This executive editor conducted a recent interview with Tom Derry, CEO of the Institute for Supply Management (ISM). Our interview was in conjunction with next week’s ISM 2015 Conference, which this year celebrates the 100th year anniversary of the organization. That is quite a noteworthy achievement offering a time to reflect on the past and future of the sourcing and procurement function.
For readers unfamiliar with ISM, this professional organization provides procurement and supply industry professionals and organizations with extensive education, research, publications and highly regarded certification. Most readers may be familiar with the often cited ISM PMI Index (Purchasing Manager’s Index) which compiles various supply chain activity indices among various industries. ISM, however, is a far broader organization focused on excellence in supply management.
Our interview touched on some broad topics. CEO Derry indicated that 2014 was an important year for ISM as an organization, one that included significant new initiatives. New staff has been recruited, finances have been solidified and new initiatives, such as attracting Millennials for careers in procurement and supply chain management, have provided broad member organization interest. Millennials will be critically important for the broad supply chain management community in the decades to come. Supply Chain Matters has previously highlighted ISM’s 30 Under 30 Rising Stars Program and we are in the process of interviewing past and current “Stars” which will be featured in upcoming blog postings.
In our interview, we touched upon ISM’s current certification programs. Because of increasing global interest and demand, CPSM (Certified Professional in Supply Management) certification exams are offered in 5 languages with nearly half of applicant interest coming from outside the United States. That is encouraging news to the global demand for recognizable skills and standards.
We wanted to sense CEO Derry’s observations of the burning topics currently on the minds of the sourcing and procurement community. One theme is macroeconomic uncertainty reflected in current volatility of commodity prices and where they may be headed. Another is top-line revenue growth, especially since demand has been slacking in mature economies while some industries are discovering slow to no growth among emerging economies. Mr. Derry described the opportunities as supply chains becoming “globally local”, where cost- opportunistic production is sourced closer to the end customer and can be catered to specific regional market and consumer needs. It is about the understanding of what is the total cost of sourcing to support both lower-cost product strategies and leveraging the most promising local markets.
In our interview we wanted to further probe on the current climate for procurement, namely whether procurement leaders are being directed towards more and deeper cost savings or whether joint innovation in processes and products is in the forefront. CEO Derry indicated that from his travels and conversations, a mind shift is occurring. He specifically cited an automotive industry example where a CFO was drilled by Wall Street analysts on cost reductions in manufacturing. The reply indicated that new technology, in areas such as navigation and driver safety innovations, incorporated in today’s vehicle models are clear signs that innovation is now coming from the supply base. This, in-turn, has led to gaining pricing power in the market. These efforts are becoming great examples of finding innovation and finding top-line revenue growth.
Supply Chain Matters recently highlighted reports that General Motors is initiating more longer-term, strategic relationships with key suppliers in order to foster more innovation in vehicle components and sub-systems.
Derry further believes that, over the past 20 years, a mind shift developed for cutting out cost. Today, arbitrage opportunities for cost advantage are mostly gone, and the new emphasis has to shift toward how procurement can influence or directly impact more value for the business.
Looking ahead, given that this year’s conference is a celebration of the 100th anniversary of ISM, we asked Derry to describe the ISM strategic agenda moving forward. First, Derry emphasized that there is a need to celebrate the past century’s profession of procurement accomplishments. Supply Chain Matters would add our observation that many of today’s occupations have not endured as long.
Moving forward, because member needs are changing, Derry noted a more globally focused basis of ISM’s member services, with added emphasis for digital and mobile based content delivery. Expect ISM to be active in establishing standards in ethics and social responsibility related to procurement practices reference points. Derry iterated that customers have high expectations not only related to products, but how products are created. He specifically cited outdoor clothing provider Patagonia as a company that “walks the talk” in socially responsible sustainable materials. The apparel provider’s Footprint Chronicles examines Patagonia’s life and habits as a company and provides transparency to its end-to-end supply chain. Derry believes that firms will be increasingly aligned with values among the customer base. In that light, we both shared examples related to how our children make their buying decisions not only factoring cost, but the standards and policies of the particular company. Another particular example was buying a new car, specifically on how Subaru markets and sells its vehicles, not only features and cost, but also its zero landfill and sustainable materials and energy standards associated with Indiana based manufacturing facility.
A final area touched upon in our interview was the state of professional education within supply chain management. This, according to Derry, is a question he often receives. He noted that the responsibilities and scope of procurement are changing rather rapidly and there is a need to constantly stay current. To be effective, procurement professionals need to understand the broader capabilities of the supply chain such as planning, logistics and transportation. A procurement professional does not necessarily need to be an overall expert, but should be knowledgeable to the needed capabilities and impacts of decisions across the entire supply chain.
Looking across all of the current professional organizations that umbrella supply chain management today, Derry observed that ostensibly, from an ISM perspective, the strategy is somewhat different than counterparts around the globe. To be effective in the role, there is a need to understand the elements of materials management, warehousing and logistics operations, not necessarily to be an expert with every one of these areas. He described ISM’s goals as concentrating on the skill and expert knowledge needs for procurement leadership and practioners to be most effective, which is slightly different than organizations striving to serve education needs in the end-to-end supply chain. ISM is deliberately striving not to replicate efforts of other professional bodies and organizations.
We thoroughly enjoyed our conversation with CEO Derry and wish ISM continued success in the next century for serving the professional development and services needs of supply management professionals across the globe.
We had all good intentions for attending this year’s ISM conference but unfortunately, other business commitments will preclude our attending. However, stay tuned for coverage of announcements.
Bob Ferrari, Executive Editor