Canadian organizations facing uphill battle in globalized supply chain and procurement market

According to Grand & Toy research study, tactical focus undermining our ability to compete

TORONTO, May 1, 2012 /CNW/ - As supply chain and procurement markets become increasingly globalized, Canadian businesses will find themselves ill-prepared to navigate the turbulent waters that lay ahead if they continue to look inward while global competitors are looking beyond the horizon, according to a Grand & Toy report, Supply Chain & Procurement Insights, conducted by Leger Marketing and released today.

When asked to predict their top supply chain challenges over the next five years, Canadian organizations placed greatest emphasis on such things as cost pressures (38 per cent) and regulatory requirements (38 per cent.)

"These areas of focus, while important, run counter to how much of the world sees future priorities," said Gary D'Andrea, Chief Operating Officer, Grand & Toy Ltd. "The top issues for global supply chain and procurement experts include increasing pressure from global competition, global labour markets, and geopolitical instability."*

In fact, the number one global issue (increasing pressure from global competition) didn't even make Canadian supply chain and procurement executives' top-ten list of challenges over the next five years. This inward orientation can lead to a failure in identifying opportunities and risk. The vast majority (82 per cent) of executives surveyed said their organization is at best "somewhat capable" of mitigating their key supply chain risks and only 16 per cent said they assess risk to their supply chain with detailed models of cash flow at risk, the standard for assessing risk.

"Given the increasing interconnectedness of the global supply chain, a single, local event can have dramatic impact on how we do business," D'Andrea said. "Companies need to work more closely with their supply chain and procurement partners to help reduce their risk profile."

Everything from floods and earthquakes to geopolitical instability can have both immediate and long-term impact on the availability of goods and services for Canadian businesses. For example, floods in Thailand in 2011 caused an immediate shortage in computer hard drives yet the impact will likely be felt by consumers, computer manufacturers, and IT departments into 2013.**

Canadian businesses tactically focused
A significant percentage of executives surveyed also viewed procurement as primarily a tactical business process, which limits its ability to contribute to organizational success beyond simply reducing purchasing costs.

• Fifty per cent of the organizations surveyed describe the key role of procurement at their organization over the past three years as "tactical purchasing/sourcing, ordering and expediting" or "negotiating purchase costs/price."
• Forty-two per cent see the procurement function at their organization continuing to focus on these tactical roles over the next five years.
• However, 24 per cent indicated procurement will have a strong strategic role over the next five years, a significant increase from the 15 per cent who said it has over the past three years.

"To be successful in the global market, companies need to move from viewing supply chain and procurement as a purely tactical business process to one that is strategically aligned with business needs," said Warren Shiau, Director of Research with Leger Marketing.

But, for the most part, Canadian organizations lack the end-to-end communication and collaboration needed to facilitate the move from tactical to strategic supply chain and procurement.

• Procurement
• Only 16 per cent of the organizations surveyed use collaborative teams across the sourcing execution phase of procurement.
• Only 19 per cent of the organizations surveyed use collaborative teams across the supplier partnering and development phase of procurement.
• Supply Chain
• Seventy-five per cent of the organizations surveyed do not share their supply chain strategy with partners, indicating a possible lack of end-to-end communication / collaboration.
• Fifty-five per cent said a lack of communication between functional areas is the biggest barrier to cross-functional collaboration at their organizations.

The report identified the two key building blocks that Canadian supply chain and procurement leaders view as necessary to transition from a tactical to a strategic mindset.

• Measurement, Metrics and Reporting
• Communication/Collaboration

"The foundation of strategic supply chain and procurement is performance visibility," Shiau said. "Without solid performance measurement capabilities, metrics, and reporting in place, many Canadian organizations lack full performance and risk visibility, and are not yet capable of competing on even footing with global leaders."

In addition, it is critical that companies communicate and collaborate with both internal and external partners to create end-to-end supply chain knowledge to better gauge and mitigate risk.

To be successful in the years to come, Canadian companies will need to become more strategic with their supply chain and procurement. Part of that process involves taking a global view of both the opportunities and risk that lie ahead.

"The marketplace is evolving so quickly even organizations that have been market leaders for years can rapidly fall behind the competition if they are not continuously refining their supply chain and procurement processes," D'Andrea said.

Grand & Toy recognizes that being agile is key to business success today. Visit www.grandandtoy.com/2012report  for more information on the study and to download the full report. Through its strategic solution Streamline, Grand & Toy takes a holistic view of the entire procurement process, delivering on efficiency, savings and control, all through the lens of sustainability, to help organizations stay responsive in a dynamic marketplace.

*2010 McKinsey & Company, The Challenges Ahead for Supply Chain

**Market research firm IDC, Computerworld Dec. 9, 2011.

About The Report
This report is based on live interviews with leading Canadian supply chain and procurement executives and a Canada-wide quantitative survey of more than 500 Canadian supply chain and procurement decision makers at organizations with a minimum of 500 employees. The survey focused on current and future state challenges & priorities for these executives as well as Canadian procurement and supply chain organizational preparedness and global competitiveness. It was conducted by Leger Marketing between January and March 2012.

About Grand & Toy
With a heritage that dates back to 1882, today's Grand & Toy is committed to offering sustainable solutions to Canadian business in the areas of interiors, technology, and imaging in addition to office and facility supplies. We operate one of the country's largest distribution networks serving clients coast-to-coast. Grand & Toy also demonstrates a firm commitment to corporate social responsibility through a comprehensive sustainability strategy that's manifested through numerous internal and external environmental and social outreach programs. For more information, visit grandandtoy.com.

About Leger
Leger Marketing is the largest Canadian-owned polling and market research firm. Founded in 1986, the company now has over 650 employees, including more than 115 professionals specializing in marketing research, communication effectiveness and public opinion polling. Our professionals are located in Montreal, our head office, Quebec City, Toronto, Edmonton, Calgary, Philadelphia, and Zurich. Leger's team of multidisciplinary professionals consists of experts in marketing, psychology, economics, communications and public affairs.

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