What Matters More: Supply Chains or Spend?
Ever since Bob Ferrari started his blog, Supply Chain Matters, I've given him a hard time about the name – but only in jest. Bob is doing an excellent job reporting and analyzing supply chain trends that all readers of this blog, and many others, should find quite captivating indeed. One of Bob's recent posts is a great example why. In it, Bob outlines why supply chains matter from a financial earnings round-up perspective -- the good, the bad, and the ugly. Consider how Kraft Foods "reported blowout second quarter 2008 results exceeding financial analyst projections … The earnings press release also notes approximately $150 million in gains from certain commodity hedging activities. We featured a previous post outlining Kraft's supply chain challenges along with its investment in supply chain analytical capabilities." But not all companies are counting their supply chains as assets.
Bob points to a blog post from my fellow Enterprise Irregular, Michael Krigsman, about how Levi Strauss "experienced significant order fulfillment problems during one week of the second quarter, attributed to a North America implementation of SAP ERP. The interruption is speculated to have caused shipping problems, and combined with other economic issues, caused the company's net income to drop a whopping 98% relative to the same quarter in 2007." After reading this, it would be impossible to say that supply chains -- not to mention their support systems -- do not matter. I would still argue that it all comes down to Spend first, but I’ll leave that for a discussion with Mr. Ferrrari next time I'm up in the Boston area.
- Jason Busch
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I would not disagree with you and your audience about the critical importance of spend management. In addition to Kraft, I also cited Southwest Airlines whose hedging strategy for acquiring fuel remains the envy of the international airline community.
The message from all of these examples is the imortance of cross-functional alignment and superior execution, even when business conditions are challenging.
I look forward to your Boston visit and continued stimulating discussion. Perhaps we can orchestrate a meeting of Boston area value-chain bloggers, similar to the recent Chicago event.
Bob Ferrari