Procurement as Strategy
In 2004, just days after Greece unexpectedly won the European Soccer Championship,
Adidas delivered more than 145,000 Greece team jerseys across markets in Europe.
Smart marketing , right? Without a doubt. But perhaps even more impressive were
Adidas’s global procurement efforts: Thanks to a centralized supply chain coordinated
with its country-based sales subsidiaries, the company created just-in-time product not
only for the championship team but also for the other national teams as they advanced
through the series. To round out the success, Adidas’s flexible supply chain strategy
delivered these sales at very low risk, avoiding any significant investment in materials or
finished product.
Procurement coups like this are helping to elevate supply management from an
operational function to an integral part of company strategy. In fact, in a recent survey of
156 procurement executives that was conducted with, more than 90% said that their job
responsibilities had expanded in the past three years. These new duties included
shortening cycle times, taking the lead in product innovation, enhancing the quality of
products or business outcomes, and even, as in the case of Adidas, generating
incremental revenue via close collaboration with sales.
Consider how supply management has become strategic at Boeing. In developing its
787 Dreamliner, Boeing has expanded the role of procurement from outsourcing parts to
outsourcing entire subsections. Nearly all of the new jet’s design and fabrication, along
with some 40% of the estimated $8 billion in development costs, is being outsourced to
subcontractors. Mitsubishi is making the 787’s wings, Messier-Dowty is making the
landing gear, and Latecoere is creating the doors. Says James Renaud, Boeing’s
director of development operations, “The subcontractors are responsible for end-to-end
design, and what we provide is integration [in project management and assembly].” As
little as five years ago, such a pivotal role for procurement seemed remote.
At the Clorox Company, many new products are developed in conjunction with supply
partners. When the company wanted to develop a line of surface-protecting cleaning
products, it partnered with specialty chemical companies to develop products that could
protect surfaces as sensitive as Teflon.
Clorox is a leader in a movement by manufacturers to expand their supplier universe in
search of innovation. They are asking savvy procurement organizations to identify
suppliers with new or different capabilities, which in turn can spur initiatives for
innovation in a variety of forms. For example, when the division of one health-product
maker sought a different way to market a new sweetener, the procurement organization
went out and found the right marketing agencies to help expand the product’s reach
beyond an initial target of diabetics to include an expanding market of food and
beverage makers and even fast-food restaurants.
Henkel Group is another supplier acting as an innovation agent for its manufacturer
customers. Henkel runs units that provide adhesives, gaskets, and other bonding
materials to auto and appliance manufacturers. Procurement teams from the appliance
manufacturers frequently call on Henkel engineers to tear down new appliances in
search of ways to save costs in assembly. In one such session, Henkel found 14 ways to
