Wanted: Purchasers Who Think Like Economists

Last weekend, a friend mentioned that his brother, a purchaser at a pet food company, was likely going to back to school to get an advanced degree in economics. And his company was going to foot the bill. This got me thinking about how, to create business value, companies need to create valuable employees.

In good times and bad, companies have a responsibility to invest in people and skills to achieve short and long-term business goals. Purchasers and supply chain managers have to know more than how to move products from point A to B. They need to understand the economics behind what moves businesses and markets.

Supply chain knowledge ebbs and flows as companies evolve, demand shifts, and markets change. Is it possible that we've reached another inflection point where another kind of textbook expertise, or life experience, will determine a supply chain managers' value in the workplace? In a world where supply chains compete against supply chains, do companies even know what skills their people have today, what skills are missing, and how they can encourage employees to advance supply chain practices?

In the late 1990s and early 2000s, many US universities created innovative undergraduate and graduate supply chain management programs. There had been a noticeable gap between the activities low-level purchasers did years before and the senior-level tasks evolving throughout the supply chain ecosystem. So a certificate in logistics management, IT systems integration, and price negotiation was no longer sufficient.

Theoretically, a university degree would close the capabilities gap, allow a procurement person to master new skills, and generate high-value corporate results. Many tech companies back then, if profits hadn’t been walloped by one recession or another, supported the idea of upping their in-house supply team's knowledge levels, to become more competitive. I would say those investments paid off; just look at how far supply chain practices and conversations have come in 10 years.

Fast forward to 2010. According to a CNN Money article, the most desired skill companies still want is logistics management leadership. But there’s a shortage of expertise. Citing a white paper from MIT, a job outlook survey by the National Association of Colleges and Employers, and other reports, the article states:

    When you think of fields where there just aren't enough skilled candidates to go around, one that probably doesn't come to mind is supply chain management: The complicated, behind-the-scenes work of getting goods from one place to another, on time and on budget.

According to the article, the shortage of supply chain talent “explains why 48 percent of US companies plan to snap up logistics grads in 2011.”

Curious to see if universities have changed their tunes to keep up with changing times, I scanned supply chain curriculum brochures. I thought I'd find tons of classes about global supply-demand economics, international trade regulations, social media, and environmental sustainability issues — just a few of the topics professionals need to be versed in when moving billions of dollars of parts around the globe.

However, most institutions, based on this grad school search board and this grad school ranking site, continue to focus on supply chain performance, sourcing strategies, and logistics and transportation process management as core courses. Courses like MIT's Supply Chain Finance and Michigan State's Change Management are a little different, but I get the sense they are secondary offerings.

If companies keep hiring people with degrees that will, at least superficially, fill a certain talent pool, universities will keep churning the same kinds of graduates companies will recruit. But don't supply chain managers in 2011 need new skills? How are companies making human resources choices that add long-term organizational value while creating valuable employees? Are we ebbing and flowing in different supply chain direction from yesteryear's skills?

6 comments on “Wanted: Purchasers Who Think Like Economists

  1. AnalyzeThis
    May 18, 2011

    Nice article, Jennifer… you actually touch on a wide variety of issues here. I'll just focus on a few.

    I certainly agree there's a shortage of supply chain talent. And figuring out a way to remedy that situation is super tricky. Logistics is a really tough sell as a potential career path for a teenager and it's super difficult to figure out a way to make it more attractive.

    And even if someone does get into a supply chain program, I'm not convinced many institutions are actually teaching skills that are relevant. You mention a couple of places where some deficiencies lie. I certainly agree that future supply chain managers will need a whole bunch of new and more varied skills.

    But then again, tech supply chain management is vastly different than, say, supplying food and weapons for the armed forces halfway across the world during a war. How can these institutions be expected to teach EVERYTHING? They really can't. Again, it's tricky.

  2. Jay_Bond
    May 19, 2011

    Your article is very informative and brings up many good points. Many companies are running into problems with getting experienced candidates for their job postings. With companies shifting focus to having more college educated employees as opposed to experienced employees without degrees, they are losing out on valuable experience. Companies are looking at college graduates with degrees that sometimes don't translate well in the real world, instead of experienced employees without the schooling who have vast knowledge in their field.

    If more and more companies are going to be focused primarily on hiring college grads, there needs to be changes made to the curriculum to better prepare these graduates for the reality of the jobs. Employers are expecting more knowledge and multitasking than ever, and if you're only thinking like the text book taught you, you're headed for a rough ride.


  3. Barbara Jorgensen
    May 19, 2011

    Great article as always, Jenn. I find the gap between the high-level thinking and hands-on execution to be an ongoing problem. We see many white papers, research reports and theories on improving the supply chian without a lot of thought paid to the day-to-day efforts of moving material from Point A to Point B. Every time someone tells me their supply chain problems can be fixed by buying more IT I roll my eyes (in private). The companies that are best in the business call on the folks who actualy pick and move material to help executive the high-level strategies of the business. Maybe we should get back to the days when an executive begins on a factory or warehouse floor and works their way up from there,

    That's not to say MBAs or other degrees aren't a huge help–they are. I think economics is a great insight to have, particulalry when trying to forecast in times like these.

  4. hwong
    May 19, 2011

    Actually, there are alot of software products that are very smart and build upon the high level strategy. For example, IBM ilog's previous netowrk optimization tool  (LogicTools) was developed by MIT renowed professor David Simchi Levi.

    This tool uses optimization methods to help companies make best decsisions about allocating, producing, distributing products in order to keep up with the customer service level.  So some of the “IT” that you mentioned are actually helpful. But I can totally understand where your view comes from . Alot of the companies keep hyping about how they invest in IT but in reality, it's not really that efficient.

  5. Barbara Jorgensen
    May 19, 2011

    Hi hwong–what I should have said was companies that think buying IT is the TOTAL  solution to the problem. Some of the best IT I've ever seen was developed in-house at distribution companies through collaborative efforts in warehousing, puchasing, IT, sales etc. IT is a key element to the entire solution, and thanks as always for your input!

  6. Jennifer Baljko
    May 22, 2011

    Thanks everyone for the thoughtful posts. I think you've all hit on sort of the magic formula companies may want to consider as they fill procurement and supply chain positions:

    1. Reaping the “hidden” in-house knowledge: How can companies nurture and tap into the wealth of know-how already existing in their employees' head and experience. How do you collect this expertise and use it to an even greater advantage.

    2. Getting some new ideas into the fold: Although some of the coursework may be mundane, but necessary, companies that find a way to put their employees' supply chain masters degrees to use in a way that sparks creative thinking may prove valuable. If these student or new hires have cross-industry experience, there could be some innovative way of connecting dots between markets, products and economies of scale.

    3. Let IT automate. This has been said before. IT tools are necessary, and I think most companies have figured out how to get quite a lot out of them. IT, though, has never be the cureall, it was, in theory, the tool that would let supply chain professionals leave behind routine tasks and focus on more challenging tasks machines and software couldn't handle.

    How exactly should companies allocate this three-prong “formula,” well that's probably what shakes out great companies from not-so-great comanies

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