I’ve caught the research bug again. And Empower 2006 is to blame. Two-days with nearly 300 supply management executives at my disposal afforded a rich pool to investigate supply and contract management best practices.

In addition to dozens of private interviews and conversations with supply execs, I took the opportunity to survey all attendees on their top supply management challenges and strategies. And, I’m somewhat dismayed to report that not that much has changed since I turned in my analyst badge back in March.

Reducing supply costs remains the top challenge and focus for supply management executives, according the survey I put to Empower 2006 attendees last month. Cost-cutting angst has been fueled by the long-held run up in energy costs and the inflationary issues it sparked. Economists expect that the recent downturn in fuel prices will take months to show up in lower supply costs. And news that OPEC could curtail production could cause another run up in oil prices right before the holiday shipping season and the home-heating crunch.

Confusion over the future of supply markets was evident when the Institute for Supply Management (ISM) released its latest Manufacturing Business Survey earlier this month. The survey of supply managers provides an aggregate index of orders, inventories, supply prices and availability. The index was down to 52.9, indicating that the economy was expanding, but at a slower rate. Supply managers continued to report price increases and supply constraints for key commodities, including copper, plastics, electronic components, and chemicals

I sat down with Norbert Ore, Chair of ISM’s Manufacturing Business Survey Committee, last week, in part to better understand future predictions for supply prices and markets. Norbert said, “It’s just too early to tell. Changes in fuel prices take months to impact [commodity] prices and manufacturers are unsure whether fuel prices will stabilize. Most inventories have been worked off and [suppliers] have been more cautious about building up inventories.” Upshot: Commodity prices will remain inflated until the energy supply stabilizes.

However, driving compliance and managing supply risk as challenges were the fastest-growing challenges reported by supply management executives. Compliance pressures have increased in recent years due to heightened financial and environmental regulatory scrutiny (e.g., SOX, RoHS, WEEE, etc.) and CFO’s tougher stance on measuring cost savings reported from strategic sourcing and supply management initiatives.

Supply risks have grown in tandem with the increase in globalization and outsourcing, both of which have expanded supply chains and introduced new challenges in the form of governance, visibility, and compliance. Mark Hillman, AMR Research’s supply risk czar, reports that supply chain risk management is emerging as a dedicated focus at many enterprises. In his recent research, nearly one-third of supply managers said their companies have dedicated budget line-items for supply chain risk management, and 54% expect spending on resources and technology to monitor and manage risks will increase this calendar year.

In the conference survey, attendees also rated securing executive support for supply and contract management initiatives among the top challenges they face today. Luckily, Dave Anderson, partner at Supply Chain Venture and former head of Accenture’s Supply Chain Management consulting practice, has shared tips for developing the perfect business case for any supply management initiative – whether it’s securing new category experts or deploying sourcing automation.

Supply Excellence readers can access a complimentary copy of Dave’s white paper on this subject, How to Make the Perfect Pitch, here.

Tomorrow we’ll examine the leading strategies supply management execs are employing to overcome their cost, compliance, and risk management challenges.