During a question and answer session at a recent industry conference, a home builder asked Moody’s Analytics chief economist Mark Zandi for his thoughts about the labor
Redefining Purchasing: Supply Chain Management Leaders
Talent is scarce, but an outside-the-industry perspective on your supply chain could yield the right business results.
Pulte Homes' CLO/National Vice President Supply Chain/Purchasing Reggie McCoy draws on experiences with the U.S. Army, Walt Disney and Wal-Mart in reshaping the GIANT builder's purchasing strategy.
From consumer-goods companies to healthcare organizations, nearly all industries are reexamining their supply chains. Their objective? To gain a strategic edge and cost advantage in a highly competitive marketplace.
Home builders are no exception to this business trend, but the is just beginning to address the issue of supply chain management. Fearing the their bubble of prosperity may burst, home builders are carefully looking at ways to save costs while adding to the bottom line. But given the traditionally decentralized nature of the business, it has been difficult to create efficiencies in the supply chain.
The management teams of best-in-class supply chain companies are telling us that leaders who are able to supply the entire organization in a more efficient manner are at a premium. Because the supply chain encompasses everything from distribution, transportation and inventory management to operations and the end-customer experience, these leaders need to consider the implications from end-to-end.
For nearly 50 years, we at SpencerStuart have studied what it means to be an exceptional leader. As a result of our work, both in the home building industry and across the supply chain function, we understand the type of talent needed to help home builders achieve this competitive advantage. A strong "blueprint" would include the following competencies:
Strong leader: No longer merely a behind-the-scenes role relegated to managing inventory, today's supply chain leader is front-and-center within the organization. People-management skills are critical for the executive responsible for overseeing a complex and scattered function.
The decentralized nature of the supply chain requires a great team builder and influencer - someone who can manage and inspire people who do not necessarily report directly to him or her. With the drive to achieve more supply chain transparency, executives need to forge strong relationships both internally and externally. This requires an exceptional communicator, motivator, collaborator and delegator.
Given the intricacy of managing across a decentralized organization, success or failure often is determined by the supply chain executive's ability to be an excellent leader as well as a good manager. The importance of leadership has increased greatly over the past few years. Prior, companies were looking for functional depth only. As more attention is paid to the supply chain, organizations see the value of hiring business-minded people who can engage, excite and inspire the team.
Negotiator: Success in the home building industry can hinge on the effectiveness of relationships with key external vendors - if the quality of materials is substandard or if they do not arrive at the site on schedule, it could be a disaster. Because supply chain sits in the center of a lot of activity that occurs outside of the organization, executives need to build sustainable and collaborative interpersonal relationships with all partners and third-party vendors.
Despite some outsourcing concerns regarding the loss of control or the risks related to choosing the wrong supplier, most of which can be managed, alliance and vendor management is critical for any supply chain leader. Executives with strong customer-interfacing capabilities and the ability to understand the nuances of complex alliance management can add a great deal to an organization. Not only does the function require someone who is able to influence others and create positive working relationships with their external providers, but also someone who is skilled at the art of negotiation.
U.S. Army: aviation engineering and logistics. Specialization in logistical concepts and design.
Lessons Learned: "How to look at an organizational structure and understand what needs to be there to deliver on a plan."
Walt Disney Co.: logistics management and strategic purchasing
Lessons Learned: "An unyielding corporate focus around the customer and exceeding expectations. Sometimes when you just meet expectations, you risk losing a customer because a lot of companies can meet expectations. However, when you consistently exceed their expectations, you keep that customer for life. You truly get only one shot at this."
Wal-Mart: managed high-velocity distribution network for the southeast operations.
Lessons Learned: "It's all about simplicity and velocity. The company's vision is very clear and they communicate it throughout the organization. The logistical function is the key cog that drives their velocity so everything is focused there. Wal-Mart has been able to leverage their speed and understands the proposition of bringing value to the customer."
Business mindset: Given the evolution of the supply chain function, home building companies require someone who can manage the entire supply chain - from manufacturing and logistics to alliance management and profit-and-loss statements. This requires an executive with a record of operational excellence; someone who has a big-picture perspective, but who can also manage the details to drive performance.
In the recent past, the supply chain professional possessed a functionally oriented perspective. Today, this individual must not only understand, but advocate, a horizontal business perspective if he or she hopes to get the most value out of the supply chain.
The successful executive also must have a breadth of general business experience, including buying, planning, construction and delivering. This requires that home builders look beyond executives who have done more than just purchasing. Today's talent needs to understand all aspects of the business and possess an analytical mind, in order to understand both the cost-saving and value-added implications of doing business. This often requires that supply chain executives have cross-functional experience in manufacturing, warehousing, purchasing and finance.
Strategic thinker: As the home building industry grows and changes, what works today may not necessarily work tomorrow. Supply chain executives need to understand how to position their organizations to stay ahead of the competition. Great leaders must manage the constantly moving components of the supply chain for both the present and the future. This requires the ability to think ahead, predicting how customer or vendor demand will change.
Home builders need strategic thinkers who can balance the essential components of the supply chain while ensuring that every single action is consistent with the organization's game plan. A strategic leader also will be better equipped to employ performance metrics to measure the effectiveness of the supply chain. World-class supply chain executives will constantly string the "dots," but they will also need to know when one of those dots will eventually fail. This requires being aware of key performance measures, understanding what's working today and, more importantly, what will work in the future. In addition, executives need to be comfortable balancing innovative ideas with risk - something that is quite foreign throughout the home building industry.
Finding The Talent
Executives seasoned in the world of supply chain management will be in high demand throughout the home building industry. As more and more builders realize the critical importance of having an effective supply chain, they will need to recruit those leaders capable of turning the supply chain into a competitive advantage.
But given the short supply of superior supply chain management talent, companies will need to look at both traditional and nontraditional sources. In the short-term, that means looking outside of the industry.
Among the traditional sources for supply chain executive talent are the established companies that have mastered global integrated supply chain management over the last decades. At SpencerStuart, we also look to global logistics and transportation organizations and consulting firms. These organizations can be a source for bright consultants who will be able to learn the operational grounding.
Last, but not least, we recommend that supply chain talent be developed internally. Yet companies must recognize that internal development takes time and may need to complement recruitment efforts if the demand for talent is urgent.
No longer just about purchasing, today's supply chain executive is charged with cutting costs and adding value. Builders will need to recruit superior supply chain management talent that will be accountable for profitability. By hiring supply chain executives who embody the critical characteristics - leadership, negotiating, business-mindedness and strategic thinking - progressive home builders will have an advantage over their competition.
Scott Petty leads SpencerStuart's Construction & Building Materials Practice. He is based in Dallas.