The Upshot

SCM: A Brave New World

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The New Face of Purchasing
By Tim A. Minahan, Aberdeen Group

Purchasing and supply chain personnel will increasingly be tasked to manage the "extended enterprise." In this position, purchasing will be required to play multiple roles, as follows.

Liaison: Positioned at the center of the extended enterprise, purchasing will be required to broker relationships and interactions between internal customers - such as engineering and manufacturing - and external trading partners, including contract manufacturers, logistics providers, and suppliers.
Market analyst: Purchasing professionals will need to have intimate knowledge of the capabilities and constraints of each member of the extended enterprise.
Figure 1: Corporate Expenditures on External Goods and Services

Source: U.S. Department of Commerce, World Bank, Aberdeen Group, December 2001
Supply chain assembler: Based on this knowledge, procurement professionals must be able to assemble the appropriate members of the extended enterprise to rapidly respond to changing market dynamics and unique customer requirements. It is important to note that individual supply chains will become increasingly temporary in nature, requiring purchasing to assemble (and disassemble) supply chains based on the product being produced, the manufacturing method utilized (i.e., mass production versus build-to-order), delivery requirements (i.e., cycle time and geographic destination), and the distribution channel.
Monitor: To ensure continued success, purchasing must monitor and manage the ongoing performance of the extended enterprise - proactively responding to glitches before they become serious problems.

To coordinate and monitor such a flexible extended enterprise, purchasing will increasingly rely on technologies for connectivity and communication as well as performance monitoring and complex analysis. Despite current disillusionment with anything "e," the Internet still offers the most practical and cost-effective channel for communicating within and across organizational boundaries. As a result, the Internet is emerging as the backbone of the extended enterprise, providing a common, standards-based platform for efficient information exchange, transactions, and collaboration across the entire extended enterprise. Companies will need to layer sophisticated workflow engines and decision-support tools on top of this backbone to efficiently monitor and analyze demand, supply, and performance information.

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