Supply management is a system of strategic sourcing that is used to acquire goods and services for an organization. It is an ongoing process that takes into account the needs of an organization and their strategic objectives, and is designed to ensure that the goods and services are acquired in a cost-effective, timely, and efficient manner. The goal of supply management is to improve the organization's ability to meet customer needs while controlling costs and ensuring quality.
Supply management can be divided into three main areas:
- Procurement: This is the process of researching and selecting suppliers who can provide the goods and services the organization needs. It involves negotiating contracts and ensuring that the goods and services are delivered on time and at the agreed-upon price.
- Inventory Management: This involves managing and monitoring the organization's inventory to ensure that there is enough stock to meet customer demand. It also involves tracking inventory levels and taking steps to reduce any excess stock.
- Distribution: This involves finding the most cost-effective and efficient way to get the goods and services to the customer. This may involve using a variety of transportation methods, such as trucking, rail, air, or sea.
Example of Supply management
An example of supply management is a company that contracts with a third-party logistics provider to handle its transportation and distribution needs. The company will work with the third-party provider to negotiate a contract that outlines the services that the provider will provide and the cost of those services. The company will also work with the provider to ensure that the goods and services are delivered on time and at the agreed-upon price. The company will also use inventory management techniques to ensure that there is enough stock to meet customer demand and that any excess stock is reduced. By utilizing these supply management techniques, the company can ensure that it is able to meet customer needs while controlling costs and ensuring quality.
When to use Supply management
The use of supply management depends on the specific needs of an organization and its strategic objectives. Generally speaking, supply management is most effective when used to acquire goods and services that are of high quality and need to be delivered quickly and reliably. Supply management is also beneficial when the organization needs to manage inventory levels and reduce excess stock, or when the organization needs to find the most cost-effective way of getting the goods and services to the customer.
Types of Supply management
Types of supply management can include:
- Strategic Sourcing: This is a process that involves researching and analyzing potential suppliers to determine which ones are the best fit for the organization's needs. It involves evaluating the cost, quality, and reliability of potential suppliers to ensure that the organization is getting the best value for its money.
- Vendor Management: This involves managing relationships with existing suppliers to ensure that they are meeting the organization's needs. It involves monitoring supplier performance, negotiating contracts, and working with suppliers to ensure that the organization is getting the best service and value.
- Contract Management: This involves managing and monitoring contracts with suppliers to ensure that they are meeting the terms and conditions of the agreement. It involves ensuring that the agreed-upon prices, delivery dates, and quality standards are met.
Steps of Supply management
The steps of supply management can be divided into four main stages:
- Planning: This involves analyzing the organization's needs and developing a plan to acquire the goods and services they need.
- Sourcing: This involves researching and selecting suppliers who can provide the goods and services the organization needs.
- Negotiation: This involves negotiating and agreeing on the terms of the contracts with the suppliers.
- Execution: This involves monitoring the performance of the suppliers and ensuring that the goods and services are delivered on time and at the agreed-upon price.
Advantages of Supply management
Supply management has several advantages, including:
- Reduced costs: By negotiating contracts with suppliers and selecting the most cost-efficient transportation methods, organizations can reduce their overall costs.
- Increased efficiency: By streamlining the process of acquiring goods and services, organizations can improve their efficiency and reduce the time it takes to get the goods and services to the customer.
- Improved quality: By selecting suppliers who can provide quality goods and services, organizations can ensure that their customers are satisfied with the products they receive.
- Increased customer satisfaction: By providing quality goods and services in a timely manner, organizations can ensure that their customers are satisfied with the products they receive.
Limitations of Supply management
Supply management is not without its limitations. For example, supply management processes are often highly complex and involve multiple stakeholders, making them difficult to manage. Additionally, the process can be time-consuming, costly, and subject to unexpected changes in the market. Finally, supply management can involve a high degree of risk, as organizations must be prepared to deal with unexpected changes in their supply chains.
In addition to supply management, there are several other approaches that can be used to efficiently acquire goods and services for an organization. These include:
- Just-in-time (JIT) inventory: This involves only purchasing goods and services when they are needed, eliminating the need for large inventories.
- Vendor relationship management: This involves cultivating relationships with vendors to ensure that they are delivering goods and services on time and at the agreed-upon price.
- Lean Manufacturing: This involves eliminating any waste and inefficiencies in the production process to ensure that goods and services are produced in a cost-effective manner.
All of these approaches can be used in conjunction with supply management to ensure that goods and services are delivered in a timely and cost-effective manner.
|Supply management — recommended articles
|Distribution network — Trading company — Supply chain networks — Procurement logistics — Material stream — Production logistics subsystem — Last mile — Global supply chains — Supply logistics subsystem
- Shin, H., Collier, D. A., & Wilson, D. D. (2000). Supply management orientation and supplier/buyer performance. Journal of operations management, 18(3), 317-333.