Play Ball! Supply Chain Roundtable Discusses Challenges and Victories
As the start of Major League Baseball’s regular season looms, the monthly roundtable of experts from Institute for Supply Management® (ISM®) has stepped up to the plate. The current business environment is delivering a steady diet of curveballs to discuss.
The panel, ready to take their swings:
- Thomas W. Derry, ISM CEO
- Jim Fleming, CPSM, CPSD, Manager, Product Development and Innovation
- Paul Archiopoli, C.P.M., CPSD, CPIM, CMFGE, Subject Matter Expert
- Michelle Rohlwing, MBA, Manager, Product Development, Innovation and Learning.
The foursome addressed two topics — artificial intelligence (AI) and tariffs — that might be monthly staples for the immediate future, as well as shared their stories of supply chain home runs. And what does Robert Burke, also known as the “Naked Cowboy,” have to do with a discussion on supply management? Well, read on.
Q: With the AI Playbook for Supply Managers available, what should a practitioner know before preparing to build a strategic framework?
Derry: AI can seem overwhelming, and a common problem is identifying where to start. The feature I like best about ISM’s new AI Playbook for Supply Managers is the guidance it provides on six specific responsibilities that supply managers own: requirements development, market research, spend analytics, scenario planning, negotiation simulation/preparation and supplier relationship management. Using AI in any of these areas will amp up an organization’s productivity. You will accomplish more and with better results than tackling these tasks in a pre-AI manner.
Rohlwing: The main goal should be to gain as much knowledge on the basics and practice as possible. Enlist help from experts as needed. The AI Playbook for Supply Managers is a great start and was developed by an expert in the field. Next, it is crucial to build out your company's governance to oversee the development and deployment of these technologies. This will ensure that these tools are used in a safe and ethical manner.
Fleming: My professional colleagues have articulated the value of the Playbook very well. We continue to hear from corporations that they want to make progress with generative AI (gen AI) but are not quite sure where to start. The Playbook provides basic building blocks to learn and experiment. One of the biggest lessons I have learned with gen AI: Prompts are not short nor overly complex. You do not require a computer engineering degree to create a good prompt. What you need is the ability to craft a story of what you want and expand that story to refine the outcome.
Archiopoli: The playbook is a great foundation to build a strategic framework on. Participants will come away with an understanding of the basics of AI and become conversant in complex prompt engineering. The playbook walks you through what you need to know in a short time and at a very reasonable cost.
Q: We’ve discussed contingency plans for tariffs like alternate sourcing, but how do you approach an environment when tariffs could be on one day and off the next? And is it a potential business relationship strain, with some companies and suppliers haggling over which party pays the tariff?
Derry: There are a few key points to bear in mind regarding new tariffs. First, I hear from many companies that we can plan for and manage any scenario as long as we have a stable set of rules. In the near term, however, keeping trading partners guessing appears to be part of the political strategy, so we may not see that stability for a while. Second, unlike many of our trading partners, the U.S. is not an export-driven economy. About 11 percent of U.S. gross domestic product (GDP) is generated by net exports. Compare that to Germany (about 50 percent), South Korea (about 44 percent), Japan (about 22 percent) and China (about 19 percent). The administration’s calculus is that it believes tariffs are more painful for our trading partners in the short run than for the U.S., and that other countries will be motivated to settle trade disputes because of their reliance on exports. I do think that in the medium term, we will land on a stable set of trade rules around which we can plan.
Archiopoli: There is a great deal of variability in these situations, of course, and sometimes our best laid plans can’t keep up with current events. Fortunately, the current situation has been mostly political positioning. The list of supply chain and sourcing approaches and negotiating positions is very long and includes actions like dual sourcing, switching to U.S. manufacturers, building safety stock and conversion of existing inventory. Relationship strain can best be managed by clear and transparent communication.
Rohlwing: The key word in dealing with these times and tariffs is “agility.” An agile supply chain can incorporate many different risk strategies to help mitigate tariffs and other risks. Working with suppliers as a customer of choice and having strong relationship management in place can also help parties work through tough conversations within negotiations. Often, simply meeting in the middle is the best strategy for both parties.
Fleming: A slightly different spin on this topic: One recent focus within ISM’s Data Analytics and Technology Committee was the need to find market intelligence that matches changes in the environment. Current fluctuations in tariffs are a prime example. Corporations are beginning to cancel market intelligence services where data reporting is obsolete by the time to end user receives it. New suppliers are entering this market by leveraging gen AI to meet the needs of the customer. Environmental latency rates are becoming critical, and supply management professionals should begin to expand focus on data solution providers that can accelerate to keep pace.
Q:We love to share stories of victories — supply managers saving the day for their companies. What’s yours?
Archiopoli: As the old saying goes, “Success has many fathers, but failure is an orphan.” If procurement does everything right, no one notices — but if something goes wrong, you are the “Naked Cowboy.” Unfortunately, urgent and heroic action by procurement professionals is often required because of broken or inadequate processes. One of my favorite stories: Due to a late engineering change, an intrepid procurement manager has to find a way to get urgently needed parts from California to Arizona, on the same business day they are needed for assembly. Counter-to-counter service was not fast enough, so we had to find one of our employees in California that could go to our supplier and get the parts, then buy a suitcase for the parts, check the bag at the airport and fly to Arizona with them. He got off the plane and was met by an Arizona employee who took the bag back to the factory for assembly. Crisis averted.
Rohlwing: When I worked for a large manufacturing facility, we were struggling with on-time delivery performance. My manager was continuing to get negative feedback at global executive meetings about our facility. Inventory had been mostly managed with spreadsheets and historical processes that no longer met business needs. Our team implemented new forecasting software, and we took our highest-running finished good products and established statistic-based stock targets. Through a lot of change management, creative problem solving and patience, we were able to bring our on-time delivery rate to an acceptable level. My manager told me that when he announced that our facility reached our goals in the next executive meeting, those in the conference room clapped and cheered.
Fleming: Our company was going through a strategic transformation from the top down, and we partnered with one of the top-tier global consulting firms to define strategies. A key message from this firm was to align outcomes to financial performance and metrics. If progress could not be measured within the balance sheet, profit-and-loss statement or cash-flow statement, it most likely was not worthwhile to pursue. The most significant paradigm shift was to look at change through the lens of the finance organization. It shifted the perspective to thinking like a business leader, not just a supply chain leader. The rate of change accelerated as finance helped the supply chain team validate impacts and results. Decision-making processes became more streamlined, and stakeholder engagement improved significantly. While not an easy transformation, the journey proved to be successful.
Derry: I heard a powerful example recently from a large medical device company. Among its overall strategic goals are to support annual revenue growth of 7 percent to 9 percent, which is very strong for a mature company. Also, the company wanted to maintain earnings per share in the mid-teens. How do you preserve earnings in an aggressive growth environment? It’s a cross-functional effort. There’s a sourcing component, value engineering component, innovation component and a customer satisfaction component. I love hearing stories of how a supply chain organization is aligned to the overall business strategy and delivers to drive overall success. It again proves that supply management is not a function to be optimized; rather, it is an integral contributor to a company’s strategic success.
(Photo credit: Getty Images/PamelasPhotoPoetry)