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Supply Chain Management – Key Considerations for Procurement and Material Management

Supply chain is a key management principle. In business, supply chain management, also known as logistics management, encompasses the actual transportation and the processing of goods, with the storage and the movement of materials, of primary work-in-process, inventory, and of end-to-end delivery throughout the supply chain. The term “supply chain” can apply to any process involving production, processing, distribution, or gathering of resources that involve the movement of materials within the supply chain.

With the aid of supply management information and guidance, businesses can effectively reduce wastes in the production, processing, storing, transporting, and re-selling of their inventory. A waste analysis of your supply management functions should always be conducted and updated on a regular basis. In the procurement department, please help improve the process by defining good purchasing decisions. Once you’ve identified the best vendors for your products, the next step is to develop a procurement strategy that will allow you to maximize your purchases and minimize your total costs.

The first step in implementing supply management strategies is to understand and determine which suppliers are essential for the success of your company. Then, select the supplier(s) whose stock is the least expensive. Remember, the supplier with the lowest inventory cost is not necessarily your best source; it could actually mean a supplier of lower quality products. In addition, when determining the suppliers that will ultimately comprise your inventory, consider the types of purchases you will make (defensive equipment, non-defense products, office supplies, office furniture, and shipping). Identify companies with inventory listings that include these items.

It is important for companies to be aware of the suppliers that they are working with. When conducting a supply chain analysis, companies must identify the suppliers that perform key risk management functions. For example, if a company procures raw materials from five suppliers, it is important to determine which of those suppliers have the best policies and procedures for quality control and compliance. Once a company has finalized its supplier selection, it is equally important to evaluate each supplier’s ability to meet delivery times and levels of service.

In addition to identifying quality vendors, it is necessary for companies to establish procurement guidelines and standards. These guidelines should establish which vendors a company should use for critical materials and supplies, how those vendors should be compensated, when those supplies and materials should be replenished, and who should establish contact to make requests for supplies or materials. Another area where companies need to establish procurement guidelines is related to time to market. Supply chain management practices should include establishing and monitoring suitable market timing.

Developing the most effective supply chain continues to be one of the most important responsibilities of a Supply Management department. This includes developing a sound Strategic Sourcing model. Many of the same principles that apply to purchasing and inventorying apply to strategic sourcing. To maximize the advantages of strategic sourcing, companies must be able to identify appropriate vendors when they are looking for materials and it is important to evaluate each vendor at every step of the supply chain. It is also important to understand the impact of supplier decisions on the organization and evaluate whether those decisions are good for the company over the long-term. In the past, supply management often seemed like a tedious task, but modern approaches have streamlined the process making it easy to identify and monitor vendors.

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