Fear over sagging corporate profits is putting a pinch on stock values, which late last month were hovering close to 52-week lows last reached in September, 2001. In the high-flying 1990s, growth fueled revenues and stock prices. Best practices in supply were important—but not critical—to corporate financial health.

That's not the case today. And sadly too few CEOs get the point. Many of them will be out of work by year's end.

Some of the best-run companies right now are those that have gone through the biggest crises. Lucent Technologies, for example, faced a liquidity crunch early last year and was strangled by $8 billion in inventory costs. Demand remains very weak for telecom equipment, yet Lucent is steadily boosting gross operating margins, President Bob Holder told PURCHASING in a meeting last month.

Reason: Lucent created a powerful Supply Networks organization headed by Jose Mejia that controls procurement, manufacturing, research and development, supply chain, and significant amounts of engineering. Inventory costs were slashed by more than $5 billion within a year through measures that only a supply czar could accomplish. Mejia's group is also responsible for all profit margin forecasting for the company. If Wall Street asks CEO Pat Russo for a margin forecast for 1Q, 2003, she goes to Mejia for the answer.

The forecast is based on a unique product cost and profit model that is used to prioritize margin improvement opportunities. Interestingly, Mejia's organization now includes a demand forecasting component—unprecedented for a supply team. Accuracy of the forecasts? Holder says it's within one-tenth of 1%. Look for a full report on the new age of supply at Lucent in the Sept. 19 issue of PURCHASING.

Gillette is also taking a new tack to improve supply performance. In January, 2000, Gillette aligned purchasing, supply chain management, and packaging on a global basis. New CEO James Kilts felt Gillette had high costs relative to its competitors and wanted to achieve leverage for the company's $4-billion annual buy. He put power behind purchasing with a concept called "negative overhead growth", which required business unit leaders to cut costs with no additional people or IT assets. The upshot was a drive for better procurement practices.

Reporting on how the best companies are boosting profits with better procurement practices is a major goal at PURCHASING Magazine now.