Live from the CPO's Summit: Supply Goes Global

By Dave Hannon -- Purchasing, 11/16/2006 10:38:00 AM

Purchasing.com will be providing updates from this week’s CPO’s Summit, sponsored by Purchasing and Aberdeen Group and taking place today and tomorrow here in Boston.

The CPO’s Summit kicked off this morning with a keynote from IBM’s John Paterson (more on that later).

Next up, Gregg Brandyberry, vice president of global procurement systems and operations at GlaxoSmithKline and member of the Purchasing magazine editorial advisory board, covered global supply from a different angle—namely, the demographic angle. Brandyberry told attendees that the future sources of global supply will have a lot to do with population trends and forward-thinking companies and procurement professionals need to start analyzing those trends now.

“Procurement needs to have strategies in place going forward not only for the materials we buy, but where we manufacture them as well,” he said.

He pointed out that while some countries may look like attractive supply markets today, they may not look so attractive down the road, as population trends change. For example, Russia, which is a hot spot for global sourcing today, will see its population decline by 6-7% in the next two decades or so due to high mortality and low birth rates.

At the same time, while more low-cost country sourcing is looking into rural regions (like inland China), Brandyberry notes that populations in many of those regions are migrating to urban centers. “The least developed countries will see the most extreme urbanization,” he said. “Right now, 18 of the ‘megacities’ or population centers larger than 10 million, are in Asia,” he says. “We need to be thinking more about the merging pools of labor as well as the emerging consumer bases in these regions.”

Brandyberry says GSK has moved from simply buying in low-cost labor regions to putting feet on the ground to do sourcing in these regions, getting away from the “Western way of thinking.”

In fact, the new wave of globalization is focusing more on white collar jobs than the manufacturing jobs more often thought of when the topic is broached. Brandyberry showed a map of the world comparing areas for offshoring of white collar work, taking in effect political risk, cultural compatibility, and proficiency in English.

The demographics in the U.S. will also play a role in the offshoring decisions of the future, he says. As baby boom generation leaves the workforce, the U.S. workforce will begin to look very different in the coming decades. Educational environments need to reflect that and become more multi-cultural in nature, if the U.S. is to compete in the global economy down the road.

On the technology front, Brandyberry pointed to nanotechnology (which he defined as ‘putting every atom in its most efficient place’) as the trend that will impact business trends perhaps more than any other in the next two or three decades.

“Nanotechnology is one of the things that keeps CEOs up at night,” he said. “Coal atoms lined up the right way can produce a diamond. Sand atoms realigned can produce silicon.”

The CPO’s Summit is leveraging some technology itself in its presentations. After each session, the audience is polled on certain topics and can respond to polling questions with wireless devices. Results are tallied instantly. Here’s an example:

Q: What would you classify as your company’s top global initiative?

Low-cost country sourcing for materials (32%)
Low-cost country sourcing for manufacturing (22%)
Business process outsourcing (30%)
Offshoring (18%)

Stay tuned for a report on the On-Demand Supply Management Technologies Panel...