Reasons To Employ Supply Chain Management

Supply chain management enables organizations to maximize resources when sales are down and costs are rising

. Below are a few benefits of an effective supply chain management program:

1. A 2.5% reduction in procurement costs produces the same amount of profit as a 10% increase in sales as indicated by The Institute of Supply Management

2. Companies engaged in process standardization are able to manage complex value chains and are 73 percent more profitable than organizations that do not standardize common components according to Ramakumar and Cooper (2004) stated in "Process Standardization Proves Profitable," published in Quality.

3. A 40 percent return on investment can be realized by lowering costs, improving productivity, and increasing opportunities with supply chain analytics as stated by Marabotti (2003) in "Build Supplier Metrics, Build Better Products," published in Quality.

Overall, the process consists of several independent, but interconnected parts that require optimization in order to achieve efficiency. Leading companies realize the benefits of an effective supply chain, so all organizations should analyze how to obtain resources and provide customers with value. Organizational leaders use analysis to develop actionable information that enable identification of problems and implementation of solutions. The tools and techniques used for management are relatively easy to employ with the appropriate knowledge.

Qualitative and quantitative analysis are the basis of the techniques used. Qualitative analysis seeks to identify how the process works through interviewing people and reviewing reports to discover critical points of success. Quantitative analysis evaluates the critical points through the collection of data, then analyzes the data to produce actionable information. The tools used to employ these techniques can be as simple as a spreadsheet or as complex as an Enterprise Resource Planning (ERP) Software Solution. The appropriate tools are determined by an organization's unique situation.

Supply chain management is more than purchasing or procurement. The intricacy of the modern supply chain requires a broad range of knowledge to understand and manage the fourteen functional areas: purchasing, sourcing, logistics, quality management, inventory control, material management, transportation, disposal, warehousing, distribution, receiving, packaging, product/service development, and manufacturing supervision. Therefore, procurement professionals should aspire to be a Certified Professional in Supply Management (CPSM) through the Institute of Supply Management. The internationally recognized CPSM credential tells the global community that a person understands the various areas of supply chain management and uses the most current best practices.

Copyright (c) 2010 Randall Mauldin

by: Randall Mauldin

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