clear Goals
Establish Priorities
It is important to create and clearly articulate the value
Based on the EAS Assessment findings and prior
contribution to be achieved from a supply
experience, the strategy areas shown in Figure 7.2
transformation. For example, supply organizations are
should be clearly evaluated for transformation priorities.
focusing on various approaches to achieve cost
Priorities will be established based on your
reduction such as negotiation, price reduction based on
organizations current state and potential short- and
raw material price decreases, achieving supplier cost
longer-term benefits from the transformation.
reduction ideas, cost modeling, best country sourcing
and so forth. In addition, some firms are also increasing
Figure 7.2, which was also discussed in 2007, continues
the longer-term focus on obtaining supplier
to be relevant today, although slightly modified to
innovations.
include sustainability.
For any of these initiatives, capital investment, people
Even though many firms are implementing some or all
and time may be required. Increasingly, firms are
of these strategies, they are only partially implemented
Figure 7.1
Improving Economic Value-Add (EVA)

Figure 7.2
Building Blocks for Supply Transformation
against the attributes shown for each of the 23 strategy Figure 7.4 shows a 10-step implementation process that
areas. This was again confirmed by our 2009 research can help achieve successful supply transformations.
findings. Therefore, these strategies should be
prioritized for implementation based on anticipated
results compared to costs and complexity to implement. The Decade Ahead: Supply Strategy
In addition, we earlier discussed those strategies with Implementation
the largest gaps. They included category and supplier
strategy development; strategic cost management; This section builds on the data gathered in the EAS,
human resource development; structuring/maintaining a other research and consulting experience combined
world-class supply base; measurement and evaluation; with the findings of Supply Management in the Decade
total cost of ownership; world-class quality; accelerated Ahead. This discussion is similar to 2007, recognizing
change management, and supplier assessment, that supply strategy implementation progress has been
measurement and communication. These strategies are a achieved to some degree, but that considerable progress
potential transformation priority and can be overall is still required.
characterized as a top priority.
Figure 7.5 illustrates the likely next wave of supply
Resources and Capabilities strategy to be the focus of innovation at leading-edge
Firms undertaking supply transformations must ensure companies. A brief discussion follows.
the resources and capabilities to execute the
transformation. Figure 7.3 provides a framework to help These strategies combine further enhancement of the
evaluate implementation capabilities for priority critical enablers and the development of supply
transformations. Considerations such as strategy strategies increasingly requiring cross-functional and
complexity and the capability to actually implement cross-enterprise collaboration with a holistic supply
require determination. chain and customer focus. The function only
perspective will slowly fade.
Supply Transformation Process and EAS
Application
Supply transformations will sometimes fail. To minimize Strategy Enhancement
failures, a critical success factor is a process to achieve
successful supply transformations. Supply Increasingly, expanded supply strategy vision with
transformations are often disjointed and lack a focus. center-led approaches will be required to achieve
CAPS Research 57
Figure 7.3
Strategic Supply Strategy Priorities & Capabilities Assessment Framework
maximum supply performance in the future. Supply category strategies. For example, at one firm revenues
will be expected to contribute to not only cost were enhanced because supply determined that there
reduction, but also to improved utilization of assets and would be insufficient capacity to meet demand for a
revenue enhancement. This can be seen based on the very long lead-time product. Supply management then
increased emphasis on obtaining supplier innovations created a new supply chain able to provide the product.
and open innovation approaches. The firm also bought out capacity and was able to
provide its business customers needed products earlier
People acquisition, development and retention strategies than the competition, thereby gaining high-value
will require transformation. Salary grades and people orders.
capabilities will increase given the capabilities required
in an increasingly complex and competitive world with Category strategy development will be resourced with
extended supply lines. Recruitment and people location highly capable people across functions for the most
at all levels will be worldwide with a focus on creating important purchase categories. The goal of the category
strategic, challenging jobs and establishing a best-place- strategies will be to provide value, going far beyond
to-work environment, recognizing generation traditional cost-reduction goals.
differences.
Increasing collaboration with strategic supply partners
E-sourcing without human touch will be achieved. The and networks will be required and achieved due to the
proportion of time supply management spends on global scope of business, limited investment capability,
clerical, administrative and routine tasks will be and the scale and know-how that other firms may
reduced. Procure-to-pay interfaces with suppliers will possess. Firms will have to develop trust and more
be automated. effectively share risk and rewards. Other CAPS Research
has demonstrated that trust and risk/reward sharing
are critical elements to successful collaboration.
Supplier Focused Strategies
Supplier development activities also will increase. As
A number of supply strategies that primarily focus on suppliers worldwide are being utilized, especially in
suppliers and supply networks will be enhanced and emerging markets, some may not have the full
take on greater importance in the future. These include manufacturing or operations capabilities required. For
true cross-functional teams developing value-driven example, automotive OEMs are using hundreds of
technical and other personnel in supplier development.

Figure 7.4
Supply Strategy Transformation Process
CAPS Research 59
Figure 7.5
Critical Supply Strategies: 2010 and Beyond
Value and demand analyses will also be more fully In addition, firms such as IBM, Cisco, Whirlpool and
utilized at the product or service design stage. many others are driving toward end-to-end supply
Standardization and product/service complexity chain integration. Those who are first and who focus on
reduction efforts will increase. At one manufacturing holistic company versus narrow function only goals
firm, engineering and supply are working closely will likely achieve competitive advantage.
together in teams, with executive engagement and
support, to reduce product complexity at the raw
material, systems and component levels. Concluding Comments
These activities are required to offer greater value to This report provides insights to firms about the supply
customers by providing differentiated features, while strategies most important to the strategic success of the
controlling costs. Implementation has been lower for firm. The findings also suggest that firms are somewhat
these strategies. lagging with respect to full implementation of important
supply strategies.
Supply/Value Chain Integration The building block strategies shown in Figure 7.5 are
the focus of Stages II and III in the Maturity Model
The integration of functions and firms making up the presented in Chapter 1. To move to Stage IV, firms will
supply chain is one of the last frontiers. How well have to implement supply strategies and their enablers
suppliers and customers are aligned and linked with that require additional collaboration, integration and
your company will influence future success. Strategies customer-focused versus functional metrics.
to better integrate the supply chain are the most
complex because they include numerous functions and Each firm requires a supply transformation strategy,
organizations. However, alignment and linkage which is regularly updated and executed, to achieve
strategies across the supply chain will be increasingly high supply performance in a fast changing and
important once supply strategy building blocks are in increasingly complex world. Those 12 to 15 supply
place. These strategies will drive alignment between strategies identified as critical to success require
functions and firms focused on collaborative innovation complete implementation to move to the next level of
efforts, shared resources, standardization and performance.
complexity reduction, and sustainability.

Although the recent economic crisis may have slowed
the rate of implementation, the lessons learned can help
firms prioritize those supply strategies most important
in the new economy. For example, risk management
will be of increasingly significant importance as part of
category and supplier strategy development. Companies
will have to re-examine their focus and ensure that the
correct supply strategies are targeted for implementation
to provide maximum future benefits.
CAPS Research 61
APPENDIX
1
Appendix One: Supply Strategy
Definitions
Vision, Mission and the Strategic Plan performance expectations. The view includes the total
supply chain or network.
Definition
Sourcing and supply chain vision, mission and strategic
plan sets direction for the development and Structuring & Maintaining the Supply Base
management of a supply network that creates value and
leads to competitive advantage. Vision and mission Definition
articulates how the supply network will create value. A properly structured supply base includes the
The strategic plan provides a blueprint for appropriate number and quality of suppliers to
implementation and execution. The vision, mission and significantly contribute to companywide EVA and to
strategic plan are documented. maintain a competitive sourcing advantage. Suppliers
are categorized as strategic, preferred, improve,
eliminate and other appropriate categories. The
Strategic Insourcing/Outsourcing maintenance of the supply base reflects changing
external economic risk and market/competitive
Definition conditions worldwide. It also aligns with the overall
This strategy is a strategic sourcing process that current and future sourcing program and specific
evaluates internal capabilities, competencies and commodity/purchase family strategies to meet
capacity versus external sources and capabilities to companywide requirements.
identify opportunities to better focus on core
competencies, improve product/service differentiation
and develop and sustain competitive advantage. Supplier Assessment, Measurement &
Communications
Commodity & Supplier Strategy Process Definition
This is a process of continuously measuring and
Definition providing feedback to suppliers about performance to
This process is a written, systematic plan to achieve ensure that the supply base is a source of competitive
both short- and long-term commodity/purchase family advantage. The objectives are to identify outstanding
goals over at least a one- to three-year horizon. suppliers and reward them with additional business; to
Strategies are developed for the important identify substandard suppliers and eliminate or
commodities/categories. Elements include supply base strengthen them through development efforts; to align
structuring, sourcing, contracting, supplier supplier/buyer goals through joint metrics, and to
development, product/process design/specifications establish a performance baseline to track trends.
characteristics, and value chain considerations. The
strategy combines various elements into an executable
plan with timelines, accountabilities and measurable

APPENDIX
1
Supplier Integration Into New Product/Process/ efforts will be characterized by greater focus on bilateral
improvements, commitment of joint resources to
Service Development
development activities and more risk/reward sharing.
Lean practices are applied.
Definition
This strategy is the systematic process of involving
external suppliers into the design, development and
introduction of new products, processes or services, Establishing World-Class Supplier Quality
including product, process and service innovations.
Integration occurs at any stage in the process. Supplier Definition
responsibilities range from black box, where supplier Supplier quality management is the process of managing
owns primary responsibility for the process, to white the entire supply chain to obtain comprehensive quality
box, where the supplier may be consulted. process controls using traditional and innovative quality
management strategies. These strategies are both
internal and external, at every stage of the supply chain
process, with the objective of attaining a competitive
Supplier Integration Into Customer Order
advantage and long-term success through customer
Fulfillment satisfaction and overall stakeholder loyalty.
Definition
This strategy involves customer-driven synchronization
of supply chain physical, financial and information
Global Sourcing & Supply Strategy
flows from customer needs through post-sales service
Definition
and disposal to enhance asset velocity, value creation
Global sourcing and supply strategy includes strategies
and competitive advantage. The cross-enterprise supply
and practices enabling firms to effectively coordinate
chain verses a single business unit is the competitive
information and decisions about customers, company
unit. The objective is to optimize capability of the total
needs, commodities/purchase families and suppliers on
value chain.
a worldwide basis. Globalization of a firms
procurement/sourcing and supply chain strategy
requires global leveraging of suppliers and internal
Strategic Supplier Alliances resources and processes.
Definition
Strategic supplier alliances are long-term, cooperative
relationships designed to leverage the strategic and
Strategic Cost Management
operational capabilities of individual participating
Definition
companies to achieve significant ongoing benefits to
This is the identification and proactive management of
each party. The relationship is based on mutual business
all costs and associated cost drivers throughout the
interest and does not involve the formation of a separate
product/service supply chain. It requires development,
legal entity. Successful alliances require high levels of
prioritization and implementation of strategies and
coordination, trust, information sharing, creativity and
processes to control, reduce or eliminate costs during
senior management support to fully exploit joint
each phase of the life cycle. Cost categories include but
opportunities.
are not limited to design, purchase item costs, quality,
inventory, delivery and end-of-life costs.
Collaborative Buyer/Supplier Development &

Continuous Improvement Total Cost of Ownership
Definition Definition
This is a strategy is for developing and improving Total Cost of Ownership (TCO) is a cost analysis
strategic and tactical processes and relationships with technique used in support of a companys strategic cost
key suppliers to maximize cross-enterprise performance. management strategies. TCO analysis involves the
Formalized development efforts and continuous identification and categorization of all cost elements and
improvement processes ensure performance targets are associated cost drivers related to a
established with appropriate metrics and progress sourcing/procurement decision. TCO includes all costs,
reporting for critical value chain processes. World-class direct and indirect, incurred throughout the life cycle of
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an asset, including acquisition and procurement, pursue tasks and assignments that link to and directly
operations and maintenance, and end-of-life support the attainment of business and/or corporate
management. objectives. Teams are the correct organizational response
when faced with complex or large-scale decisions or
tasks that span functions, geographies, product/service
Standardization of Systems, Components & lines, etc.
Processes vs. Creation of Unique Designs &
Specifications Measurement & Evaluation
Definition Definition
Standardization strategies include companywide Strategic and supply chain performance measurements
determination of those products, services, processes include metrics for commodity/purchase family sourcing
and/or technologies that can be defined to company or effectiveness. The measurements also can be used to
industry standards for simplification and cost savings. gauge supplier performance, overall functional strategies
Differentiation is only applied when it provides value to and processes, cross-functional team performance, and
the ultimate customer and justifies higher pricing and cross-enterprise performance. Metrics are used within a
greater margins. Differentiation is commonly established balanced scorecard performance measurement and
around core competencies. evaluation methodology against specific measures and
objectives. The metrics are integrated with the
company/business unit performance evaluation system.
Environmentally Sustainable Supply Chain
Management
E-Sourcing & Supply Chain Strategies
Definition
This strategy is a written systematic set of supply Definition
management strategies that incorporate environmentally E-sourcing and supply chain strategies are a series of
sustainable processes to make both short- and long- practices that involve automating supply chain process
term performance improvements in supply management and/or conducting supply chain activities electronically
at the firm level and/or across the supply network. and via the Internet to optimize inherent efficiencies.
E-sourcing and supply chain strategies streamline
processes including procurement, supply/demand
Procurement & Supply Organization Structure & planning and logistics as well as supplier relationship
management, design/development, and customer-
Governance relationship management. E-systems are substituted for
tactical operations where possible.
Definition
Firms operate in a globally coordinated environment
with companywide or strategic business unit (SBU)
center-led leadership with purchasing authority and Human Resource Development
coordination with decentralized purchasing execution.
Purchasing or supply reports to a top-level executive. Definition
Much of the sourcing/supply strategy development is Human resource development is a continuous process
increasingly performed by global commodity teams, of attracting, acquiring, developing and retaining
recognizing the direct needs of customer-facing knowledgeable and skilled personnel to achieve
organizations and the ultimate customers. increasing competitive advantage worldwide. The
evolution to a virtual organization makes highly
effective human resource development practices
imperative as personnel are provided with significant
Cross-Functional/Location Teaming place and time flexibility. Ongoing knowledge
management and development are a priority.
Definition
World-class teaming involves proactively forming,
managing and supporting cross-functional/location
teams with the objective of achieving competitive
advantage through purchasing/supply strategies. Teams

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Engagement by Corporate Executives & Business to a new paradigm. The new paradigm, which is now
the existing environment, is again shifted to a new
Unit Leaders
paradigm with increasing speed. This continuous
improvement process combines an organizations
Definition
system, structures and culture. Project and process
Executive engagement includes company executives
implementation speed are measured, communicated
participating in, and sometimes leading and providing
and reinforced throughout the organization.
organizational and budgetary support for critical
sourcing and supply chain strategies and initiatives.
This engagement signals to the organization the strategic
criticality of sourcing and supply to sustaining the Sustainable Competitive Performance
competitive advantage of the firm.
Definition
Strategic sourcing and supply chain strategies achieve
Functional & Business Processes, Practices & competitive performance by creating and enabling a
Systems competitive network of supplying firms that produce
superior results. Key elements of competitive
Definition performance include direct and measurable economic
To achieve strategic sourcing and supply chain world- value-add (EVA) or return on invested capital (ROIC)
class excellence, it is critical that functional and process contributions to the overall business unit performance
leadership be integrated within the business. Nearly and for specific sourcing and supply chain metrics. The
every sourcing and supply chain business process, following quantitative and qualitative performance areas
practice and/or system has an impact on more than one will generally show results related to the implementation
other functional organization within the company. of different supply strategies and are considered
Strong functional and process leadership within the important to supply organizations in varying degrees.
sourcing and supply chain organization is required to
drive companywide change through integration and Instructions Direct & Quantitative
collaboration with other major functional areas and Improvement Areas
across enterprises. For your most important purchases (80/20 rule) over
the past twelve (12) months, indicate the magnitude of
measurable performance improvements and/or business
Innovation & Accelerated Change Management unit contribution achieved through sourcing & supply
chain strategies at your business unit. NA=Not
Definition Applicable.
Accelerated change management is a process that
enables rapid, innovative change from the existing state
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Instructions Indirect & Qualitative
Improvement Areas
Please indicate the overall results achieved by your
business unit over the past 12 months from your
business units strategic sourcing and supply chain
strategies for each of the following:

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Appendix Two: Statistical Analysis
23 Strategy Area Calculations performance (unit purchase price, transportation and

The statistics provided for each of the 23 strategies are logistics cost, etc.) and between each of the industry
based on simple averages of strategy implementation groupings (discrete, process, service). These calculations
and strategy importance for all of the respondents or were done using a one-way analysis of variance
groups of respondents, namely discrete manufacturing, (ANOVA). The ANOVA statistical procedure examines
process manufacturing and service. The gap scores the difference in the mean for each group and then
provided are calculated as the average implementation forms a confidence interval around the mean (in this
score for a specific strategy area minus the average case) of 95 percent probability. Each mean is compared
importance score for a specific strategy area. Therefore, and, based on the 95 percent confidence level, a
positive scores indicate that implementation exceeds determination is made as to whether the difference in
importance and negative scores indicate that importance the means is statistically significant (at a 95 percent
exceeds implementation (the more common case). level of confidence).
Strategy Area Difference Tests Correlation Analysis

For each of the 23 strategy areas, estimates of Chapter 4 of the report provides a written discussion of
statistically significant (paired t-test) differences are a correlation analysis between each of the strategy areas
indicated by a box drawn around a group of either and each dimension of performance (unit purchase
importance or implementation strategy areas. To price, transportation and logistics, etc.) for overall,
determine the box that represents the approximate discrete manufacturing, process manufacturing, and
differences, statistical difference tests (paired t-tests) service. The correlations were calculated as simple
were calculated between each of the averages for a Pearson product moments.
specific strategy area (implementation or average) with
each of the other 22 averages, yielding 253 difference
tests ((23 * 22)/2). The differences were then rank
ordered from largest to smallest absolute difference. An
inspection of this rank ordering was used to determine
the smallest absolute difference, where all larger
absolute differences were statistically significant. The
boxes were then created by subtracting this smallest
statistically significant absolute difference value from the
largest of the average values (average implementation or
average importance). All of the values that were less
than this value were included in the box that is reflected
on each of the rank-ordered strategy importance and
strategy implementation tables.
Performance Difference by Industry

Chapter 3 of the report includes a section that examines
the difference between each of the dimensions of

APPENDIX
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Appendix Three: Strategy
Implementation Obstacles
The following are selected obstacles identified for each We could use stronger support from the CEO that
of the 23 strategy areas. The major obstacle categories the procurement group provides more value than
are highlighted. They are followed by a selected set of just cost reduction. Also, the next steps in the
obstacles identified by respondents, although the list is vision to pursue added value are not readily clear.
not all inclusive.
There are change management challenges and
Q1. Primary obstacles limiting further limited investment money for procurement
implementation of Vision, Mission and organization.
Strategic Plan. N = 130.
Extensive stakeholder engagement and buy-in are
Comment crucial underpinnings in the culture of this
Executive engagement and resources was cited as the organization. The time required to build the
most significant factor limiting implementation of this foundation, while necessary, impeded further
strategy. A majority of responses indicated that a lack of implementation until completed.
resources and clear-cut strategic initiatives were
hampering implementation. One respondent succinctly There is growing complexity of (company/supply)
stated, Money and money! was the main obstacle. footprint and diverging support requirements for
widening SKU portfolio. Aggressive expansion
The second most mentioned obstacle was procurement through acquisition has limited the ability to
and supply organization and governance. The main carefully capture voice of customer inputs to
issues involved decentralization and poor cross- satisfy key considerations such as on-time-
functional communication/alignment. This sentiment is delivery (OTD), amount of inventory, response
reflected in the following response: Most procurement times, order fulfillment, cost, etc. As a result, we
and sourcing resources are decentralized without tend to funnel acquisitive growth into a one-stop
consistent linkage and accountability to corporate shop model that leverages the functional
supply chain management goals. Growth and limited capacities rather than the business unit or end-
cross-functional team effectiveness were also limiters. market requirements.
Lack of business/manufacturing/operations/technology/ Resources and scope. We are a worldwide

supply strategy alignment and integration was the third organization with a fast changing business
most mentioned obstacle. Lack of accountability and environment. It is difficult to get all supply chain
key stakeholder engagement were the primary limiters. members behind a single vision.
Selected Obstacles Cross-functional collaboration needs improvement

Executive management support. There is no in some parts of the organization. Strategic plan
development of balanced scorecard aligned with not fully deployed.
corporate objectives.
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Current supply chain activities are highly typical response was, Difficulty in obtaining timely
decentralized and there is no corporate center of data.
excellence.
Selected Obstacles
Decision to adopt a more decentralized Commonly cited obstacles included inconsistent
purchasing approach has increased our make/buy strategies, inconsistent ownership of the
knowledge of business unit needs but weakened make/buy process, and the ability to accurately
execution to the vision. forecast demand.
The current organization structure not all No standardized make-versus-buy model is

procurement functions are centralized under the deployed across the business, making it difficult
CPO. to build a business case for outsourcing materials
or products due to absorption rates in the
Current market environment reduces resources factories. A standardized model does not exist for
available to address same issues. determining core competencies and potential
outsourcing or insourcing opportunities.
Cross-functional participation to align strategy
across business functions. A strategic plan is Collaboration about internal business decisions
defined and documented, but it lacks an articulate (make) or often hampered by non-strategic or
vision and mission. qualitative issues resulting in less than optimal
insourcing/outsourcing decisions in some cases.
Limited resources to implement all transformation
initiatives in the function. Dotted line with Our strategy has evolved from one of trying to
purchasing functions in the countries adds outsource everything to wanting to retain key
complexity to cross-location initiatives. touchpoints with our customers. The realized
experience from outsourced services did not
Q2. Primary obstacles limiting further consistently deliver, and in some cases never
implementation of Strategic Insourcing/ delivered, the expected cost savings.
Outsourcing Strategy. N = 112.
Too many decisions were being made at a plant
Comment level without reviewing the strategy.
Lack of strategic alignment and integration was
mentioned most often as the limiting factor for this Internal capacity can skew the make-versus-buy
strategy. Responses varied, but there were common decision. We can be short-sighted on total cost
themes about the lack of alignment and integration. and total performance by focusing on price to
One was the lack of a consistent strategy and the other meet EBIT goals.
was poor alignment and/or execution of existing
strategy. One person stated, No standardized make- Supply chain is not supply chain but purchasing.
versus-buy model is deployed across the business, The line of demarcation still remains. Supply
making it difficult to build a business case for chain still is viewed as a support organization and
outsourcing materials or products due to absorption not integral part of business strategy.
rate in the factories.
Outsourcing company functions is a low priority
Executive engagement was the second most significant for executive management.
factor limiting implementation. Lack of resources was
the most cited obstacle illustrated by a respondent who Currently, corporate has put all initiatives
stated, Resources are always a limitation. regarding outsourcing activities on hold.
Organization and governance was the third most There is a lack of executive management support
frequently mentioned obstacle. Decentralization was the and team accountability for deliverables.
most mentioned reason. Decentralized and no
mandates, was an illustrative response. Cross-functional participation and appropriate
level of executive involvement is lacking.
Information systems and data availability was the fourth
most mentioned limiting factor. The major issue The economic downturn has caused excessive
centered around IT/IS capabilities and integration. A overcapacity, which causes short-term insourcing

APPENDIX
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to absorb costs. Also, the ownership of processes There is a large variation of final products and raw
continues to be in flux because of leadership materials with unique specification.
changes.
Procurement resources tend to focus too much on
Very vertically integrated business model limits the plan and making sure the process looks pretty,
make-versus-buy opportunities. rather than the execution of the plan. Its the
results that are important.
There is a need for a formal methodology for
identifying these opportunities. Support is needed Some category leaders treat the strategy
from the IT department to get integration and development as a one-off annual exercise instead
reporting capabilities so we can analyze and come of a living document.
up with strategies to keep a competitive
advantage. There are not written strategies for all
commodities/purchase families. We do not have a
Core competencies are not identified, and if they single global process to establish purchasing
are identified, they not being communicated. strategies.
Standard costs are the baseline but are not always
accurate in the assessments. There are limited resources focusing on short-
term versus moderate-term.
Q3. Primary obstacles limiting further
implementation of Commodity & Supplier The need for resources to get the processes built
Strategy Process. N = 112. and implemented.
Comment The two primary obstacles to furthering the

Executive engagement with resources was the most strategic process are the lack of resources to
frequent factor cited as the reason for limiting dedicate to the overall process, and the current
implementation of this strategy. This is illustrated by a drive from senior management to get as much
respondent who stated, Resources to get the processes savings as possible as quickly as possible in the
built and implemented are lacking. current year.
Strategy alignment and integration was also a major There are two obstacles new acquisitions
limiting factor. Responses varied, but a common theme entering the company that are not at the same
was the lack of a consistent strategy with follow- level as the base company and a macroeconomic
through. One person stated, Staff does not consistently environment limiting investments.
view procurement as an end-to-end process. As such,
we sometimes take a snapshot in time, execute a good There needs to be better synthesis of data into
strategy and then do not measure realization of that information and specific actions.
strategy.
There is a need to develop metrics to be reviewed
Organization and governance ranked as the third regularly; corrective actions identified and taken;
limiting factor. Decentralization was the most and learnings captured and considered in
mentioned reason, as illustrated in this response: We subsequent strategy development. There also is a
are not operating as a global company, so it is difficult need for a better way to measure supplier
to drive sourcing strategies globally. performance with variable rewards and emphasis
on overall performance.
Selected Obstacles
There is a need to identify the right commodities The strategic business unit and value stream not
that will bring sustainable competitive advantage connected at all supply chain touch points.
to the business and to find internal alignment for Supplier metrics need consistency across multiple
the long term. SBUs.
There needs to be discipline of documenting and Executing a center-led functional commodity

structurally reviewing the commodity strategies management team with oversight of a very broad
deployment of agreed commodity strategies in footprint and eclectic mix of products presents
various business units across regions. challenges to drive strategy compliance. Strategic
intent can get lost in translation at points of
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execution (design or manufacturing), diminishing We can only manage a subset of all suppliers.
the leverage intended to be captured. There are just not enough resources to manage
them all.
Supply management is not fully leveraged across
the enterprise due to our divisional organization Supply base consolidation requires more resources
and lack of segmentation for highly complex than are available at present.
commodities. Strategies are not life-cycle oriented
and not forward-looking. Basic processes are in place, such as segmentation,
an electronic supplier rating system and formal
Q4. Primary obstacles limiting further periodic supplier performance reviews. What is
implementation of Structuring & missing is a market intelligence process supplier
Maintaining the Supply Base. N = 98. discovery capability. Obstacles are resource
availability and development of the processes.
Comment
Executive engagement and support with resources was There are too many suppliers with low spend.
the major factor limiting implementation. The majority Business resources are not committed to phasing
of responses within this category indicated that a lack of out and transferring this low spend to better
resources was hampering implementation. One leveraged suppliers due to the effort required and
respondent stated, Still on an ad hoc basis and no minimal near-term cost out (or ROI).
dedicated resources. Work carried out by buyers
without support. The biggest impediment is the rapidity of
acquisitions (26 in six years) presents a volume
Business/manufacturing/operations/technology/supply that cannot be digested quickly enough,
strategy alignment was the second most mentioned independent of solid integration processes and
limiting factor. Responses varied. playbooks by functional stream.
The third most mentioned factor was organization and There is a large variation of final products and raw
governance. The main issue involved decentralization materials with unique specification.
and lack of collaboration across business units and
functions. This sentiment is reflected in the following We are in the process of realigning our supply
response: Decentralization and lack of corporate organization and implementing our enterprise
governance to support collaboration. resource planning system as steps to manage the
supply base in particular for strategic items.
Measurement and evaluation was the fourth most
limiting factor for this strategy. An illustrative response There is decentralization and lack of corporate
follows: We have some difficulties to obtain our governance to support collaboration.
supplier cost breakdowns, and we dont have formalized
measurement system utilizing global supplier There is a dynamic supply base in the R&D
scorecards. environment nature of the business.
Selected Obstacles Obstacles are spend diagnostics and maturity of

One obstacle is the capacity of the organization to enterprise sourcing.
implement the systems globally and the second is
the cost to provide training to both internal Biggest gap is in scorecards and measuring key
personnel and the supply base. performance indicators, other than cost and
quality.
There is a need for money and more supplier
development resources. An obstacle is our highly decentralized
organization.
There is a lack of tools and resources dedicated
for this work. Q5. Primary obstacles limiting further
implementation of Supplier Assessment,
It is difficult to consolidate the supply base to an Measurement & Communications. N = 108.
optimal level with the number of acquisitions
made. Also, there are budget/resource constraints.

APPENDIX
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Comment have not matured the process to provide
Measurement and evaluation was the most mentioned recognition and reward in terms of new business.
factor limiting implementation. Lack of supplier No benchmarking of one supplier against another
scorecard use was a frequently cited obstacle. This is exists yet.
illustrated by a respondent who stated, (There is) only
recent interest in scorecarding suppliers. We do send the measurements to the suppliers,
but are we making decisions based on their
Information systems and data availability was the delivery, quality ratings? Seems we are still using
second most mentioned limiting factor. Responses suppliers that have low ratings. Small suppliers
varied, but a common theme was the lack of systems to are not set up in the system to receive their
capture data. One person stated, System capabilities reports, so not 100 percent of suppliers get
limit data gathering. feedback.
Executive engagement and support with resources We have been awaiting a corporate Web-based
ranked as the third most mentioned limiting factor. supplier scorecard system, anticipating late 2009.
Resource constraints were cited most often as the We have some customer-directed suppliers that
reason. One respondent stated, Due to resource make it hard to eliminate substandard suppliers.
constraints we have really focused this effort on the
critical few called our strategic suppliers. The process has not matured due to lack of
common systems. There are non-standard
Business/manufacturing/technology/supply strategies supplier selection processes across the business
alignment was the fourth most mentioned limiting units.
factor. One person stated, Limited linkage of supplier
performance to sourcing strategies another symptom Poor data quality and a poor process setup in the
of a failure to view the process end to end. MRP system results in a lot of manual
intervention to convert system-generated data into
Selected Obstacles information that appropriately characterizes
There is no formal system (and no budget) for supplier activity and performance. Links between
capturing and reporting supplier performance. supplier performance and internal company
There is dependence on Excel-based spreadsheet. activities which affect performance have not been
well established. While they are understood, for
Supplier scorecard system is not yet implemented. example late engineering releases impact supplier
quality and OTD, they are not yet codified in the
We do not measure 100 percent of suppliers due system nor are their effects quantified.
to size, scope and scale of the supplier base. There
is a need to reduce the supply base and expand Current supplier performance and quality
the measurement system to complete full communication is not handled by a Web-based
implementation (in process). tool that would provide measures, scorecard
results and two-way communications. Tools are
A scorecard has been developed and is being being reviewed and expected to be implemented
piloted with several suppliers representing more beginning in 2010.
than 50 percent of spend. Full roll-out will occur
in 2010. We will not be able to perform assessment and
measurement for 100 percent of the supply base.
We have a very specific supplier performance We will be concentrating on the ones who have
evaluation process in place that is mandatory. potential high-impact on the business. The
Suppliers are given very specific feedback and an approach not fully integrated due to lack of
opportunity to question/challenge anything they system support.
disagree with. Also, once the final evaluation is
done, the suppliers must submit a corrective There is a new program in place that needs to be
action plan. fully embraced. Budget constraints may start to
limit organizational capacity to get all the required
Quarterly supplier scorecards are collected on the work done.
tier-one and tier-two suppliers but are primarily
used to detect operational risk and contractual There is the significant and costly challenge of
requirements to perform to SLAs or KPIs. We overcoming diversity of ERPs from merged
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companies etc. There is a large resources Selected Obstacles
requirement on the part of the business, The shift from a predominant make to
procurement and the supplier to be successful in predominant buy requires changes in business
this space. structure and priority. Top-tier suppliers are also
competitors, limiting collaboration in the business
Due to resource constraints, we have really development phase.
focused this effort on the critical few called our
strategic suppliers. We do believe that there is Our current terms and conditions make
another tier of suppliers that dont have the same collaboration difficult. We look for protection of
level of EVA potential, but due to the nature of our rights at the expense of open innovation;
their risk we need to develop measurements for although we do have a concerted effort under way
them. to change our approach.
Q6. Primary obstacles limiting further Leadership in sourcing and R&D are not always
implementation of Supplier Integration aligned on needs. For example, sourcing has been
into New Product/Process/Service rewarded for productivity not volume growth
Development Strategy. N = 91. through new product introductions. New sourcing
leadership has sought to create better alignment.
Comment An early management component of our
Business/manufacturing/operations/technology/supply continuous improvement corporate initiative is
strategies alignment and integration was the most helping as well.
mentioned factor limiting implementation. A common
obstacle was the view that suppliers are not on the same This is a key area of focus for the company and
team as the supply managers company. One respondent directly related to long-term revenue projects. The
stated, Benefits of supplier collaboration are not fully first hurdle is we just havent done a good job in
understood. Supplier involvement is suspect by users this area even though we have product
balance required to maintain competitiveness. development teams. The second hurdle is related
to the fact we are still working on developing our
The second most mentioned factor hindering sourcing strategies with an emphasis on future
implementation was people and culture. The main issue products with involvement from the product
was engineerings reluctance to involve other functions engineering group. The third hurdle, and one that
and suppliers in this process. This sentiment is reflected is being addressed, is the focus on cost reduction
by the following response: The engineering in the design phase versus just scrapping for
organization in general has been allowed to make many pennies later in the supply phase.
of the sourcing decisions on new product development
and involves supply chain/procurement too late in the We are behind in the development of our Lean
process, limiting the ability to leverage existing supplier Product Development tool initiative based on the
relationships and maximize cost benefits. Toyota Production System model we follow. There
is a lack of aerospace suppliers with the depth of
Organization and governance was the third most our understanding in the design/development of
mentioned limiting factor. Lack of cross-functional new programs. For many commodities there are
teaming effectiveness with stakeholders was the most few choices, the marketplace is small.
mentioned obstacle. This is illustrated in the following
statement: All functional areas are not a part of the We still retain a somewhat legacy reputation of
overall process from start to finish. A formalized failing to truly collaborate and trust suppliers
approach in identifying an opportunity is not shared insights and input into product development and
across the functional groups. improvement activities.
Respondents identified internal/external communication Language barriers/time-zone differences among

as the fourth most mentioned limiting factor. Poor supplier-internal technical teams are obstacles.
communication was the major issue as the following
statement shows: Supply chain is not well represented The engineering organization in general has been
at some businesses during design consideration and allowed to make many of the sourcing decisions
there is not enough cross talk between engineering and on new product development and involves supply
supply chain regarding design needs and supplier chain/procurement too late in the process,
capabilities.

APPENDIX
3
limiting the ability to leverage existing supplier The third major obstacle was executive engagement and
relationships and maximize cost benefits. support with resources. This sentiment was reflected in
the following response: This needs a lot of funding
Obstacles include culture change/support from because it requires a large number of people to handle
other functional groups. the supplier management. Also, (this strategy) needs a
lot of IT coordination which is not readily available.
We have more than 4,600 design engineers with
less than 75 new product introduction sourcing Selected Obstacles
personnel. One obstacle is the full integration of some plants
and some suppliers into Web-based applications
There is a lack of cross-business unit new to allow updated flow of planning and release
product/process development process and lack of information versus reliance on faxed, scanned and
supply management involvement in new designs. e-mailed forecasting data. Second is the lack of IT
support to move faster in implementation.
All functional areas are not a part of the overall
process from start to finish. A formalized Multiple ERPs exist across the corporation. Sales,
approach to identify an opportunity is not shared inventory and operations planning (SIOP) is
across the functional groups. Joint meetings occur inconsistently deployed across the business.
further along in the process.
There is a large variation of final product and
Communication issues present obstacles. There is different specification for each customer. Also, it is
still a disconnect between new product difficult to have credible sales forecast and large
development and commodity management. I quantity variation.
dont feel that commodity management really
values new product development or keeps them We are currently in the middle of an enterprise-
in the loop with strategy changes. wide rollout of SAP. Previously, we had legacy
systems with multiple instances across the globe.
Supply chain is not well represented at some There was no single version of the truth. Previous
businesses during design consideration. There is culture did not understand the interdependencies
not enough cross talk between engineering and between procurement, supply chain and
supply chain regarding design needs and supplier operations. That is vastly improving, and
capabilities collaboration is becoming more the norm.
Q7. Primary obstacles limiting further An obstacle is establishing information

implementation of Supplier Integration transparency.
into Customer Order Fulfillment Strategy.
N = 84. There is no dedicated customer service personnel
focused on order fulfillment, underutilized
Comment systems and application.
Information systems and data availability was the most
limiting factor. The lack of common systems capable of There is a need for improvement in cross-
providing needed information was the most mentioned enterprise demand/supply planning.
reason obstructing implementation. One respondent
stated, Lack of one system to understand supply chain We need improved technology to asses real-time
from the product we sell, to the material we purchase. inventory levels and customer spend triggering
inventory pulls.
Business/manufacturing/operations/technology/supply
strategy alignment was the second most mentioned There is a lack of a single system to understand
limiting factor. The lack of customer recognition of the supply chain, from the product we sell to the
dividends this strategy can produce in the long run was material we purchase. All systems are separated.
a common theme from respondents. As one respondent
said, Interest by the end customer for supply chain Systems dont enable suppliers to more effectively
integration, and the value case versus cost to implement and efficiently see customer demand.
(is too low).
CAPS Research 75
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3
We have not implemented a common parts library internal resources with understanding on how strategic
in the corporation. There are no standard alliance is properly created/implemented.
processes on collaborative planning.
Internal/external communication was the third most
Most of these attributes are either implemented or mentioned limiting factor.
in the process of being implemented. The first A typical response was: Supplier selection and
hurdle is the fact that we are just getting started in expectation criteria is not consistently documented and
some areas, such as cross-enterprise communicated to potential suppliers or even to current
demand/supply planning, S&OP, etc. suppliers. Another respondent stated, Lacking alliance
mentality. We have contracts and key suppliers, but we
There is a lack of standardization of component need to act from supplier to customer seamlessly with
parts during development. Differentiation, or communication.
offering of so many different products to the end
customer, often becomes costly and presents People and culture was the fourth most limiting factor.
continual risks of error in regard to BOMs, Trust was the main issue. One person stated, Lack of
inventory, etc. high trust relationships. Another said, Lack of
confidence risk.
The cost of IS/IT solution and development
post-SAP carnage still exists and has slowed Selected Obstacles
implementation. The competitive edge and nature of this business
has intellectual property as one of its key
Resource limitation (people, dollars, time) to advantages or enablers. Many suppliers are either
complete implementation is an obstacle. Changes owned, controlled or count on the competition
in supplier base and customer base and for their business portfolio, which inhibits
connection of data flows to make data available informal alliances with these firms.
on real-time basis and in appropriate views are
also obstacles. Strategic alliances are a competitive driver in
certain situations. We have an example where
Q8. Primary obstacles limiting further such a relationship has been enormously
implementation of Strategic Supplier successful for both parties. They require a certain
Alliances. N = 86. set of business conditions and a lot of resources in
order to be effective.
Comment
Aligned business/manufacturing/operations/technology/ Sourcing and supplier resources are spending too
supply strategies are the major factor limiting much time on day-to-day supply management
implementation. Cost/price was often mentioned as an issues. There is a lack of commitment to long-
obstacle. One respondent stated, In many cases we term relationships within sourcing.
have not been able to find the right formula to continue
this as a win-win for both parties. At the end of the day, Too many times weve put alliances in place that
cost is still a huge part of the equation and that is result in market price disadvantages over time.
generally revenue for the supplier. Another respondent
stated, Too many times weve put alliances in place that There is a need to formalize alliance definitions
result in market price disadvantages over time. and alignment of cross-business unit involvement.
The second most mentioned factor was executive Alliance definitions are not formally documented
engagement and support. The two following responses or well understood across the business.
are a good summation. One stated, Alliance
management requires extensive resources by both In many cases, we have not been able to find the
customer and supplier in a resource constrained right formula to continue this as a win-win for
world we need to make choices about the number of both parties. At the end of the day, cost is still a
strategic alliances and how we manage same. Another huge part of the equation and that is generally
respondent stated, Two primary obstacles driving revenue for the supplier.
further implementation is senior managements
disregard for the importance/impact of the soft benefits There is a lack of alliance and exit conditions.
of supplier alliances in favor of immediate returns from
constant rebidding. The other obstacle is the lack of

APPENDIX
3
Budget constraints may start to limit The second most mentioned factor hindering
organizational capacity to get all the required implementation was aligned business/manufacturing/
work done for supplier relationship operations/technology/supply strategies. Responses
management/strategic supplier integration. varied. One respondent stated, Focus on tactical rather
than strategic relationships firefighting and sourcing
The level of implementation is related to the are highest priorities. A second person said, The
amount of time required to be successful and to supply base is too large. There are limited resources
the alignment of available company resource. Too focused on development activities; primarily focused on
often the approach is to just get it done versus a tactical execution.
collaborative approach, which takes more time
and effort. People and culture was the third limiting factor. One
respondent stated, Suppliers are willing to collaborate
This strategy requires top management up to a certain point, but their company culture can
sponsorship that is not always available. It also inhibit full collaboration. Sometimes it is difficult for
requires changes to work procedures and suppliers to risk the resources to experience the reward
obtaining clients approvals. of continuous improvement activities. Supplier
development on new programs is limited due to time
Rapid organization changes among executives and constraints placed by customers.
supply chain management make it difficult to roll
out executive sponsorship of suppliers. Selected Obstacles
There needs to be greater awareness of the
Supplier selection and expectation criteria are not changing interdependence between the buyer and
consistently documented and communicated to supplier as well as a commitment to deploying
potential suppliers or even to current suppliers. more resources in this area.
There is limited and inconsistent executive-level
management engagement or involvement with There is a poor understanding of process tools
strategic supplier partners. within the supply base and poor use of process
improvement staffs within our company.
We have selected two to three major service
providers globally and are quite transparent to Significant work has been done in the
these companies for the purpose of foreseeing our manufacturing area with fairly standard processes
needs to ensure power plant reliability. We need and applications. We are just deploying similar
to have cross-functional collaboration beyond expectations and approaches across the business
operations and maintenance to involve other supply base with a high level of openness
support teams and structured guidelines to internally and from the supply base. As with other
sustain this initiative. strategic initiatives, the amount of resource is a
limiting factor to expand or accelerated
Q9. Primary obstacles limiting further implementation.
implementation of Collaborative
Buyer/Seller Development & Continuous The structure of the business in the business units
Improvement. N = 77. does not provide enough central authority, which
is needed for any long-term initiative.
Comment
Executive engagement and support with resources was We have had success using CI techniques with
the biggest limiting factor. The availability of resources improvement plans with key suppliers. Obstacles
was the main obstacle. One respondent stated, We are supplier receptiveness, resources for
have had success using continuous improvement implementation and ensuring that the business
techniques with improvement plans with key suppliers. case exists to support the effort involved.
Obstacles are supplier receptiveness, resources to
implement and assuring that the business case exists to Resources need to be available to drive lean-type
support the effort involved. Another said, Resources processes externally. There still is some skepticism
and skill set. When we focus, we do it well, but day-to- among the supply base as to our motives for
day pressures sometimes prohibit us from taking the initiating such programs. We still have too many
time to leverage best practices. suppliers.
CAPS Research 77
APPENDIX
3
Obstacles include resources and skill set. When Internal/external communication was the fourth most
we focus, we do it well, but day-to-day pressures mentioned limiting factor. One respondent stated,
sometimes prohibit us from taking the time to Quality manual is not consistently communicated and
leverage best practices. There needs to be deployed across the supply base.
communication pathways and forums to share
across functions. Selected Obstacles
One obstacle is the infancy of the program, and
The internal emphasis on lean thinking and lean- the second is the lack of staffing globally to
thinking tools needs to and is moving to manage the size of the supply base.
the external supply base to enable and leverage
the continuous improvement cycle within the Decentralized and resource constraints limit the
supply chain. ability to engage efforts in preventative work .
No standard processes are in place, and trust An obstacle is leadership to support

needs to be built over longer time period. implementation of a global supplier quality
management program.
The supply base is too large. Limited resources are
focused on development activities and we are Standards are not deployed across all sites, and
primarily focused on tactical execution. there is no buy-in from senior management.
A large supply base and limited number of Quality assurance process is being implemented
development resources are obstacles. slower than our needs, due to other priorities like
follow-up supplier production process to deliver
Bilateral improvements are often overshadowed by according our lead time.
the cost-cutting mandates to maintain product
margins. Senior staff understanding of supplier We need a structured process that can be applied
development is emerging. Often, local SBU to world-class supplier quality, as well as
leadership needs additional education and vision resources to implement it.
of demonstrated successes and strategies other
than negotiating price and total cost of Quality strategies have not been developed (or
ownership/acquisition. communicated). Quality process is not clear.
Q10. Primary obstacles limiting implementation Too many suppliers and not enough resources.
of World-Class Supplier Quality. N = 73. Lack of standardization and simplification.
Comment The formal quality program in the indirect space

Executive engagement and support with resources was is immature.
the biggest factor limiting world-class supplier quality.
The lack of resources was the most mentioned obstacle With our product being so integral to the
for this factor. A typical response was, Site functionality of our customers products, quality
commitment to redeploy additional resources with the has taken on a new level of focus in the company.
right background to drive this effort is lacking. Hurdles to further implementation include the
time to align the internal resources and setting
Business/manufacturing/operations/technology/supply expectations with the supply base. The foundation
strategies alignment was the second most mentioned is being set, and it is expected that progress will
limiting factor. There wasnt much commonality among be made in 2009.
respondents. One person stated, The supply chain
department and quality department are not integrated Our supply chain department and quality
together. Another responded, Too many suppliers and department are not integrated. Our industry is
not enough resources lack of standardization and regulated by quality standards, and we rely on
simplification. this to help manage quality process controls.
The third most mentioned factor was measurement and Qualification and vendor rating is not
evaluation. A typical response follows: Lack of a implemented for 100 percent of suppliers, only
common supplier quality system creates multiple for our main suppliers. We dont have a formal
supplier scorecards with different results. follow-up of nonconformity action plan.

APPENDIX
3
We are in the beginning stages of new roles and Selected Obstacles
responsibilities in the purchasing function. Roles There is a need for global coordination and
and responsibilities are still being defined between cooperation as well as mutual understanding
buyers and supplier quality engineers. among participants.
Supply chain and quality organizations are still Obstacles include lead times for bulk
separate reporting functions. A consistent supplier commodities, credit risks and lack of currency
performance rating system, although a developed hedging infrastructure.
best practice, is not being used across the
enterprise. There is a need for education in the project
execution groups because of concerns about
The quality manual is not consistently quality and distance, and the complexity of
communicated and deployed across the supply supply chain additions.
base. While a centralized quality data repository
exists, resources are limited to continue further Supply lines are considered too long, and
implementation of new sites. therefore risky by some executives, especially for
our project business.
need to solicit more supplier involvement, and
expand the opportunity to review quality Obstacles include lack of a corporate-wide
issues/concerns with low-cost country vendors. purchasing system (currently under
implementation), and limited visibility of global
Q11. Primary obstacles limiting implementation purchasing activity, volume and suppliers. A lack
of Global Sourcing & Supply Strategy. of resources for some corporate categories has so
N = 80. far limited the development of global
opportunities.
Comment
Business/manufacturing/operations/technology/supply Obstacles include language barriers, time
strategy alignment was the major factor limiting differences and universal quality standards -
implementation. A common theme was the different standards in different countries. Another
inefficiencies of global sourcing. One respondent stated, obstacle is time delays in regards to critical issues
Inflexibilities with global suppliers in regard to longer due to complex global supply chains. Inflexibility
lead times, order quantities Another said, Many with global suppliers regarding longer lead times
commodity groups are best sourced locally or and order quantities is another obstacle.
regionally.
There is a need for data systems that provide
The second most mentioned factor was information improved spend data and improved landed costs
systems and data availability. An efficient method of modeling.
gathering/retrieving data was the most mentioned
obstacle. One person stated, Lack of a data warehouse Standardizing data and integrating it into one
which is easy to manage is key hurdle. Another system for easy viewing and analysis is needed.
responded, Standardizing data and integrating it into
one system for easy viewing and analysis. There are still too many disparate
methods/systems for managing data, but were
Organization and governance was the third most getting there.
mentioned factor. Decentralized organizations were the
most common obstacle. One respondent stated, The lack of a global sourcing strategy and IT tools
Decentralized supply chain organization. Another are obstacles we face.
respondent noted, Lack of support for continued
central coordination. Regional bias with organization structure impedes
potential business area intelligence leverage.
Executive engagement and support with resources was Program and customer-specific funding cycles
the next limiting factor. Lack of resources was the most limit optimal leverage strategies.
mentioned obstacle. A typical response follows: No
resources to drive the strategy through the tactical There is a lack of support for continued central
requirements. coordination.
CAPS Research 79
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3
Our past organizational structure limited contact, Selected Obstacles
and few suppliers are able to effectively compete Total cost of ownership process is not fully
globally. embraced. Strategies and approaches are not fully
standardized across the corporation.
The organization is very U.S.-focused, even in
terms of structure and resources. Cultural There is a need to integrate development,
sensitivities and experience in global markets procurement and sales teams into cost-reduction
needs to be enhanced. planning. However, this is improving.
Dedicated resources to work strategic global There is the lack of a traditional broad approach
supply chain management (SCM) initiatives do to involve suppliers.
not exist. The reliance is on cross-business leaders
from various commodity teams with conflicting We need an end-to-end view. We are very good at
priorities. The process of using strategic business the early stages and in less mature categories.
units SCM commodity leaders only works when
the resources have sufficient time to work the Cost consciousness has not been a strength of this
global and enterprise tasks within the parameters industry.
of their job responsibilities. A global warehouse is
in process but still lacks several SBUs due to There is a lack of a fully implemented total cost of
multiple ERP systems in use. Currently, savings ownership (TCO) process.
are not truly calculated instead year-over-year
cost variation is and this is an opportunity for Many costs are identified, but one area that is not
enhancement. identified is end-of-life costs.
Q12. Primary obstacles limiting implementation We recognize that more work could be done to
of Strategic Cost Management Strategy. construct should be costing and target
N = 87. improvements from established baselines.
However, resource constraints impede our ability
Comment to follow through with work required to develop
Business/manufacturing/operations/technology/supply and manage those targets. We have improved our
strategy alignment was the biggest factor limiting ability to benchmark many suppliers in similar
implementation. Lack of focus on the life-cycle costs of size, function, capacity and performance to back
products was cited as a reason. One respondent stated, into targets.
No focus on life cycle by purchasing or design
engineering ignored after implementation. Another We need executive management support to
respondent said, Cost management is limited to one expand cross-functional teams or existing
portion of the product life cycle, and is not widely used programs and decentralization.
throughout the entire life cycle of the product.
Other functions are not totally engaged to support
The second most mentioned factor was executive this initiative. Senior management needs to
engagement and support. The most mentioned obstacle mandate that this is critical to our success, so that
was resources. One respondent stated, Lack of all functions are on board.
committed engineering resources to support value
analysis/value engineering cost-out activities or review, Obstacles include lack of coordination between
and process supplier proposed cost reduction ideas. supply chain functions and lack of
ownership/accountability in implementing cost-
Organization and governance was the third limiting saving tasks.
factor. Working as a team was the main obstacle. One
respondent stated, Our purchasing process is cross- Q13. Primary obstacles limiting implementation
functional. Our capacity to directly impact cost drivers of Total Cost of Ownership. N = 78.
is limited to part of the process/drivers that is under
purchasings responsibility. Another said, Lack of Comment
cross-functional support, namely engineering was an Information systems and data availability was the major
obstacle to strategic cost management. factor limiting implementation. The major obstacle was
the lack of a standardized tool/model. One respondent
said, A standardized TCO tool or model does not

APPENDIX
3
exist. Another stated, Lack of an effective We are stuck in the paradigm of unit price
comprehensive tool. versus total cost.
The second most mentioned factor was measurement One obstacle is the lack of maturity in applying
and evaluation. The ability to measure/understand total total cost analysis. The second is the compressed
cost was the major obstacle. This sentiment can be seen time frame in which customer quotations are
in the following response, Knowledge and expertise in received and replies required, giving little time to
the total cost structure and cost drivers. Another properly cost a program.
example is the following statement, Bias given to
transaction price. Training and improved understanding An obstacle is open cost calculations from
of the total cost of ownership versus BOM cost is suppliers too much short-term focus.
required.
The company generally uses a limited TCO
People and culture was the third most mentioned approach to supplier selection decisions. At some
limiting factor. Lack of skills was the main obstacle. level, the ability to understand all TCO elements
One respondent stated, Lack of knowledge or practice and to accurately cost the elements is a limitation.
of TCO. Another said, Skills in developing TCO
models. Availability of consistent reliable total cost of
ownership data is a challenge. We have
Selected Obstacles scorecards, but translating TCO performance to
Just getting this is in the priority queue within IT dollar metrics is difficult. It is difficult to
for an integrated solution. First, we need to sometimes apply a dollar value to the TCO
determine if this is a stand-alone solution tool or element.
part of a broader supply chain system solution.
There is a lack of trust in the costs identified. The
An obstacle is the availability of TCO models belief is that TCO drives the wrong behaviors to
across the enterprise. Particularly, there is a gap select higher TC suppliers.
regarding end-of-life costing as well as maturity in
costing of the risk elements in these models. Relative inexperience of supply chain staffs
(procurement, engineering and suppliers) in
There is a need for better use and understanding developing TCO models is an obstacle.
of tools throughout the organization.
Obstacles include the skills needed to develop
A standardized TCO tool or model does not exist. TCO models as well as the transparency to costs
The total cost of ownership is inconsistently in other functional areas.
evaluated across the enterprise during sourcing
decisions. Q14. Primary obstacles limiting implementation
of Standardization of Systems,
Getting the TCO rolled out to all users and Components & Processes vs. Creation of
gathering information to complete TCO is a Unique Designs & Specifications. N = 81.
challenge.
Comment
Several cost elements are unknown and are not Business/manufacturing/operations/technology/supply
tracked when considering supplier selection and strategy alignment was the major limiting factor
evaluation, for example cost of ordering, regarding standardization. The most common obstacle
inventory impacts and supplier costs. Since we are was unique/complex products. One respondent stated,
not aware of such costs in our company, when we The industry is based on design to customers
talk about the same kind of cost with suppliers requirement. Another said, Most of the items we
there is even less information and no formal IT purchase are highly customized, presenting challenges
systems to record this data. to standardization.
It is challenging to get top management to agree The second most mentioned factor was executive
on how to weight different elements in a TCO engagement and support with resources. Lack of
model. It is difficult to use a TCO model for new resources was the main obstacle. One respondent stated
suppliers that do not have history, and to know there is a lack of technical resource availability in
how to measure risk with those suppliers. research and development, and sourcing.
CAPS Research 81
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3
Organization and governance, and people and culture strongly in engineering innovation and like to
were third as limiting factors. Decentralized design and re-design components in order to
organization structures were the most mentioned achieve functional improvements.
obstacle. One person said, Our decentralized approach
has been slow and limited in results. In addition, one Resources are one obstacle. Another is the lack of
respondent stated, Innovative culture is resistant to a clear understanding of the cost of our non-
standardization. Another said, Business units have standardization in terms of money, resources and
created a not invented here mentality and thus want quality.
their own version.
There is no organizational vision for
Selected Obstacles standardization.
Product and service standardization is still in its
infancy. Ownership and executive leadership for Progress is slow due to resources.
product and service standardization is still being
defined. We are making the attempt but have lots of
competing aspects across operating divisions and
Long product life cycles within the aerospace plant locations.
Industry means that even though you start the
process, there is so much legacy product that Globalization and matrix organization is affecting
progress is moderated. standardization.
There is an inability to agree on core/non-core An obstacle is the multiple engineering groups

competencies and a poor alignment on strategic that operate independently.
goals.
Innovative culture is resistant to standardization.
One obstacle is the lack of engineering standards
for direct material product design. Significant More work needs to be done engaging internal
product mix diversity and part number count stakeholders and partners on the value of
exists. But there is no centralized engineering standardization. They need to understand the
focus or direction regarding the leverage of problems created by suboptimizing for short-term
current designs or like/similar hardware to save design wins at the expense of longer-term higher
cost. Focus remains on timely product launch to costs.
the marketplace with a post-production review on
cost-out opportunities, rather than during the Q15. Primary obstacles limiting implementation
product development stage. of Environmentally Sustainable Supply
Chain Management. N = 59.
We do well tying all purchased direct materials
into a common (UNSPSC) coding system across Comment
the company. However, the consistency of Executive engagement and support was the major factor
definition (one definition of machine part can be limiting environmentally sustainable supply chain
different than another) leaves open the issues of management. Executive backing with resources and
data integrity. sponsorship was the main obstacle. One respondent
stated, It is not strategic at this time. It will be in the
We have many exclusive materials/projects next couple of years with resources.
without any communality with the utilities sector.
Our projects are very complex. Aligned business/manufacturing/operations/technology/
supply strategies was the second most mentioned
It seems that the extensive product offerings tends limiting factor. One respondent said, We need further
to focus more on customer satisfaction than the integration with enterprise sustainability strategies.
goal of standardization and simplification. The Another responded, Maintaining a global supply chain
incorrect choice of supplier during development is in conflict with reducing our carbon footprint.
sometimes becomes a barrier for plant production
in the future. The third most mentioned factor was measurement and
evaluation. The major obstacle was life- cycle analysis.
Customers drive design, making standardization One respondent stated, We need a better method to
across components hard to achieve. We believe monitor the life cycle of products and services.

APPENDIX
3
Selected Obstacles Q16. Primary obstacles limiting implementation
It is not critical. of Procurement & Supply Organization
Structure & Governance. N = 73.
Costs focus is still sometimes a priority to
sustainability. Comment
Information systems and data availability was the major
There is limited investment dollars into systems factor limiting implementation. A typical respondent
and resources. stated, Information systems need additional fidelity,
data integrity and robustness to incorporate all
An environmentally sustainable supply chain is an businesses.
important objective of the organization, but that
objective can often be ignored on a cost basis. The second most mentioned factor was organization
and governance. Centralized/decentralized organization
Executive sponsorship of environmental structures were the most common obstacle. One
sustainability is an obstacle. respondent stated, While an executive Supply chain
management council exists, few decisions are made to
Cost is a factor along with the inability to collect a consistently deploy and implement centralized
lot of information with the resources available. strategies, tools and processes at the operational level.
This is due to the individual plant- by-plant profit and
One obstacle is the lack of supply strategy loss plans that exist, which control the resources
development. The other is the company response required to implement.
to legislation in which the desire is to meet
minimum requirements. People and culture was the third most mentioned
limiting factor. Cultural/trust issues were the most
It is viewed as a distraction from real cost-saving mentioned obstacles. One respondent stated, Still
initiatives. It is regarded as fluffy. migrating shadow organizations from non-
manufacturing divisions. Culture change in non-
We need a structured effort to integrate more manufacturing divisions still ongoing.
sustainable terms into our requests, commitments
and performance measurements. Sustainability Executive engagement and support with resources was
has gained traction more quickly in the European the fourth most mentioned limiting factor. Hesitation
nations than it has in North America. We have by management to invest properly in the procurement
great opportunities to improve specifications for organization, was a typical response.
sustainability up and down the supply chain and
in our practices. Selected Obstacles
A leadership council is in place but leadership
Maintaining a global supply chain is in conflict continues to rotate into other roles at a rapid
with reducing our carbon footprint. pace, preventing stabilization and common
initiatives. Information systems are available to
A higher level of attention during product provide data but lack of standard data entries
development is needed. Life-cycle analysis is not prevent normalized data for analysis.
always in place.
Information systems are being developed to
Organizational focus is now established to push provide global visibility, but full visibility may still
sustainability, definitions are now developed, but be one to two years away.
metrics and methods of pushing it into the supply
base are not fully developed. Staffing is an obstacle.
We need to identify a common standard across There is a lack of enterprise spend data. A
corporate and a regular assessment of (supply) council concept has not yet been
deployment. adopted, but it is being discussed.
We need a better method to monitor the life cycle It is primarily a North American and western
of products and services. Training is needed in all European focus. However, that is changing now to
aspects of sustainability companywide. include South America and Asia, but IT systems
limit effectiveness.
CAPS Research 83
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3
Career pathing in global locations is limited by Comment
cost. Executive engagement and support with resources was
the major limiting factor. The main obstacle was lack of
Information systems are not able to communicate resources. One person said, Money, time and overall
the visibility of needed data. There is a need to shortage of technical people with whom to partner.
communicate processes companywide. Another stated, Resources stretched thin, everybody
needed already on too many teams.
Reporting relationships are through local business
leadership and information systems. Although The second most mentioned factor was organization
those reporting relationships are improving, they and governance. Decentralization and geographic
dont provide necessary visibility fast enough. distance were the main obstacles. One respondent
stated, Project execution teams are widely the norm
There needs to be management of the tension primary driver that breaks teams down is distance and a
between centralized and decentralized elements of non-colocated environment. Use technology to bridge
the organization. Importance is placed on local but has limitations.
metrics.
Measurement and evaluation was the third most
While an executive supply chain management mentioned limiting factor. The main obstacle was a lack
council exists, few decisions are made to of performance/rewards system that places the team
consistently deploy and implement centralized ahead of individuals. One respondent said, A
strategies, tools and processes at the operational mechanism to truly recognize team performance in a
level. This is due to the individual plant-by-plant sustained manner is needed. Another person said,
profit and loss plans that exist, which control the Rewards are based on individual performance and not
resources required to implement. Global policies team performance.
and procedures that have been deployed and
translated into multiple languages do not receive The fourth most limiting factor affecting
consistent oversight and compliance focus by the implementation was people and culture. One person
business groups. said, Culture is still consensus driven, as such, team
sizes can be large and coming to decisions time
Limits on reporting structures between poles consuming.
hinder total alignment of agendas complexity
of the budgeting process hinders further Selected Obstacles
alignment at the tactical operational level. Team members tend to be the same. There are not
enough high-caliber individuals available.
Support of central-led efforts and minimal use of Resource availability is a key issue.
current supplier relationship management tools
are obstacles. Policy deployment bridges the functions to tackle
specific initiatives. However, sustainability
We are still migrating shadow organizations from sometimes becomes an issue after resources are
non manufacturing divisions. The culture change returned to other competing priorities.
in non-manufacturing divisions is still ongoing.
Executive management support and central-led
Executive procurement and supply chain councils leadership is needed.
are implemented on a category basis. No
enterprise-wide council is established. Obstacles include money, time and an overall
Coordination and trust between lines of business shortage of technical people with whom to
will have to be established before higher level partner.
cooperation can be carried out.
Time zone differences (Asia/Europe/United States)
New organization being rolled out. It will require hinder total collaboration. Somebody is going to
resource realignment across business units to be up in the middle of the night. Resource
maximize opportunities. constraints impede volunteers or managers from
opting to provide resources to special purpose
Q17. Primary obstacles limiting implementation teams.
of Cross-Functional/Location Teaming.
N = 69.

APPENDIX
3
Resources are needed to support cross-functional Comment
activities as well as maintain plant responsibilities. Information systems and data availability was the most
limiting factor for measurement and evaluation. The
Different agendas between SBU and functional main obstacle was getting pertinent data from the
areas are obstacles. companys information systems. One respondent said,
Systems in place today do not readily accommodate
We have a broad global footprint with more than functional- and product-based metrics. Another person
100 factories. stated, Multiple IT systems and poor integration make
consolidated metrics a real challenge.
We are a decentralized company with multiple
business units. The second most mentioned factor was business/
manufacturing/operations/technology/supply strategy
Global teams are managed at parent company- alignment. Proper metric identification and alignment
level, which limits ability to construct these teams was a challenge. One respondent stated, Difficulty
on an ad hoc basis. choosing the correct measures to ensure that we realize
results versus checking boxes. Metrics not always
We are not good at creating or maintaining cross- aligned across divisions. Another said, Ability to
functional teams. We sometimes have cross- include and measure qualitative type measures
functional meetings, but not good ongoing teams. synchronization of sourcing goals with business
The same people are tasked for all cross- priorities beyond general price deflation.
functional teams, but there is not enough time for
them to participate in all the requested teams. Organization and governance was the third most
There is little or no team recognition. mentioned limiting factor. The major obstacle was
developing metrics that span the organization. One
A recognition structure is needed that supports person said, Metrics are managed at the business unit
accountability into a global versus local level difficult to compile results across entire
deliverables for successful achievement and corporation. Another stated, We lack cross-functional
recognition. Additionally, a mechanism to truly ownership/accountability for supply chain metrics.
recognize team performance in a sustained
manner is needed. The fourth most mentioned factor was measurement
and evaluation itself. One obstacle was the lack of
Teams are an integral part of the sourcing process proper measurements. One person responded, No
and the corporate approach to business. The gaps metrics and performance expectations linked to specific
are the method of forming teams based on customer requirements. Another stated, We do not
selection criteria and the recognition of teamed have a balanced scorecard.
accomplishments. More focus is being placed on
both of these, but more is needed for teams to be Selected Obstacles
ingrained as a standard. Systems in place today do not readily
accommodate functional- and product-based
Rewards are based on individual performance and metrics.
not team performance. Company structure does
not support self-directed work teams. One obstacle is the infancy of the program. The
second is the IT support for development of
Culture is still consensus driven, as such, team systems to collect and report information.
sizes can be large and coming to decisions time
consuming. Scalability in software and tools to track metrics
are obstacles.
This will be critical moving forward, especially
combining to one brand. We will need to first One obstacle is the inability of MRP system to
break down our internal silos, which is generate consistent metrics.
happening, and then work together with new
subsidiaries. Heritage/legacy systems are main obstacle to
filling the few remaining caps. Function-based
Q18. Primary obstacles limiting implementation metrics make it difficult to integrate cross-
of Measurement & Evaluation. N = 62. enterprise.
CAPS Research 85
APPENDIX
3
We need metrics that drive the right behaviors The second most mentioned factor hindering
and not just results. Systems integration issues implementation was executive engagement and support
that exist from merging numerous legacy with resources. Resources were the major obstacles. One
companies include SAP (multiple instances and respondent stated, There is a lack of resources to put
releases), JDE (Oracle), Ariba, Maximo, etc. full suite of e-enabled capabilities in place. Another
said, Two primary obstacles are funding for the
There is a lack of access and systems across all e-sourcing functionality and resources to support
entities. roll-out.
One obstacle is the manual compilation of some Business/manufacturing/technology/supply strategy

key performance indicators alignment of alignment was the third most mentioned limiting factor
supply and supply chain. by respondents. System integration and alignment
between buyer and supplier was the most mentioned
A high level of synchronization exists with senior obstacle. One respondent said, Lack of system
executive review. Scorecard needs to be expanded integration between buyer/supplier. Another stated,
to address linkage directly to customer. Review We need to drive alignment between our supplier and
process is monthly and validated by finance. The our company.
qualitative measures dont always receive the same
amount of focus as the quantitative ones. Selected Obstacles
Buyer and supplier applications are not fully
Horizontal links need to be improved. integrated. There are multiple ERP systems in
place and there is inconsistent forecasting.
Cross-functional metrics need to be established,
agreed upon and used to run the business. There Multiple back-office ERP systems at multiple sites
also needs to be a core, minimum number of make enterprise-wide decisions more difficult.
metrics that are significant to run the business to
versus a proliferation within the different Single ERP instance is required for globalization
businesses. efforts to be truly effective and efficient. E-systems
and e-tools should be viewed as crucial to a
Obstacles include decentralized and lack of world-class organization. Funding, integration
mandates. and adherence to their use needs to be mandated.
We need to agree on organization-wide metrics There are too many ERP Systems master data
that go beyond just the supply management alignment.
organization.
Varied businesses each have their own ERP system
Measurements vary across entities, businesses and to support specific needs, but they are not tied
regions. globally together.
Agreement and enforcement of meaningful System interfaces, such as the SCM system, does
metrics and use of available tools is needed, not interface with the e-tool. This causes some
including councils. Also, scorecards needs to be inefficiencies that prohibit full implementation of
fully used. the total e-sourcing option.
Current metrics are not actionable. There is no single global purchasing system,
although it is currently being implemented.
Q19. Primary obstacles limiting implementation
of E-Sourcing & Supply Chain Strategies. While weve automated many activities over the
N = 85. past few years, we are a long way off from having
a world-class organization. Today, we are too
Comment dependent on many different systems, and in
Information systems and data availability was the most cases they do not talk to each other. A data
biggest factor limiting implementation. The main warehouse structure is in the implementation
obstacle was too many systems. One person stated, stages but as of yet, not deployed.
Lack of standard ERP system across all SBUs and sites.
Another said, Multiple platforms limit full integration.

APPENDIX
3
Single instance ERP is currently being deployed. Another stated, The marketplace is affecting the talent
However, it is lacking in driving supply chain pool as well as our changing company. Yet another
uniformity across the enterprise. Supply chain commented, The economic downturn will cost us
tools needed to enhance ERP are being driven by talented people.
global supply chain organization.
Information systems and data availability was also a
We have many ERPs that present a challenge to third limiting factor. The main obstacle was the lack of a
timely implementations. A common goal single system that would efficiently provide HR data.
alignment does not exist across the business One respondent said, Current data systems do not
groups, resulting in limited resources committed support this well thus requiring sites to manage
to training, deployment, implementation and independently. Another stated, Efficient and effective
compliance over sites. knowledge management sorting through everything
out there and getting the critical information is more
There is a lack of resources to put full suite of difficult. We have not yet seen an optimal system that
e-enabled capabilities in place. Global complexity enables information sharing globally, and that is
of language, work processes, tax rules and legal established and used.
obstacles preclude ability to fully complete
implementation. Selected Obstacles
Knowledge management system is being
Budget limitations and the complexity of differing implemented to capture and retain knowledge
business unit legacy systems are obstacles. and drive competitive advantage. There are
resource limitations to finalize implementation.
Obstacles include budget and resources, although
we are evolving this ability steadily. Although significant effort is being expended at
the corporate level and cascading down, we are
There is a lack of system integration between still early in the evolution of talent management.
buyer/supplier. There is no global leader or Integrated capability to review and analyze talent
initiatives focused on e-sourcing, such as RFI, would be a hurdle along with the availability of
RFP, e-auction. training for top talent to prepare for advanced or
future roles. Due to reduction of budgets, several
Q20. Primary obstacles limiting implementation development initiatives have been deleted from
of Human Resource Development. N = 68. this years offerings.
Comment There are limited financial resources to recruit and

Executive engagement and support with resources was attract appropriate talent.
the biggest factor limiting implementation. Resource
availability was the major obstacle. One person said, SBUs protect their own, so there is a lack of
Resources to implement a comprehensive plan is a willingness to share resources. Traditional HR
limitation Another respondent stated, Limited hires, trains on the basics (no profession-specific
financial resources to recruit and attract appropriate training), deals with non-performers and trains on
talent is an obstacle. benefits. There is little strategic focus. Training is
left to the hiring manager. Career development is
The second most mentioned limiting factor was aligned sparse to non-existent.
business/manufacturing/operations/ technology/supply
strategies. The major obstacle was the lack of human There is a lack of international mobility and
resource strategies. One person stated, There is no flexibility in the reward system, especially in
roadmap for competency development, no defined developing markets.
supply management competency profile. Another
stated, Lack of HR processes. The lack of globalized HR management and tools
create obstacles.
External economic environment impact was the third
most mentioned limiting factor. The economic There is a lack of knowledge/experience in regard
downturn is dynamically affecting the human resource to manufacturing and no sense of urgency in
pool and reducing the amount of money companies regard to product line concerns. Also, we
have to spend. One person said, Budgetary constraints currently have no training plans for newcomers.
during these economic times are the greatest inhibitor.
CAPS Research 87
APPENDIX
3
Knowledge gap identification and closure are Senior managements reluctance to embrace
managed by the individual unit manager. fundamental supply chain best practices is an obstacle.
Consistent job/career training curriculum and Another said, There is some SBU leadership resistance
plans are not implemented across the enterprise. to an enterprise view of supply chain.
One obstacle is that new acquisitions entering the The second most mentioned factor hindering
company are not at the same level as the base implementation was organization and governance. A
company. Also, there is a macroeconomic common obstacle for this factor was purchasings
environment limiting investments. reporting level. One respondent stated, Lack of
purchasing executive at the C level is an obstacle.
There needs to be a greater focus on development There is no direct purchasing director at the site
of personnel among sister companies. Budget organization. Another stated, Our vice president of
limitations impede rotational assignments. purchasing needs to report to the president and COO,
not the vice president of operations.
The economy is creating reductions-in-force that
impact this area. Business/manufacturing/operations/technology/supply
strategies alignment as well as people and culture were
Economic downturn will cost us talented people. the next most mentioned limiting factor. Producing
We do not seem focused on creative ways to keep effective strategies was an obstacle. One person said,
our people versus letting them go. One is just the lack of written supply strategies. And
another stated, Making our supplier and sourcing
A shared knowledge management network/system strategies feel like engaged business plans versus
needs to be developed. In todays environment, procurement bureaucracy can be challenging. We need
knowledge of individual skill gaps, system to make the strategy relevant to internal stakeholders.
processes that trigger HR actions on gaps, and
agreed global systems do not exist. While these Regarding culture, one person stated, We must
things are in works, it needs a significant push to overcome old stereotypes. Another said, Some still
move forward in this area. want to do things their own ways.
While there are many centralized and common Selected Obstacles

tool sets associated with our workforce Executive management support and central-led
assessment, development and recruitment, the leadership is an obstacle.
annual organizational workforce review is a highly
manual process with no central repository of data, One obstacle is the availability of executives.
which has to be created from scratch each year.
No central database to capture an inventory of Priority is mostly directed internally. We have
workforce knowledge, skills and professional some level of engagement in key categories but it
certifications exists. is not uniformly applied.
Our challenge is the diversity of the workforce, Obstacles include budget restraints, lack of
and related development and training across that knowledge, and too much concentration on the
spectrum. While we can reasonably identify unit price, not the cost.
and/or develop training materials and courses for
the majority of our workforce, there remains a Just a portion of the executives seems to be really
smaller, but critical segment that is sometimes engaged, the ability to get the rest of the executive
under-recognized and does not receive equitable committee is crucial.
opportunities.
Sourcing and supply chain strategies are still seen
Q21. Primary obstacles limiting implementation as supportive roles rather than collaborative,
of Engagement by Corporate Executives driving strategic innovators and supporting
& Business Unit Leaders. N = 55. company goals.
Comment Senior management still questions supply chain

Executive engagement and support with resources was activities communication in some areas is still
the major factor limiting implementation. The main a push versus a pull.
obstacle was executive support. One person stated,

APPENDIX
3
Rotation in leadership provides obstacles once the The second most mentioned factor hindering
business case has been accepted. Organizational implementation was executive engagement and support
structure differences regarding who supply chain with resources. Senior management involvement was
reports to in the business units provides the major obstacle. One person said, Fundamentals
additional business case approval challenges. and the foundation are in place for cross-functional
global teams and alignment. The hurdle is recognition
Executive buy-in and support demonstrated by at the executive level of a need for a body to drive the
committing resources to a central-led strategic horizontal alignment. Another stated, Key executive
sourcing project is difficult to obtain since each stakeholders dont always fully comprehend the role
business location is evaluated on its profit and they have to play.
loss. The business location is not required to
collectively support benefits to the enterprise Aligned business/manufacturing/operations/technology/
without receiving its own ROI directly. supply strategies was the third most mentioned limiting
factor. Strategy alignment and implementation were the
One obstacle is the lack of a purchasing executive major obstacles. One respondent stated, Sourcing
at the C level. There is no direct purchasing process, procedure, policy and systems are not fully
director at the site organization. implemented worldwide. Another person said, There
is a lack of common objective, measurement and reward
Our vice president of purchasing needs to report across levels of management and the business units.
to the president and COO, not the vice president
of operations. The scope of his job has doubled Selected Obstacles
with the addition of acquisitions. Not all There needs to be greater cross-fertilization
acquisitions report to the vice president of among organizations for insight and perspective.
operations.
Overall organization is very decentralized.
Making our supplier and sourcing strategies feel
like engaged business plans versus procurement One obstacle is the perception of the tactical
bureaucracy can be challenging. We need to make nature of procurement activities just negotiate
the strategy relevant to internal stakeholders. the deal and get the supplier to deliver. Another
obstacle is the decentralized perspective on
Decoupling of budgets from activities and benefits business alignment strong, regional
is needed. Finance groups tend to believe organizations; global (central) organizations are in
procurement can achieve results for free. an advising role, rather than responsible for
results.
We need skills across the function to develop
business cases to make the argument for change. Obstacles include the multiple process governance
Courageous leadership alignment across divisions layers within the organization; many formalized
is needed along with a one company philosophy. structures and boards that vary by operating
company, and advocacy groups versus empowered
Our business culture is an obstacle. decision-maker groups.
Q22. Primary obstacles limiting implementation We need to create a structure and stick to it. We
of Functional & Business Processes, have had too many reorganizations over the last
Practices and Systems. N = 58. few years. There is not enough centralization of
influence. We are too decentralized by pole on
Comment execution ... not enough coordination.
Organization and governance was the major factor
limiting implementation. Decentralization was the major Obstacles include our decentralized organization
obstacle. One respondent stated, There is a and lack of a clear long-term vision.
decentralized perspective on business alignment
strong, regional organizations; global (central) We must continue to fight for seat at the table.
organizations are in an advising role, rather than
responsible for results. Another person said, There is Fundamentals and the foundation are in place for
not enough centralization of influence. cross-functional global teams and alignment. The
hurdle is recognition at the executive level of a
CAPS Research 89
APPENDIX
3
need for a body to drive the horizontal understand that the perfect execution of the status
alignments. This is a work in progress. quo is a dangerous position.
There is no ownership of business process and One obstacle is impatience. We are unwilling to
systems. There is a lack of manpower. give existing changes the opportunity to bear fruit
There are consequences for business units that There needs to be an acceptance by all of the need
budget, and headcount limitations that restrict for continuous change as normal part of work.
how deeply procurement can integrate. Change needs to be viewed as a positive
approach.
Key executive stakeholders dont always fully
comprehend the role they have to play. Culture in some business units is not conducive
to this mode of operation. Rewards and
There is a lack of common objectives, recognition systems are geared more toward risk
measurement and reward across levels of aversion.
management and business units.
Resistance to change is still a cultural issue.
There is a need to line up the team with the same Significant rewards and punishments have not
objective and compromise. been implemented to drive change in
organizational behavior.
Q23. Primary obstacles limiting implementation
of Innovation & Accelerated Change One obstacle is our business culture. Rewards are
Management. N = 69. not tied to realization of change, but rather to
early successes, not necessarily sustainable
Comment outcomes.
People and culture was the major factor limiting
implementation. The main obstacle was cultural Obstacles are our culture and legacy systems
resistance to change. One person said, We are firmly autonomy.
establishing cultural change around transition change
management (TCM). Another stated, The culture is to Our organization dedicates no time for innovation
remain in the comfort zone and the level of change activities. Resistance to change is a cultural issue.
being brought to supply chain is bringing folks out of Individuals or groups are rarely rewarded based
their comfort zone. on behavior.
The second most mentioned factor hindering I do not think we foster innovation as well as we
implementation was executive engagement and support should. If something is tried and fails, there is
with resources. Lack of resources was the major more pressure to revert back to the way we were
obstacle. One person stated, We need dedicated doing things rather than improving the failed
capacity to drive continuous improvement. process to get to a best practice.
Aligned business/manufacturing/operations/technology/ Progress is being made in this area. However, in

supply strategies was the third most mentioned limiting addition to acceptance, time and leadership of
factor. The main obstacle was the risk involved in change management requires a commitment to
making changes. One respondent stated, Process the time required.
manufacturing complexities and varying manufacturing
processes by facility limit the rate of change in a safe One obstacle is manpower. Another is the
environmentally friendly manner. Another said, We executive support given competing initiatives and
are in a risk adverse industry with high cost to make priorities.
changes to products based upon customer and
regulatory agency approvals. Low-risk/no-risk mentality The approach to change management is one of do
means we go with a proven solution versus taking on it and everyone will see it and comply over time.
something that is unknown. The intent and motivation is in place, however,
the methods are not well defined or coordinated.
Selected Obstacles One hurdle is the leadership and its position on
We need a better understanding of the increasing how to drive change. The other is the level of
rate of change in the industry. We need to reward associated with risk of leading the change

APPENDIX
3
effort. This is particularly true if the ultimate
change isnt achieved in a timely manner.
Sometimes the focus is on what didnt get
changed versus what did.
Rolling out a formal change management process

needs time for that process to take hold. There
can be Initiative overload.
We have a limited capacity to take risks in the

change of technologies and specifications.
Alignment of priorities is an issue too many

projects versus completing priorities quickly.
CAPS Research 91
CAPS Research
CAPS Research was established in November 1986 as the result of an affiliation agreement between the W. P. Carey
School of Business at Arizona State University and the Institute for Supply ManagementTM. It is located at the
Arizona State University Research Park, 2055 East Centennial Circle, P.O. Box 22160, Tempe, Arizona 85285-2160,
telephone 480-752-2277.
The Mission Statement: CAPS Research, working in partnership with its global network of executives and academics,
is dedicated to the discovery and dissemination of strategic supply management knowledge and best practices.
Research published includes more than 70 focus studies on purchasing and supply management topics, as well as
benchmarking reports on purchasing and supply management performance in 20-plus industries.
CAPS Research, affiliated with two 501(c)(3) educational organizations, is funded solely by contributions from
organizations and individuals who want to make a difference in the state of purchasing and supply chain
management knowledge. Policy guidance is provided by the Board of Trustees, consisting of:
Christine Breves, C.P.M., Alcoa, Inc.

Susan Brownell, U.S. Postal Service
Phillip L. Carter, D.B.A., CAPS Research
Timothy W. Coats, General Mills, Inc.
Harold E. Fearon, Ph.D., C.P.M., CAPS Research (retired)
Timothy R. Fiore, CPSM, C.P.M., Terex Corporation
Beverly Gaskin, Rolls-Royce Corporation
John S. Gundersen, CPSM, Emerson PlantWeb Solutions
Timothy S. Harden, AT&T Services, Inc.
Bradley J. Holcomb, Dean Foods
Cecil R. House, Southern California Edison Company
Thomas K. Linton, LG Electronics Inc.
Leo Lonergan, Chevron Corporation
Mary McDaniel, FedEx Express
Farryn Melton, C.P.M., Amgen, Inc.
Vince Messimer, Royal Dutch Shell plc.
Robert Mittelstaedt, Jr., W. P. Carey School of Business at Arizona State University
Robert Monczka, Ph.D., C.P.M., CAPS Research/ASU
Paul Novak, CPSM, C.P.M., Institute for Supply Management
Dan Rooker, IBM
James A. Scotti, Fluor Corporation, Chair, CAPS Research
Michael E. Slomke, C.P.M., Honeywell
James A. Ward, Eli Lilly and Company
Keith P. Weber, 3M Company
Jeffrey M. Wood, Schneider Electric North America

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Supply Strategy Implementation:

Current State and

Robert M. Monczka, Ph.D.

Kenneth J. Petersen, Ph.D.

Robert M. Monczka, Ph.D.

Kenneth J. Petersen, Ph.D.

Copyright 2009 Institute for Supply Management

Kathleen A. Chester of the Institute for Supply Management (ISM) provided

Steve Koch, Director of Information Technology Services at CAPS Research,

Tammy Schwerman, Senior Technical Analyst at CAPS Research, supported

Gregory R. Gay, Research Associate, reviewed and analyzed qualitative

2 Supply Strategy Implementation: Current State and Future Opportunities 2009

Robert M. Monczka, Ph.D., is Director of Strategic Sourcing and Supply Chain

Kenneth J. Petersen, Ph.D., is Professor of Supply Chain Management and First

4 Supply Strategy Implementation: Current State and Future Opportunities 2009

Figure 1.2 EAS Application . . . . . . . . . . . . . . . 13 Table 2.2 Overall Implementation Strategy

6 Supply Strategy Implementation: Current State and Future Opportunities 2009

Table 3.9 Implementation: Highest 10 Discrete Table 5.1 Comparison of 2007/2009

Table 3.14 Implementation: Highest 10 Process

Table 3.15 Process Manufacturing

Table 3.16 Service Importance Strategy

Table 3.17 Service Implementation Strategy

Table 3.18 Service Strategy Gap Rankings/

Table 3.19 Implementation: Highest 10

Table 3.20 Service Implementation Ranking/

Table 4.1 Supply Performance Results

Table 4.2 Performance Ratings (2007 and

Table 4.3 Actual Performance: Overall and by

Research Background organizations across 26 industries to further develop a

8 Supply Strategy Implementation: Current State and Future Opportunities 2009

Transforming Purchasing/Supply This transformation can be illustrated by the maturity

10 Supply Strategy Implementation: Current State and Future Opportunities 2009

12 Supply Strategy Implementation: Current State and Future Opportunities 2009

$1 billion to $5 billion 40% 38%

Less than $1 billion 36% 47% Report Organization

14 Supply Strategy Implementation: Current State and Future Opportunities 2009

16 Supply Strategy Implementation: Current State and Future Opportunities 2009

Introduction implementation and importance. A gap is the difference

3. The average gap has been reduced by a

18 Supply Strategy Implementation: Current State and Future Opportunities 2009

Strategy Area Implementation

The overall average strategy ratings range from

20 Supply Strategy Implementation: Current State and Future Opportunities 2009

Strategy Area Importance

Supply Strategy Gap Analysis The smallest gaps were for:

Strategy Area Gap

In addition, quadrant 4 in Figure 2.3 shows a number

22 Supply Strategy Implementation: Current State and Future Opportunities 2009

Collaborative Buyer/Supplier Development & anticipated benefits is required to establish clear

Quadrant 1 strategies in Figure 2.3 require a continuing

24 Supply Strategy Implementation: Current State and Future Opportunities 2009

Category (commodity) and Supplier Strategy

Naturally, each firm will have to evaluate its own needs,

All firms also should consider how they can accelerate

Finally, in our opinion, the strategies that are generally

26 Supply Strategy Implementation: Current State and Future Opportunities 2009

Introduction Generally, discrete manufacturing had higher

Tables 3.3 and 3.4 provide some interesting data:

Strategy Area Significant Differences*

*Differences significant at the .10 level (see Appendix Two)

Strategy Area Significant Differences*

*Differences significant at the .10 level (see Appendix Two)

28 Supply Strategy Implementation: Current State and Future Opportunities 2009

Industry Sector Importance Implementation Gap