One of the best things about my research career is that I’ve had the chance to get to know some of the great minds and practitioners in supply management. I have been fortunate enough to know Doug Smock, an award-winning Editor-in-Chief of Purchasing Magazine and Plastics World (among others), for more than 15 years. Doug shares a common passion for supply management, having launched his own online community for supply strategy, GlobalCPO.com.

But Doug is probably best known for co-authoring the best-selling supply management title, Straight to the Bottom Line: An Executive’s Roadmap to World Class Supply Management. The book is a must-read for any supply manager, providing compelling evidence of the strategic value of supply management and how some of the world’s leading companies are using it to drive bottom and top-line improvements. You can order a copy here.

Below, Doug shares some of the supply management best practices he has uncovered. He has also agreed to be a periodic contributor to Supply Excellence, so check back here for more insights into world-class supply management organizations.

Doug, you’ve been researching commodity markets and supply management strategies for more than 20 years. How has the supply management discipline changed over that time? I joined Purchasing magazine in 1977 after spending seven years at the Pittsburgh Post-Gazette, primarily covering the steel industry. At that time purchasing was local and tactical. Our biggest job at Purchasing magazine was to try to convince people that the purchasing function really was important. It was a harder job than it should have been.

Soon, household names like Xerox and Chrysler were under attack by foreign competition and fighting to stay alive. It became apparent that we were often competing against foreign companies that had well-organized supply chains and far superior business process integration. Tom Stallkamp changed the traditional purchasing paradigm at Chrysler around 1990-91 when he created the Extended Enterprise model that made Chrysler a stock market sweetheart and earned him the president’s chair. As we pointed out in Straight to the Bottom Line in a full chapter on purchasing in Detroit, Tom’s lessons were abandoned in the catastrophe known as Covisint.

In the 21^st Century, purchasing has evolved into sourcing and supply management, and is far more sophisticated. Many critical issues remain.

What are the key skills required to be an effective supply management executive today?

My favorite buyer of all time is the late R. Gene Richter. I asked him that question once during one of our many meetings, events and meals together. He didn’t hesitate with his answer: great people skills. I couldn’t agree more. Purchasing executives must attract, retain and motivate great people. That’s Job One. In addition to that, if I had to advise someone on that career path, I would strongly suggest that they study finance and begin their career in finance. Key sourcing team members needs to have technical skills, but the CPO does not. Ditto for information technology.

Straight to the Bottom Line is a guidebook for C-level executives on how supply management can contribute value and support the corporate strategic agenda. In your research what were the best techniques you uncovered for selling the value of supply management to the C-suite?

My co-authors are Shelley Stewart, VP and CPO at Tyco; Mike Katzorke, who earned his supply stripes at Honeywell, Cessna, Smiths-Aerospace, and elsewhere; and Bob Rudzki, who had been CPO at Bayer for the NAFTA region. Wonderful people. Our collective experience pointed to a unanimous answer: Make your numbers believable. C-Level executives strongly complain they cannot find the savings claimed by purchasing executives. This lack of credibility is deadly, and still happens very, very often. The biggest sins are “cost avoidance” and pathetic cost benchmarks, such as PPI.

Another big theme of your book is defining the right performance metrics. What do you feel are the right measures for supply management success?If I answer all of these questions Tim, no one will have any reason to buy the book. I have some college loans for kids to pay off.  Joking aside, we give specific guidance on how to achieve the right financial metrics. After all, the CEO will be looking to his supply group to keep him competitive on costs. Or better yet, we want the supply department to provide a competitive advantage.  The biggest problem on metrics really is that they are set by the purchasing department themselves without any meaningful guidance from the highest levels on the company. In our book, we tell the CEOs they should be establishing metrics to measure supply performance. Best-in-class C-Level metrics (read the chapter on P&G) require innovation from suppliers or establish some other benchmark that has top-line implications. For example, I love the way Johnson Controls uses supplier diversity goals to improve sales and profitability. I covered this at http://www.globalcpo.com/ and in my e-letter “How Smart People Buy”. 

You are currently working on a new book that focuses on the role technology plays in enabling and accelerating supply management transformation. Can you share some insights into just some of the early findings we can expect in your new book?

There are five steps to supply transformation outlined in Straight to the Bottom Line. One of them is use of technology. The next book does a deep dive on technology from a supply management perspective. Supply chain software is a bewildering morass from a buyer’s point of view (sorry Tim). For example, the software companies have tried to take control of definitions such as Supplier Relationship Management. If you look at how they define SRM, it covers a myriad of topics from spend analysis to business intelligence. My co-authors (Bob again plus Steve Rogers, who introduced technology to P&G) and I want to take back the high ground for buyers. We define the areas, how they fit, what are the pitfalls, what are the best-in-class doing, how do you sell it, how do you masterplan it, how do you train for it,  and so on. We emphasize, of course, that business process always comes first. Technology only makes sense if you have the basics in place, as outlined in Straight to the Bottom Line.

You have been generous enough to sign on as a periodic contributor to Supply Excellence.com, what are the most pressing topics and strategies you plan to post on?

I’d like to comment on best-in-class developments as I see them, the importance of blue-chip relationships with your most important suppliers plus talk about what I feel is my sweet spot: the convergence of design engineering and supply management. One subject I particularly like that I don’t hear much about is should cost and could cost. There are some really cool technologies emerging here which I researched in depth for the second book, which is being published by J. Ross Publishing.  I also would like to talk a little bit about the greatest buyers I ever knew: Gene Richter and Tom Stallkamp. They did their work before software was a big factor, but the lessons they taught are eternal. I don’t want them to be forgotten. 

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