The Procurement Value Proposition: The Rise of Supply Management – Chapter 4

Chapter 4: Five Game Changers: Their Impact on Procurement and Supply Management

 

Overview

Increasingly businesses are directing more and more of their budgets towards a complex web of global suppliers to help deliver on their business strategies. According to some industry reports as much as 70 per cent of corporate revenue is directed towards externalized, supplier-driven costs. In 2011–14 alone it is estimated that companies have increased their external spend as a percentage of revenue by nearly 4 per cent. As a result, the role of procurement has been brought into very sharp focus.

And yet as has already been mentioned, procurement doesn’t register on the C-suite’s radar in a manner proportionate to its growing importance within the organization, and most procurement departments are neither ready nor empowered to take on their new responsibilities. Given theever-increasing logistics costs of globalization, increasing levels of risk and complexity and the perennial issue of rising labour costs, now seems a good time for a major rethink on procurement and supply management strategy.

The story of procurement since the mid-1980s mirrors the wider business landscape. During this time, the profession has risen steadily. The impact of the economic downturn triggered in 2008 has only served to further both the cause of procurement and raise questions regarding its perception in the wider business world. The next several decades promise to bring even more significant change. Having established its credentials, procurement needs to evolve and demonstrate the benefits it can bring in a wide range of areas to add genuine value to business as a whole. Risk will increase in importance, CSR will be tied up with security of supply, and procurement will need to draw on market knowledge, supplier relationships and the use of new technology to identify major threats to a business.

The way in which procurement is structured – and perhaps even where it is based – will change too. With teams spread around the globe, procurement will increasingly find itself managing virtual networks of suppliers, stakeholders and internal customers, drawing on powerful new social media channels to communicate. But it is important that this technology does not come at the expense of the face-to-face relationships that will be so important in establishing solid supplier connections. Alongside all this, the profession must continue its battle for talent and aim to recruit thebest and the brightest.

One thing that is for sure is that leaders can no longer afford to downplay the strategic role of procurement. To understand why this has happened we will look at the game-changing phenomena that have brought this about and how procurement can offer the wider business opportunities to take advantage of some of them. Clearly not every procurement organization is at the same level of maturity, so we will consider them against the three levels of capability identified in Chapter 2 in terms of the achieverthe value-adder and the leader.

Game changer no. 1: corporate social responsibility (CSR)

The world’s bio-capacity is becoming increasingly unbalanced. Global warming and pollution, the result of industrialization and greenhouse gas emissions, ever-increasing water consumption and levels of cropland fertility are changing or at least shifting regionally. As a consequence we can be sure that energy costs will rise, even if liberalization of energy markets does result in price decreases in the short term in certain regions (eg natural gas and electricity in Europe and the United States). But it is our dependence on unstable regions that will grow in the medium to long term – and price increases are likely to be the outcome.

The increasing levels of demand for energy will undoubtedly raise prices and force exploration for new resources – for example, deep-water oil exploration. However, the risks associated with this are becoming increasingly obvious – a recent example is the monumental incident off thecoast of the southern United States following the explosion on BP’s Deepwater Horizon Rig in 2010. Clearly the exploration for primary raw materials such as oil and gas will become more challenging as resources decrease. Renewable raw materials as an alternative source are already being considered but their wide use will only be seriously exploited if they prove to be more competitive in the markets than fossil raw materials and/or they can offer technical advantages – the cost of their recovery notwithstanding. Finally, it is becoming increasingly clear that gas will be the fastest growing primary energy source.

What we can take from this is that increasing energy costs and general risk aversion will create a shift in energy demand and a focus on renewables. Nevertheless, usage of renewable energy will increase slowly due to the energy transition lag.[1] Biofuel utilization will be driven by regulation, most probably leading to price increases as production is limited by cropland availability for food production in many regions. Renewable energy sources are most likely to become significant beyond 2030. A demand-driven focus on renewables is not foreseeable until 2020 but may become a bigger issue in the decade that follows, as the availability of fossil fuels diminishes. Whilst renewables are most certainly on the business agenda and driven by increased awareness of CSR, its ranking might well change in the light of the Fukushima disaster of 2011 and help speed up the transition time.

Never have environmental challenges been so present in public awareness as today. The trend towards ecological and social responsibility, which was once the preserve of a few zealots, has gained tremendous speed in the 21st century and will grow in focus and impact over the next decade to 2024.

The importance of requirements related to CSR has increased over the last few years, mainly driven by growing consumer awareness and extensive legislative requirements (compliance). Environmental issues are clearly of concern to consumers and this concern will increase in importance over the next 10 years or so.

There will also be an increased awareness concerning the social impacts of these changes as consumers understand the holistic nature of the sustainability agenda. Already there has been some reaction: Supplier Diversity, Localism and Big Society in the UK, and legislation in both theUnited States and China. This will result in a combining of environmental protection with social and economic development – and a better understanding of the triple bottom line.[2] This shift is also being triggered by a new generation of consumers who are much more aware of the impacts of climate change and will assert their demands for even greater social progress. One only has to look at the rising middle class in the developing economies, who conform to Western consumption patterns, yet are paying an increasing level of attention to sustainability-related issues.

This trend is clearly event driven. In a world where information spreads faster than ever before, catastrophes such as Fukushima have far more impact on the environment and society than their immediate environs. As a consequence of the social media tools available to us, social injustice is revealed more quickly and more often. Consequently, incidents such as Deepwater Horizon or Fukushima create greater immediate awareness and, behind the immediate reaction, much deeper changes in trust and opinion.

In the world’s fastest growing economies legislation is changing very rapidly and huge reforms are planned. Legislative changes can be introduced overnight, making it almost impossible for organizations to foresee them and even harder to react accordingly. For China, whose markets are cost driven, players will be forced to respond to sustainability issues very quickly due to the potential of adverse effects on both domestic and foreign consumption. However, this situation could stabilize as the high-growth markets increase in maturity, and one can reasonably expect that China particularly will reach legislative stability and maturity regarding both environmental and social aspects of CSR by 2020. Whether it is at a level comparable to the United States and Europe in that timescale remains questionable.

For most organizations the impact of this change in emphasis on CSR is twofold. On the one hand, the consumer demands transparency regarding production conditions and the environmental footprint of products. On the other, young ‘socially literate’ talent is attracted to organizations that offer the best working conditions and are associated with a ‘green’ or sociably responsible image. Organizations can no longer afford to ignore environmental and social issues. They can choose one of two paths to deal with this growing need: they can be defensive and avoid risks related to social and environmental issues, or drive differentiation by embracing them. The latter radically changes both the structure and focus of the organization, with tremendous impact being placed on the value chain;[3] increasingly we see the most advanced organizations embrace a strategy that reads: Sustainability = Innovation.

CSR is no longer the sole responsibility of a corporate function or the mantra of the Marketing Department. Procurement now plays a central role in championing it through its responsibility for the environmental and social integrity of the supply base, thereby directly ensuring theorganization’s brand value. Indeed both consumers and the media are very quick to blame organizations for the transgressions of their suppliers. Furthermore, the challenge is increasingly coming from within and procurement will have to accept its responsibility in this regard and demonstrate its know-how in handling these often brand-critical responsibilities. For efficient communication and transparency regarding these topics, procurement professionals will need to work closely with both PR and marketing departments. Additionally, sophisticated monitoring systems will be needed to assess suppliers’ compliance and to understand legislative evolutions all around the world.

A special focus on suppliers located in developing/high-growth markets with unpredictable legislative environments is very important, and keeping up with a growing body of suppliers in these markets – many of which will require very specific audits – can be expected to be a major challenge. Moreover, the speed of change in these high-growth markets makes early warning systems pretty much ineffective and leaves supplier audits as the only feasible solution.

However, this approach will not be enough, as supplier relationship management (SRM) incorporates many CSR themes and, for first-tier suppliers, the danger often lurks at the margins of the supply chain. We know too that organizations will remain responsible for problems that appear anywhere in the chain, despite best efforts to eradicate danger. We also know that organizations with the most significant brand value and customer proximity are always to blame. CPOs must take on responsibility for compliance at all levels in the supply chain but they don’t have – and never will have – the capacity to keep track of them all. So how can it be possible to control and assess the compliance and performance of thousands of suppliers on a regular basis? What is certain is that it will be of paramount importance for procurement professionals to engage more and more in initiatives designed to cover entire markets by establishing binding standards. By 2024 we will almost certainly see leading procurement organizations in the role of lobbyist, lobbying governments and participating in the legislative effort to diminish risks that cannot be covered internally.

How should procurement organizations respond to this increased focus on CSR?

For those organizations working at the traditional end of the procurement spectrum, the achievers:

  • They should be closely monitoring the CSR-related aspects of SRM and the development of adequate risk mitigation stratagem. This is a must-do. Furthermore, the supply base and value chain must be re-evaluated and aligned with the organization’s CSR policy in order to seize competitive advantage opportunities emerging from developing supply markets.

  • They should also consider looking at critical suppliers beyond tier one in an effort to understand the full depth of supply. CSR has to become part of the daily routine of both category managers and strategic buyers. SRM has to provide criteria and methods to facilitate theintegration of CSR in supplier qualification, approval and evaluation.

  • For organizations procuring in Asia-Pacific, keeping track of regulatory changes will be key.[4] This will require both efficient warning systems (knowledge transfer, escalation systems and defined reaction planning) as well as close relationships with suppliers.

  • At the next level of maturity, that of the value-adding procurement organization, supplier development with a specific focus on CSR will be of paramount importance. Suppliers must be classified in terms of levels of (CSR) risks. Supplier development activity might simply be target setting or actively helping suppliers to reach the necessary levels of compliance to work in your supply chain. A high-performing or strategic supplier with difficulties in embracing CSR has to be supported, as losing them could be disastrous.

  • CSR in the procurement organization needs C-suite support. To create organization-wide transparency and uptake of CSR, procurement as a function must become part of corporate machinery with a place on the board regarding CSR issues and be fully involved in top management decisions. Optimization of environmental and social issues has to be designed in cross-functional processes, for example in optimizing waste management or carbon-reduction initiatives. Here, procurement has to go hand in hand with operations, linking suppliers’ manufacturing with the internal operations of the organization.

  • Finally, reporting has to include CSR-related KPIs so as to track procurement‘s achievements and value generation. Some examples include the percentage of spend covered by sustainability assessment, the percentage of suppliers with a potential sustainability risk, thepercentage of suppliers in high-risk countries, or of suppliers not complying with your organization’s code of conduct.

When we get to the top of the pile, amongst those procurement organizations seen as the practice leadersthe picture changes again. Here procurement has to:

  • Promote industry-wide approaches and standards across the whole supply chain.

  • Monitor the evolution of regulation and involvement in political decision-making processes. This is becoming crucial for leading global corporates.

  • Report on CSR topics in ways that must be both transparent and reliable – for internal and external audiences. This will enhance the organization’s competitive advantage, enhance its brand and position it as a reliable and responsible organization. Consumer awareness will be driven by recognized indices and certification – such as the Dow Jones Sustainability Index. Serious CSR activity requires real investment, which will have payback in the long run. Baselines in measuring procurement‘s success have to be adjusted accordingly when decisions and commitment in favour of CSR investment are made.

  • Finally, procurement has to contribute to carbon-reduction calculations across the supply chain, using support and external data from suppliers. In major supply markets, procurement needs local CSR (regulations) expertise and has to be in country and as close as possible to decision makers.

A global perspective on CSR

The CSR focus changes as we move around the globe. The United States considers itself as the ‘differentiator’ in all matters CSR and that it is they who will define tomorrow’s standards. Supplier Diversity has long been part of business in the United States encapsulated in law, and diversity and inclusion have long been part of the procurement role – the social inclusion aspect has an equal weighting in the United States to environmental considerations.

In Europe, and particularly the UK, sustainability – once considered a fad – is now taken very seriously. Europe leads the world in developing green supply chains. In the UK, legislation is being developed regarding this: the Carbon Bill, the Equalities Act and the Remedies Act will all impact directly on supply chains. Sustainability will drive innovation for smart organizations – via small and medium enterprise (SME) engagement or through green applications where there are advantages to be gained. Procurement here has to play a leading role in CSR activity. Procurement will be the external interface for CSR.

Finally, turning our focus to Asia-Pacific, we will see CSR but with a premium price tag. Their ability to become ‘green’ quickly will be limited by financial imperatives. SME engagement and other socially focused initiatives are being developed to drive internal consumption patterns and reduce dependence on exports. However, limited CSR awareness in a cost-driven environment today limits CSR potential via procurement, but this will change over time.

[1]Droege, P (2008) Urban Energy Transition: From fossil fuels to renewable power, Elsevier, Oxford.

[2]Rogers, P, Jalal, K F and Boyd, J A (2008) An Introduction to Sustainable Development, Earthscan, London.

[3]Fearne, A et al (2009) Sustainable value chain analysis: a case study of South Australian wine. A report prepared for the Government of South Australia, January.

[4]Asia-Pacific is the part of the world in or near the Western Pacific Ocean. The region varies in size depending on context, but it typically includes much of East Asia, Southeast Asia and Oceania.

Game changer no. 2: technological advances

The proliferation of innovation in recent years from the developing economies has seen a speeding up of innovation cycles globally and an increase in pressure to perform on businesses in the developed economies. The developing economies will make enormous investments in education and technological advances in order to close the gap between them and the developed economies. Today, developing economies have a significantly higher rate of year-on-year increases in innovative products and services than the developed economies.

The growth of research and development (R&D) expenditure and intellectual property (IP) filings in Asia-Pacific across all industries reflects a significant shift in where the new ideas are coming from. The old notion of ‘heads’ in the West and ‘hands’ in the East is rapidly fading. Developing economies will soon become the main destination for R&D activity and the global lead in innovation. China experienced very strong growth in the 2000s, closing the gap on the United States and Japan in patents ownership. It is significant too that IP violations and industrial espionage is widespread around the world, and protectionism is growing in significance. It is also important to recognize that, as productivity and innovations in materials and services grow, an eye needs to be kept on price increases and an understanding of the potential impact they might have.

Disruptive innovation will trigger new products and fundamental improvements in productivity and IT and data communication.[5] Internet applications play a vital role almost everywhere today, but there will be continuous developments in IT and communications and a similar growth in usage in all walks of life. Growing coverage and access to the internet across the globe will encourage greater use of social media and web. 2.0 applications in areas of the world that as yet do not use them. These social innovations will translate to business applications, enabling ease ofuse, standardization, as well as ERPs, information and communications technology (ICT) processes and so forth. As a consequence, the financial and economic impact of IT will increase and at the same time there will be higher demands placed on our ability to extract the important data from increased information flow.

Advances in technology will become increasingly tied to organizational success, especially in high-growth markets. The fact that many developing economies are not burdened with legacy systems means they can establish themselves with state-ofthe-art technologies, often developed by them and bypassing the turgid development cycles that have characterized the catch-up strategies in Western economies. It is not too bold to suggest that China is likely to dictate and lead in specifications of the future.

This situation will boost demand for innovative products – with the innovation often being derived from local sources hungry to satisfy the voracious appetite of developing economies, which in time will reach critical mass; given, too, the entrepreneurial spirit, and the indifference to high workloads prevalent in the developing economies, this furnace of innovation is stoked for the higher generation of ideas and greater developments. The established markets might still have the edge today, but over the next decade efficiency gains in the developing economies will catch up and eventually outstrip the West.

Finally, information and knowledge exchange will speed up and be facilitated by technological advances. Absolute transparency will become a must for complex organizations with the mantra ‘adapt or die’ becoming universal. Social networking, via communications channels yet to be defined, will enable the establishment of innovation networks far removed from the internal R&D activities of the organization, building on the growing phenomenon of open innovation.[6] This is likely to change the way that people work together; indeed new information and communication technologies are creating some of the biggest shifts in human behaviour and fundamentally changing the way we live, work and interact. Location is not a limitation; people are increasingly connected to the global network not because of their geographies, but in spite of them.

As all organizations strive to be more innovative, so the role of the procurement professional becomes more entwined in the creative activities associated with it. Depending on the depth of the organization’s value chain, procurement will become a significant player in securing a continuous flow of innovation. According to Holger Schiele at the University of Twente in the Netherlands, at the beginning of the 2000s more than 80 per cent of organizations depended on external partners in order to remain competitive – and this trend continues. Procurement‘s role will be to work with suppliers on the development of innovations via their relationships and to secure cooperation to bring the innovation from the supply market into the organization. This in turn can only work if procurement has strong ties between R&D, Sales and Operations and is brought in at an early stage of new projects. Procurement, for its part, needs people with new skills – a significant characteristic of the new supply professional is the extent and depth of his or her knowledge: they will become ‘students of their industry’. They will know everything of their supplymarkets – the science, economics, law and politics – on a global scale.

Procurement too will need to play a major role in promoting the organization’s image in the supply market. Lean organizations rely on innovative suppliers to compete in supply markets and it is becoming increasingly important to be the preferred customer of your key suppliers. As supplier cooperation is critical to develop successful innovation sourcing strategies, so traditional price-oriented and global-sourcing strategies are becoming less effective than innovation-oriented cost-saving strategies. Since the 1990s the move from closed to open innovation models has facilitated innovation-oriented cost-saving strategies and this innovation typically occurs between manufacturers and their suppliers. There is evidence too that the largest savings potential in the purchasing volume of a typical modern industrial firm stems from innovation-oriented strategies; early supplier involvement in new product development has become critical in increasing the impact of co-creation strategies.

To enable this, a tremendous amount of information in real time will have to be filtered through procurement and shared effectively across the organization. A category manager’s ability to network effectively will be as important as the processes developed within the organization to capture and analyse supplier relationships. This can be achieved through mechanisms such as virtual exchange networks, and software developers are increasingly enhancing social networking platforms into equivalent business applications.

How is procurement responding to advanced technologies?

For those organizations working at the traditional end of the procurement spectrum, the achievers:

  • They will need to take a leading role in bringing innovation from the supply market. Early involvement in projects is critical.

    Organizations need to reposition themselves to facilitate this via cross-functional working, with procurement developing its knowledge and understanding of internal customer requirements and operating as a networker and integrator.

  • A prerequisite for this evolution is an enhanced level of skills and competencies in procurement – which is an absolute necessity to develop credibility inside the organization. Procurement professionals need to become business savvy – professional; polished; intelligent; respected; influential; persuasive; visionary; strategic; sharp; global; collaborative.

  • The increased possibilities brought about by the technological developments will free up procurement professionals to focus on more strategic tasks – promoting these value-adding efficiency gains will be an important aspect of procurement‘s forward focus.

For the value-adders:

  • Market intelligence activities will need to be developed to ensure a clear view of innovative developments and activities in the organization’s supply markets, providing transparent and consistent information as well as a reduction in out-of-date information. The value added from this procurement-driven market intelligence will free up category managers to focus on core tasks and to develop relationships within the supply base.

  • Reverse marketing and the achievement of preferred customer status are critical activities for the future procurement professional. By developing preferred customer status, the procurement function needs to fully embrace the notion of reverse marketing and it needs to become part of the DNA of category management.

    Recommendations regarding this activity include:

    – put your best and brightest people on to joint NPD activity;

    – customize your products to the customer’s preference;

    – offer preferential treatment to the supplier if bottlenecks in production occur;

    – offer innovations first;

    – enter into exclusive agreements.

For those procurement organizations seen as the practice leaders:

  • They will develop dedicated resources to uncover innovations and will better manage their supply markets worldwide. These highly specialized procurement professionals will work closely with other functions in the organization to ensure optimal relationships to drive thevalue-adding opportunities offered by the supply market.

  • Buyer–supplier lines will blur – supply management professionals will look to extract more value from suppliers in coming years. But it won’t always be about improving processes. Rather, it will be about leveraging supplier resources and integrating supplier functions one-to-one with your own.

Dedicated technologies such as smartphones, tablets, embedded chips and other not-yet imagined devices will create a massively mobile work environment for procurement professionals and suppliers alike. As procurement and supplier communities collaborate, buyers and sellers will increasingly rely upon digital trading networks and communities that allow them to quickly and easily discover each other, connect and collaborate.

Procurement has spent the last decade looking backward, at money spent last year, supplier performance in the past week, month or quarter. The coming decade will bring information and models that look forward as procurement intelligence moves into context, with full visibility regarding spend, risk and performance available by 2020. Ready access to accurate, timely, structured internal and external business intelligence will create unprecedented capability to synthesize information in support of decision making.

A global perspective on technological advances

The United States leads the way in the application of social media applications for business and this is radically changing the way that business is done. The application and leverage of these tools will open up the opportunity to maximize the benefits to be derived from open innovation. Driving open innovation in terms of creating a new enabler role for procurement – one that maximizes the leadership aspects of world class procurement teams – is an imperative:

  • In Europe we are seeing the development of new technologies as possibly the most significant aspect of the trend; the threat of being surpassed by Eastern technologies is the stay-awake issue. Driving innovation via partnerships and collaboration will become the new normal.

  • Goodbye products, hello solutions – suppliers in this decade will continue to take on bigger chunks of things they already do for their customers. Think of it as ‘turbo-charged integrated supply‘, where suppliers step out of their comfort zones to drive customer performance.

  • Finally, the timing of customer–supplier collaboration will shift; today, suppliers may be asked to contribute ideas to existing designs or to help fix existing processes. By 2024 they will be more consistently in on the ground floor.

In Asia-Pacific, and specifically China the goal seems to be emulation of the US system with similar levels of success. Efficiency gains are their major challenge in global terms – giving procurement a strategic goal brings added value in terms of market expertise and innovation through close proximity to the supply base; and yet there is a difficult balance here between effectiveness set against their desire for efficiency.

[5]Christensen, C (1997) The Innovator’s Dilemma: When new technologies cause great firms to fail, Harvard Business School Press, Boston.

[6]Open innovation is a term promoted by Henry Chesbrough, in his book Open Innovation.

Game changer no. 3: globalization

Globalization has accelerated market interconnectedness, and fundamental market changes have spread between highly integrated markets as a result. Coping with international terrorism, tsunamis, sovereign-debt defaults, volatility of commodity prices and other crises are now a central feature of our increasingly complex business world. Risk management has become the recurrent theme of the decade; organizations need to react and adapt more quickly to developing market conditions and increase their ability to forecast changes. Changing supply market structures also need to be better understood and assimilated quickly.

Access to and availability of raw materials will become ever-more critical (see trend no. 1 above). Growing demand from markets with insatiable appetites for raw materials, such as China, are driving up prices, and since this is triggered (in China’s case) by state-owned enterprises (SOEs) utilizing sovereign wealth funds, these activities are impacting global markets and prices – for example Chinalco’s acquisition of the Toromocho mines in Peru in 2008. Governments will be pushed to the brink by deals like this, some to emulate them, others to cope with the fallout from them.

We are witnessing an evolution in the role that governments play in business, especially in the developing economies where they are prioritizing both national interests and local companies. But as protectionism is anticipated over the next several years in the light of this, in the longer term global free markets will rebalance, making the unrestricted circulation of goods and services a global reality. Derivatives too are creating an artificial scarcity – driven by speculation on the financial markets using raw materials as an alternative to financial investments – the volatility ofcommodity prices created by this activity and markets generally will increase as a consequence of the fact that demand is being artificially stimulated.

Then there is the ever-present spectre of peak oil, expected between now and 2050 to continue to impact markets and consequently prices.[7] Whilst there is no certainty regarding peak oil, or the consequences of it, this hypothetical event continues to send out ripples of uncertainty.

In the aftermath of the 2008 financial crisis and the uncertain economics of the eurozone today, it has become clear that the proximity of economies also quickens the pace of imbalances. Given the foregoing, we should be asking the following questions:

  • Were the supply chain woes from the earthquake in Japan in 2011 predictable?

  • Are we living beyond risk mitigation and living in a business world where risk must be weighed up on its probability and not our ability to avoid it?

  • Given the misapplication of lean, do we need to think about risk and rational, regional, practical supply chains?

Furthermore, growing political activism has to be anticipated as times get tougher and competition accelerates. On the one hand, increasingly rare resources will be used as a political as well as an economic weapon; and on the other, in the race to make the most effective economic and technological advances market leaders will look for sovereign wealth funds to ensure their position. Protectionism seems the likely outcome of all this, but we are not seeing it. This kind of political activism leads to instability, primarily in non-democratic high-growth economies such as China where decisions can be taken instantly, leaving little reaction time for businesses caught up in it.

The challenge for procurement is quite clear. It must adapt to these changes through a solid risk-and-event-management approach, recognizing how changes in political and macroeconomic environments impact their ability to assure supply:

  • Risk management needs to become more proactive, linking a deep understanding of the organization’s value chain with its knowledge of its supply markets. Moreover, procurement needs to develop intelligence regarding alternatives in terms of suppliers, materials and geographical sources.

  • Security of supply is and will remain the number one critical role for the procurement function. As raw material shortages grow, the strategic role of procurement professionals will come to the fore. These procurement people will need to be able to develop the right relationships with suppliers and understand how, for example, to use financial instruments to hedge risk. Understanding the political environments of their suppliers’ countries will increase too, as conflicts of interest become an increasing barrier to trade.

  • Finally, procurement professionals will have to manage reputational risk relating to the tiers of their supply chains. These risks, alluded to in trend no. 1 above in relation to CSR, have to be managed by the proximity of the buyer to the supplier through close relationships – it will depend too on the impact of procurement on policy making and setting and the development of mandated industry standards.

How is procurement responding to globalization?

For achievers:

  • Risk management has to become far more focused than it is today, working more closely with the corporate risk unit and across other business units so as to understand all risks and adopting an holistic approach for assessing the impact of supply risks for the organization as a whole. Furthermore, the scope of analysed risk has to be extended to include not only financial and operational risk but also strategic and environmental ones.

  • The mindset of procurement towards its role in managing risk should be one where everyone wakes up to increased supply risk. Converging trends will make supply relationships even riskier as the decade progresses and research recently commissioned by CIPS anticipates big increases in companies’ awareness around supply risk and also an expansion in their perceptions of where risk lies.

  • Risk information must improve dramatically, as the general awakening around supply-related risk demands a far sharper focus on it. We will see consensus develop around how to measure risk, as more standardized and readily available third-party information and networked communities develop, where people pool data for operational risk assessment.

  • Risk mitigation has to be measured consistently by a set of appropriate KPIs that are integrated in the overall procurement approach to monitoring and managing risk. All these measures should result in a more consistent selection of suppliers and a redefinition of supplystrategies with consideration given to a number of risk scenarios.

The procurement organizations that see themselves as value-adders are:

  • Increasingly developing cross-functional risk assessment protocols and the production of meaningful corporately aligned management information, leveraged through knowledge management activity and tools that will deliver a comprehensive risk evaluation capability within the organization. Not just for procurement.

  • Using scenario techniques and/or Monte Carlo simulations in critical categories that will begin to deliver strategic options and flexibility for the business.[8]

The leaders will:

  • Develop close relationships with the politicos and other decision makers connected with the supply markets they operate in. This typically only applies to organizations that have an extended global footprint. In such circumstances the goal will be to be accepted as a ‘local’ brand. This strategy needs to be developed over a long period and requires consistent and reliable location policies, investment in ‘in-country’ operations with access to senior positions by local employees.

Observations on globalization

The United States it seems has taken to a policy of ‘choose your friends carefully’. Government connections will be critical but also extremely sensitive. Rigorous risk management with an acute business perspective is fast becoming an imperative. Cross-functional and fully integrated risk management approaches via SRM are becoming critical for business in the United States.

In Europe, procurement becomes the lobbying arm of the organization in a battle to avoid the spectre of protectionism. Lobbying will become a critical part of any risk management strategy – with an eye to regulation and developing influence. Risk management must become an integrated function in all smart organizations.

In Asia-Pacific there is a move away from ‘annularity’ as one-year budget cycles become irrelevant. Scenario planning and contingency planning from one country (in the Asia-Pacific region) in the short term become a must. Procurement has to anticipate shifts in supply chain function and capability to ensure supply.

[7]First created by M King Hubbert in 1956, peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.

[8]The Monte Carlo method (established in the 1940s by John von Neumann, Stanislaw Ulam and Nicholas Metropoli) are a class of computational algorithms that rely on repeated random sampling to compute their results.

Game changer no. 4: demographic changes

As baby boomers head towards retirement, and birth rates decline globally, the available talent pool is shrinking; traditional barriers to employment such as age and gender are being reconsidered. Geographical disparities in fertility rates will create imbalances across countries in available labour, with India having the highest potential surplus in working-age population, as will Pakistan, Bangladesh, Indonesia, Mexico and Brazil. The United States and Europe (both with declining birth rates), and China (as a consequence of its one child policy), will suffer the greatest deficits.

Recruitment and talent management and retention are fast becoming the greatest challenges for Western businesses. All organizations now face increased competition for the best and the brightest people from businesses in the developing economies. Entry into and retention of women in the workplace is being seen as one of the immediate solutions to the talent issue.[9]

As the mobility of talent becomes ever more fluid, Western Europe will no longer attract the best and the brightest as it did for so long. Whilst it is still an attractive destination for workers from the United States, Australasia and Eastern Europe; it is Southeast Asia, Brazil and Africa that are snapping up knowledge workers from the developed economies.[10]

The availability and mobility of human resources will radically change by 2020. Whilst availability will move from the developed to the developing economies, overall mobility will decrease; young and skilled people will become less mobile, even in regional contexts, and people will be more likely to remain where their personal ties are strongest. That said, the unskilled will join an exodus to the Middle East or China, where the crane-dominated skylines are throwing up cities and skyscrapers while we stand and watch.

Availability of skilled talent is likely to come from India: with its overcapacity and the fact that it produces more university graduates than anywhere else in the world it could become the most attractive talent exporter on the face of the globe. It is the sheer size of India’s surplus and the fact that they are English-speaking that is the non-negotiable competitive advantage for India’s workforce. However, India and China will still lag in terms of average years of education in comparison to the global top three – Germany, the United States and Korea.[11] One final point, in theMiddle East we are witnessing ‘youth bulges’ driving huge sociopolitical change – think the recent Arab Spring – and a very demanding new workforce looking for employment.

The single biggest issue is the demographic time bomb; whilst mobility will be enhanced by technological developments and we are seeing a softening of cultural differences, the increasing sedentary nature of society means that people will stay put, and this only lends itself to an upsurge in the war for talent. In effect, talented people will increasingly have their personal needs met by employers who fight to attract the best. This leaves behind the long tail of the less talented and less educated, who in turn will have to move further and further in search of better education and/or remuneration. Here we will see increasing flows of the workforce between the high-growth markets and the next emerging countries/economies. We are currently witnessing unprecedented migrations of workers between India and boom-time UAE, and between China and African countries.

For global organizations these evolving patterns of migration will pose real challenges. Attracting and retaining skilled workers will be more difficult than ever. In adapting to these changes organizations will have to develop new models allowing individual time planning and extended work–life balance in Western economies; whilst in Asia employers will be dealing with an expectation of regular promotion, salary increases and rapid personal growth through adapted or fragmented hierarchical structures.

At the same time, global corporates will have to find the right balance between local presence and international direction in order to remain attractive to a workforce that increasingly demands to be employed by a ‘local’ organization. As seniority with delegated responsibility moves to high-growth markets, confidence in and the loyalty of local management will be critical to success.

The consequence of this is that issues such as diversity and social and economic inclusion will gain in importance. The United States and Republic of South Africa (RSA) have long been aware of these issues – due to their respective legacies of segregation and apartheid. In Europe, and to a lesser extent Asia, these issues are becoming very high on both political and business agendas. As relationships play such a critical role in modern business, and especially in procurement, diversity is becoming an essential facet of the function.

The challenges outlined above regarding demographic change will have to be faced by all organizations over the next decade. More importantly, procurement professionals will be impacted more than any other business function. Whilst procurement professionals are dashing around theglobe in search of the most reliable, cost-efficient, innovative and value-adding suppliers, they are often the first movers in markets where the organization is not equally active on the sales side. Having a global presence requires a deep understanding of local custom and practice – so therapport between the buyer and the supplier is paramount. A diverse procurement team is a must.

With the shift in the economic centre of gravity from West to East, it follows that procurement organizations will move too. In the coming decades, the Asian consumer market will grow to become much larger than the combined consumer markets of the United States and Europe. Thebest-practice supply chain solutions of the West will be transferred to Asia, while new supply chain solutions unique to Asia will also be developed locally and successfully deployed.[12] Businesses will need to attract and retain a workforce despite not having the ‘local’ tag, and be able to demonstrate that there will be equal opportunities for their new recruits, allowing them to reach middle- and top-management positions.

Procurement‘s role is also likely to increase in complexity as the function evolves – procurement professionals will need to be technically savvy, internal networkers, supply-base developers and innovation magnates – the future procurement professional will need to be so much more than a buyer. Knowledge of the end-to-end supply chain, the ability to address internal customer needs and an authority on the intricacies of the supply market will become de rigueur.

Category management will also demand a new breed – an entrepreneurial approach with strong leadership skills will be the fundamentals. The sourcing-geek’s days are numbered; whilst they may be highly valued in today’s marketplace, people who excel at (sourcing) processes or at being big-time users of procurement and sourcing automation technologies – the ‘doers’ will find themselves working for third-party service providers, or not at all! The enablers – value-adders – will rule!

Procurement‘s strategy scope must widen. Much has been achieved in the past decade to transform procurement from tactical to strategic. But the idea of ‘strategic’ remains to some extent hemmed inside the function, the process or the spend category. With a cultured understanding ofthe (strategic) value-adding capability of procurement – the meaning of strategic is going to get much bigger. If procurement as a career is to become more attractive, it needs to both answer the challenges set by these global mega trends and those set by its evolution from ‘doer’ to ‘enabler’.

Finally, procurement needs to attract the best from the millennials,[13] Generation Y and increasingly Generation Z, who as they scramble for money and status, and go in search of jobs, will bring a different set of priorities to the generation who went before them. They care less about salaries, and more about flexible working, time to travel and a better work–life balance. And employers will have to meet their demands. As well as working with and employing a different generational cohort, procurement will need to fundamentally change the way it works and is perceived. Be it through adapted job rotation schemes, where to some extent strategic business units (SBUs) absorb procurement or where the future brings a loose network rather than a tight function. A world of supplier-facing professionals needs to be embedded into strategic business lines, communities and processes wherever needed, constantly moving and reinventing their roles as needs shift.

How is procurement responding to these demographic shifts?

For the achievers:

  • The procurement revolution has made it a much more attractive career of choice. Career paths can be developed around procurement and supply management (P&SM); the scope and complexity offered by the modern P&SM role demands a broader skill set and differentiated competencies ranging from technical, category specific, financial and legal to name but a few. On the ‘soft (social) skills’ side, procurement professionals need to be culturally aware, collaborative and innovative, with leadership skills and the ability to work across functional boundaries.

For the value-adding procurement professional:

  • There is an immediate need to raise their internal profile and build credibility by promoting – but not selling – procurement. They need to become internal brokers of value, reflecting the scope and nature of the modern role they fulfil.

  • Leadership programmes should be developed to meet the new skills requirements of these business-savvy procurement professionals: polished, intelligent, respected, influential, persuasive, visionary, strategic, sharp, global and collaborative executives.

  • Job rotation is absolutely necessary to attract skilled individuals who will bring all the necessary language and capability to move across functional boundaries and be able to integrate with colleagues in other business units. Procurement should work closely with HR professionals to develop the best and brightest and place them on to high-potential career paths.

As for the leaders:

  • A decreasing trend in mobility and the increasing need for specific skills will be supported by the advent of virtual offices. This in itself might well increase the attractiveness of non-traditional workplaces. Virtual offices are an excellent means of reflecting the bottom-line impact of an improvement in work–life balance.

  • Due to the different challenges in attracting and retaining people, differentiated strategies for retention (eg awards/promotion) and recruitment have to be developed, based on defined career path prospects and personalized working-time models. Employees should have more flexibility and freedom of choice on how, when and from where they will be working. The organization has to give its employees time for their own ideas and for developing their own input into the organization’s development.

New office concepts are redesigning the office space to create comfort zones to compensate for the stress, monotony and lack of options in day-to-day business. Avant-garde work spaces, bringing family life to the fore during evening hours and moving people into homeworking: the way we are working will continue to evolve around putting the employee at the centre of the equation.

A global perspective on demographic changes

In the United States, diversity and social and economic inclusion sit at the heart of HR and procurement people strategies. Talent shortages will rise by 2024. As diversity programmes develop, and procurement becomes ever more complex, skills and competency mixes will develop alongside them.

In both mainland Europe and the UK diversity and social and economic inclusion are growing issues, both in employment and the supply base. Procurement has to develop its reputation and strategic impact within the organization. Cross-functional working, supported by placements and rotation, will become the norm.

In China and Asia-Pacific, performance is king! Diversity is not explicitly on the agenda but social and economic inclusion is. As China builds internal consumption patterns, talent must ‘stay at home’ and talent retention will be critical to maintain performance. Corruption will remain a challenge. Career paths and the development of local leadership talent in procurement is critical – regular promotion amongst the best and brightest is also a critical component in this region.

[9]McKinsey Quarterly (2011) How women can contribute more to the US economy, McKinsey Quarterly, April.

[10]Knowledge workers in today’s workforce are individuals who are valued for their ability to act and communicate with knowledge within a specific subject area. The phrase was first coined by Peter Drucker in 1966.

[11]OECD, Deutsche Bank.

[12]Paul W Bradley, Asian Supply Chain Manager of the Year, Lloyds FTB Publications in 2004.

[13]Millennials (also known as the millennial generation or Generation Y) are the demographic cohort following Generation X. There are no precise dates when the generation starts and ends. Researchers and commentators use birth years ranging from the early 1980s to the early 2000s.

Game changer no. 5: the shift in the global economic centre of gravity

Demand for the product of traditional industries is increasingly shifting to developing economies, while demand for new products adapted to service an ageing population is dramatically increasing in Western economies. The developing economies – the high-growth markets predominantly in the East – will continue to drive economic growth. Economic power and the centre of gravity is shifting away from the West and re-establishing itself in the Asia-Pacific rim. In addition to this shift in the centre of economic gravity, today’s low-cost economies such as China will cease to have the now well-accepted advantage of low labour cost. Whilst Chinese labour costs are rising and will continue to rise, they are still some way behind those of the developed economies. In China the average annual salary is around £3,000 per annum and in the UK around £25,000. That said, Chinese labour costs will grow by 2020 and labour costs in other BRIC countries – particularly Brazil – are already on a par with Eastern Europe.[14] The question here is – considering globalization, increased logistics costs, increasing levels of risk and rising labour costs – whether now is the time for a serious reconsideration of the status quo.

Where should future global sourcing benefits come from given the foregoing? Will we soon be looking at something aligned to ’embedded procurement‘? That is, establishing procurement teams locally, making them agile and in touch with what is happening in the particular region; and at the same time maintaining a focus on the limitations of global sourcing.

Europe, the United States and Japan will continue to have slow GDP growth and China is predicted to become the second biggest economy by 2020. India too will continue to experience high growth; Brazil will grow dynamically with a focus on its massive resource in raw materials, its engineering base and the potential for renewables such as biofuels; and Russia’s growth will centre particularly on raw materials’ export and energy.

The rapid growth too of middle-class consumers in the developing economies, such as but not limited to the BRIC countries, will spawn a new generation of globally competitive companies to cater for the needs of these consumers, and will be a critical measure for innovation and a launch pad for new consumer products. By 2034 the global middle class will expand by something in the region of three billion people, principally in developing economies, and will be a springboard for growth for the next 30 or so years. This is because the emerging middle classes around theworld will follow Western expenditure and consumption patterns, centring in the fast-developing urbanizations in India and China, with more than 50 per cent of the world’s population living in these megacities.

Economic growth and opportunities will be concentrated in the urban areas and this will trigger increasing business opportunities arising from the development and growth of these megacities – principally involving building materials, sanitation, water treatment and green technologies. Leveraging this potential requires massive local investment, and doubtless global corporates will want to position themselves as part of this local growth if they want to be part of this unfolding market opportunity.

This shift in the economic centre of gravity will profoundly change the global business environment by 2020. Markets in the Asia-Pacific rim and South America are experiencing phenomenal growth and will continue to do so, following a similar trajectory to that experienced in recent years, buoyed by the anticipated exponential rise in consumption as millions join the middle classes in those economies.

Markets, described by Jim O’Neill as ‘the Next 11′ (N-11),[15] which are currently viewed as global ‘extended workbenches’,[16] will grow out of this role to become innovation sources in their own right and, as a consequence, the low-cost advantage once obtained through this trend will facilitate the move to still less developed economies. It is no secret that, in anticipation of this, many global corporates and some of the businesses from the high-growth economies are already investing heavily in the N-11 countries, anticipating the soon-to-be-gained advantages. China in particular is investing hugely in Africa. An adjunct to this change too is that European and US businesses will (as alluded to above) become increasingly dependent on growth outside of their national boundaries. This shift in the global centre of gravity will be the major challenge to business in the very near future.

The emerging middle classes in Asia and South America will have the aspiration for a ‘Western’ lifestyle but with their own very particular cultural and individual tastes. This will bring with it more complexity and a need for many businesses to re-evaluate and, in many cases, overhaul their product portfolios to service this new demand. One particularly interesting phenomenon is that of the increasing number of DINKs in China.[17] These households drive the dynamics of the market trends described above and are defining today what the standard in China is likely to be over the coming years.

To fully understand and be able to benefit from these trends and developing needs, a strong regional presence will become a must. Most global corporates will have to shift their mindset from the classic multinational corporate (MNC) mindset to a network mindset. Management will still be global, but regional activity and foci will be driven by their knowledge of contingent consumer markets.

Procurement has become one of the most important functions enabling cost-effective international growth for MNCs, as the markets they exploit are low-cost sources prior to their developments into sales markets – smart procurement professionals are active in these markets long before sales or marketing executives are even interested in them. Therefore, procurement will often hold deep business intelligence regarding them. As such, the challenge will be to couple the knowledge developed by P&SM with emerging consumer intelligence to develop a more complete vision of the needs of the market. The focus for procurement is to be seen as the enabler – the ‘go-to’ source – and to develop intelligence through cross-functional collaborative working.

It is well documented that supplier markets in high-growth economies are far more fractured and in many cases more dynamic than those in the West. As a consequence, procurement must closely monitor the supply market conditions in order to identify those suppliers that are willing to peruse ‘downstream’ integration strategies and potentially become competitors. The exchange of intelligence with these suppliers has to be carried out in such a fashion that intellectual property rights are not compromised.

There is absolutely no doubt that complexity in P&SM will increase as these supply markets grow and develop. It will be critical for P&SM to develop network approaches to their activities, fostering flexible management intelligence and decision-making regimens. To meet the needs ofinternal stakeholders a differentiated business model has to be adopted – so different approaches might be taken in-country to meet the needs of the local market as opposed to those applied to meet the needs of, for example, an export market, even if both business units ultimately deliver to the same SBU. In addition, P&SM’s role will grow further as the need to be seen as a ‘local’ player becomes a prerequisite for collaboration with suppliers.

How is procurement responding to this shift in economic power?

For the achiever procurement organization, a ‘local presence’ is critical in high-growth markets and the development by the function of local procurement capability to meet this need is a given. The scope of local sourcing capability will depend on the perceived needs of the internal stakeholder and will be predicated on the demands of local customers. Probably the most effective way of meeting this need would be to establish an office with the capacity for expansion at a later date and to which decision-making authority can easily be delegated.

For the value-adder, local knowledge and intelligence capability is critical in high-growth markets – these functions need to be populated with teams with an explicit focus on the development of new business in the regions identified as ripe for exploitation. Here proximity to local suppliers, customers and decision makers is paramount.

Amongst the most forward-looking procurement organizations outsourcing will explode – many current procurement and sourcing activities, the ones that do not get redistributed to internal end users of goods and services, as mentioned above, will be outsourced by the end of the decade. And increasingly service providers will call the shots. With fast-growing demand for procurement outsourcing, both the quantity and quality of third-party procurement services will increase dramatically; their performance in many spend categories will surpass what can be achieved by an in-house equivalent.

The leaders are increasingly moving their procurement organizations into the growth markets, devolving into networks to bridge cultural gaps and develop competitive advantage through proximity to the supply base. This will require full integration with the internal organization of thebusiness unit.

A global market intelligence capability within procurement to identify the hotspots will define investment decisions and focus new market development activity based on their prior knowledge of the supply market in the region.

A global perspective on the economic power shift

In the United States the shift in the economic centre of gravity to Asia has had a profound effect on its position in the world today. New organizational and business models, which can accommodate centralization set against the regional disparities, will be the major challenge. Procurementmust establish itself centre stage as the monitor of shifting activity from home to offshore markets – only move if you absolutely have to.

Across Europe the maxim has become ‘think global, act local’. What will be critical for success will be the ability of organizations to move from an ‘HQ’ mindset to a networked one – with the capability of developing a sustainable local brand in the high-growth markets. There are strong indications that to be successful procurement will have to decamp overseas to where the action is.

For the whole of the Asia-Pacific, market growth is set to continue. Close identification of the new market opportunities is critical as is, from the Asian perspective, developing knowledge of the complex legal requirements of export markets. Procurement has to vision where the emerging markets will develop next.

As organizations expand their global reach, more and more companies will need to consider how to engage suppliers and drive these types of relationships. One company that has learned quickly how to do so (as well as Honda) is Toyota. The case study that follows provides insights into how they structured supplier councils as a way to engage and work with suppliers not just in Japan, but all over the world, and harness their ideas and innovations.

[14]O’Neill, J (2001) Building better global economic BRICs, Goldman Sachs Global Economics Paper, No 153, 28 March 2007. BRIC, an acronym coined by Jim O’Neill, refers to Brazil, Russia, India and China, which are all deemed to be at a similar stage of newly advanced economic development.

[15]O’Neill, J (2001) Building better global economic BRICs. The ‘Next 11’ – Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam – are described by Jim O’Neill to be the follow-on from the BRIC economies.

[16]Maurer, J (2011) Relationships between foreign subsidiaries, DOI 10.1007/978–3-8349–6249–2_2, Gabler Verlag | Springer Fachmedien Wiesbaden GmbH. The term describes ‘in-country’ subsidiaries or local industry performing as extended workbenches to their corporate activities.

[17]DINK is used to describe high-earning couples who do not have children and are therefore able to afford a more expensive consumer lifestyle than those with families.

[18]Paul, D et al (1998) Case study: a leveraged learning network, Sloan Management Review, Summer.

[19]Kamath, R and Liker, J (1994) A second look at Japanese product development, Harvard Business Review, November–December.

[20]Paul, D et al (1998) Case study: a leveraged learning network.

[21]Paul, D et al (1998) Case study: a leveraged learning network.

[22]Kotabe, M and Swan, K (1995) The role of strategic alliance in high-technology new product development, Strategic Management Journal, November.

[23]Miles, R and Snow, C (1992) Causes of failure in network organizations, California Management Review, Summer.

[24]Paul, D et al (1998) Case study: a leveraged learning network.

[25]Paul, D et al (1998) Case study: a leveraged learning network.

Some conclusions

In this chapter we have seen how procurement is increasingly gaining control over its main purpose – the procurement of goods and services for the organization. However, in this modern era, procurement professionals are facing a variety of broader challenges. All organizations are rapidly investing in new technologies to meet the challenges of procurement in the contemporary, global marketplace; however, procurement often lacks the skills required to take full advantage of these tools and circumstances.

As scrutiny of organizations’ environmental and ethical practices increases, there is also a requirement for procurement to understand the implications of its corporate responsibility and sustainability within the supply chain. Efforts to make a bigger contribution to corporate strategy continue, but sometimes at the cost of misunderstandings between the profession and the rest of the business. And yet procurement has much expertise to offer, which can provide substantial financial benefits. Convincing colleagues across the business of this, and aligning not just goals but thinking about where the profession can – and cannot – add value, is potentially the biggest challenge in the years ahead.

That said, the only certain thing about the future is increased volatility and the consequential uncertainty it brings. But this is no reason for not trying to anticipate what may happen, or for not trying to shape developments for the better. It is true to say that the only way to predict the future is by helping to shape it.

Notes

  1. Droege, P (2008) Urban Energy Transition: From fossil fuels to renewable power, Elsevier, Oxford.

  2. Rogers, P, Jalal, K F and Boyd, J A (2008) An Introduction to Sustainable Development, Earthscan, London.

  3. Fearne, A et al (2009) Sustainable value chain analysis: a case study of South Australian wine. A report prepared for the Government of South Australia, January.

  4. Asia-Pacific is the part of the world in or near the Western Pacific Ocean. The region varies in size depending on context, but it typically includes much of East Asia, Southeast Asia and Oceania.

  5. Christensen, C (1997) The Innovator’s Dilemma: When new technologies cause great firms to fail, Harvard Business School Press, Boston.

  6. Open innovation is a term promoted by Henry Chesbrough, in his book Open Innovation.

  7. First created by M King Hubbert in 1956, peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.

  8. The Monte Carlo method (established in the 1940s by John von Neumann, Stanislaw Ulam and Nicholas Metropoli) are a class of computational algorithms that rely on repeated random sampling to compute their results.

  9. McKinsey Quarterly (2011) How women can contribute more to the US economy, McKinsey Quarterly, April.

  10. Knowledge workers in today’s workforce are individuals who are valued for their ability to act and communicate with knowledge within a specific subject area. The phrase was first coined by Peter Drucker in 1966.

  11. OECD, Deutsche Bank.

  12. Paul W Bradley, Asian Supply Chain Manager of the Year, Lloyds FTB Publications in 2004.

  13. Millennials (also known as the millennial generation or Generation Y) are the demographic cohort following Generation X. There are no precise dates when the generation starts and ends. Researchers and commentators use birth years ranging from the early 1980s to theearly 2000s.

  14. O’Neill, J (2001) Building better global economic BRICs, Goldman Sachs Global Economics Paper, No 153, 28 March 2007. BRIC, an acronym coined by Jim O’Neill, refers to Brazil, Russia, India and China, which are all deemed to be at a similar stage of newly advanced economic development.

  15. O’Neill, J (2001) Building better global economic BRICs. The ‘Next 11’ – Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam – are described by Jim O’Neill to be the follow-on from the BRIC economies.

  16. Maurer, J (2011) Relationships between foreign subsidiaries, DOI 10.1007/978–3-8349–6249–2_2, Gabler Verlag | Springer Fachmedien Wiesbaden GmbH. The term describes ‘in-country’ subsidiaries or local industry performing as extended workbenches to their corporate activities.

  17. DINK is used to describe high-earning couples who do not have children and are therefore able to afford a more expensive consumer lifestyle than those with families.

  18. Paul, D et al (1998) Case study: a leveraged learning network, Sloan Management Review, Summer.

  19. Kamath, R and Liker, J (1994) A second look at Japanese product development, Harvard Business Review, November–December.

  20. Paul, D et al (1998) Case study: a leveraged learning network.

  21. Paul, D et al (1998) Case study: a leveraged learning network.

  22. Kotabe, M and Swan, K (1995) The role of strategic alliance in high-technology new product development, Strategic Management Journal, November.

  23. Miles, R and Snow, C (1992) Causes of failure in network organizations, California Management Review, Summer.

  24. Paul, D et al (1998) Case study: a leveraged learning network.

  25. Paul, D et al (1998) Case study: a leveraged learning network.