INTRODUCTION TO SUPPLY MANAGEMENT
- SCOPE OF SUPPLY MANAGEMENT
Supply management: This is a process responsible for the development and management of a firm’s total internal and external supply system.
The specific activities include:
- Early purchase involvement (EPI) and early supplier involvement (ESI) in product design and subsequent specifications development for important items through the use of cross-functional teams
- Conduct of all purchasing function and procurement process activities
- Heavy use of cross-functional teams in supplier qualification and selection
- Heavy use of purchasing partnering arrangement and strategic alliances with suppliers-to develop close and mutually beneficial linkages with key suppliers in the value chain and control quality and costs
- Continuous identification of threats and opportunities in a firm’s supply environment
- Development of strategic , long term acquisition plans for all major materials
- The monitoring of continuous improvement in the supply chain
- Active participation in the corporate strategic planning process
Its prudent to note that supply management concept represents the most advanced stage in the evolutionary development of purchasing/procurement.
Objectives of supply chain management:
- Enhancing Customer Service/satisfaction
- Expanding Sales Revenue
- Reducing Inventory Cost
- Improving On-Time Delivery
- Improving quality
- Reducing Lead Time
- Reducing Transportation Cost
- Reducing Warehouse Cost
- Reducing / Rationalize Supplier Base
- Expanding Width / Depth of Distribution
- PLANNING FOR MATERIALS
Material management: Can be defined as the planning, organizing and control of all aspects of inventory embracing procurement, warehousing, work-in process and distribution. The goal of materials management is to consolidate and efficiently handle core services. The specific materials management activities include:
- Purchasing and supply management
- Inventory management
- Stores and warehousing
- In-plant materials handling
- Production planning, scheduling and control
- Traffic and transportation
- SUPPLY MANAGEMENT RELATIONSHIP WITH OTHER DEPARTMENTS
Relationship between the purchasing and supply function with other departments:
Some issues on which interaction and cooperation may take place between purchasing and other company departments include the following:
- Purchasing and finance/accounts department:
- Finance/accounts department prepares budget allocation for goods/services to be purchased in a given time period
- The purchase department establishes and forwards to finance/accounts department value analysis report for goods/services to be purchased
- Finance/accounts department briefs the purchasing department on issues based on supplier payment
- Purchasing department gives accounts department information based on damaged items and obsolete items
- Purchasing department gives out information based on stock movement to the accounts department
- Purchasing/supplies department works together with accounts department during stock taking exercise which is based on assessing the variance status of the company’s inventory.
- Stores personnel who works under purchasing/supplies department works together with the accounts personnel when it comes to the issue of receiving goods from the supplier(s). The accounts personnel checks whether the amount indicated in the invoice correspond with the amount indicated in the local purchase order (LPO).
- Purchasing and design department:
- Preparation of specifications for purchase of materials and components
- Quality assurance or defect prevention
- Value engineering and value analysis
- Information to departments regarding availability of materials, suppliers and costs
- Agreement of alternatives when specified materials are not available
- Creation of library of books, catalogues, journals and specifications for joint use by the design and purchasing departments
- Purchasing and production (User department)
- Preparation of material schedules to meet just in time requirements
- Ensuring that delivery schedules are maintained
- Control of inventory to meet production requirements
- Disposal of scrap and obsolete items
- Quality control or defect detection and correction
- Approval of ‘first-off samples’
- Make or buy decisions
- General involvement in such techniques and systems as optimised production technology, computer integrated technology, materials requirement planning (MRP) and manufacturing resource planning (MRP 2)
- Purchasing and human resource development:
- Purchasing professionals gives out technical expertise when a prospective purchasing staff is being interviewed for a job.
- Human resource personnel liaise with purchasing managers on checking the performance of purchasing employees through job appraisal analysis.
- Human resource development relates with purchasing department when it comes to issues of arranging training and seminars for the purchasing staffs.
- Human resource development work hand in hand with purchasing department through provision of motivational incentives for the purchasing staffs. This entail the acknowledgment of best employees through giving out Awards, presents and so on.
- Purchasing department works also with human resource development on disciplinary matters of the employees.
- Purchasing and marketing:
- Provision of sales forecasts on which purchasing can base its forward planning of materials, components etc
- Ensuring that through efficient buying, purchasing contributes to the maintenance of competitive prices
- Obtaining materials on time to enable marketing and production to meet promised delivery dates to the end-customer
- Exchange of information regarding customers and suppliers
- Marketing implications on partnership sourcing
- Purchasing and information technology department (IT):
Purchasing department and IT have an increasing number of interdependencies. In some cases IT function is outsourced by the purchasing function. To this extent therefore its performance is evaluated accordingly by the purchasing department. Also the manager of IT works closely with purchasing manager to develop automated procedures and reports in line with purchasing. To add on that IT department establishes computer devices to purchase and to this extent the IT manager prepares purchase order requisition (POR) for such items and forwards the same to purchasing department. On the other hand the purchasing department sources for such devices on behalf of the IT department.
- IMPORTANCE OF SUPPLY MANAGEMENT
members of the organisation. Organisation design and structure is concerned with such elements as: