“One of the biggest misunderstandings about supply chain management is that it’s a thing that exists,” Uldis Sipols says, laughing. The vice president of procurement has spent the entirety of his career in the industry, joining Sonoco Products after an early retirement from Procter & Gamble. He is amazed by how little people generally know about the supply side of business.
“I’m still surprised by how many people don’t seem aware that when a company makes their products, they need materials, services, designers, procurement, logistics, in addition to finance, engineering, distribution, etc.,” Sipols says. “Supply chain management makes sense of all of those moving pieces. Even in the business world, we’re just starting to see a shift in how we approach the supply chain. Having a chief procurement officer isn’t standard yet; it’s even rare to have a true supply-chain leader. Smart companies are beginning to see the competitive advantage of having their best and brightest in these roles.”
Given that Sonoco is an international provider of diversified consumer packaging, industrial products, protective packaging, and packaging supply chain services, Sipols is vital to the overall success of the company. But as Sipols mentions, it isn’t only the nature of Sonoco’s business that makes his role so crucial.
It is understood that top talent should be placed in all functions of a company, and Sipols wants to make it clear that the same approach needs to be taken with supply chain. “A mistake that was made early on in many companies was that supply chain was treated as a dumping ground, for a lack of a better phrase,” Sipols says. “People who didn’t want to be in their roles, and were asking to get placed somewhere else, were being given the responsibility of supply chain management. Supply chain needs highly capable people with the right combination of technical and interpersonal skills who understand the importance of the work they’re doing, and the impact it has on the company.”
If the right people are placed in supply-chain management, it doesn’t just benefit the company. Sipols asserts that business skills are developed in these roles and that supply chain can be used as a springboard into upper management, with the supply-chain leader acting as a de facto COO.
There’s always something that needs to be acquired by a person in Sipols’s role: raw materials, finished goods, talent, and more. The vice president of procurement adds that those skills translate; those abilities and talents that are developed and strengthened can be applied anywhere in the organization.
The strategic importance of supply chain is just being recognized, but the concept of it is deeply ingrained in American business. Early in his career, Sipols worked with Ford Motor Company. Henry Ford’s Ford River Rouge Complex and assembly line called for vertically integrated manufacturing—from base raw materials to finished automobiles—in an attempt to control the supply chain, Sipols says. It became the model for the rest of the industry.
When Sipols started at Ford in the late seventies, its supply chain was already considered relatively sophisticated. Even today, in 2016, Sipols says that many companies’ supply chains aren’t as sophisticated as Ford’s was in 1977.
The good news is that technology has enabled many companies to leapfrog their way to a high-level supply chain. The bad news is that starting from scratch is challenging and expensive, so companies who can’t afford to invest in new technology are stuck operating with antiquated systems.
“If you have the means to invest in technology, there’s no real excuse for not making the most of your supply chain—and if you don’t, you’re only shooting yourself in the foot,” Sipols says. “You don’t need to take thirty years to catch up. You can avoid the slings, arrows, and pains other companies have gone through.”
With an effective supply chain in place and some of the company’s best and brightest in critical roles, Sonoco has come to focus on something many companies don’t: leveraging supplier relations into the sales side as a competitive strategy. Sonoco is in a unique position—some of its suppliers are also its customers, so Sonoco has made deals with suppliers that raise revenue on both sides of the table.
These relationships also allow for a free exchange of ideas that enables Sonoco and other companies to share best practices. This is possible with bigger companies, Sipols says, but it’s much harder to do.
The vice president of procurement has been in his role for just two years, but he already characterizes his time with the company as “transformative.” Moving forward, he plans to increase his department’s role as a way of reducing overall costs for Sonoco globally. This means increasing productivity and optimizing working capital, putting metrics in place to better measure quality, investing in outside supplier innovation that will ideally help generate new ideas that will also drive revenue, and continuing to put strong people in key roles that will follow these objectives.
“No doubt these are tough goals to accomplish,” Sipols says. “But the benefits are overwhelming. This isn’t just about keeping up anymore; it’s about advancing and creating competitive advantage.”