- 28
- JUN
- 2011
Procurement GPS: Supply Management - making value flow
Author: Ian George - Categories: Supplier Relationship Management, Risk, Procurement Strategy
Is supply management an art or a science? Yes, we can use complex algorithms to predict and plan for requirements, but my experience is that unless you operate within a reasonably stable environment, predictions are either wrong or lucky.
When competition was less fierce businesses could build resource and stock buffers to cushion themselves against surges in demand. Not only is cash tight, but markets keep changing and the risk of being left with obsolete stock is ever present. It seems that carrying too much stock presents as many risks as carrying too little.
Just-in-Time (JiT) has been touted as the solution to these problems for many years, and it does have advantages over other supply management systems. What seems to be often forgotten is that JiT is one tool in a comprehensive suite known as 'lean'.
My frustration is with the way that lean is generally applied in the West. Many organisations learn what tools are needed and then start to apply them to areas of the shop floor or office. The effects of this piecemeal approach are reported in terms such as 'floor-space saved' and 'inventory reduced'. My issue is that unless you are expanding and need extra space, what is the benefit of saving floor space? You still have to pay for the infrastructure, you just realise that you didn't actually need it in the first place. And as for the 'islands' of inventory reduction, often that means shifting your stock back to your supplier and having them run back and forth drip feeding you the minimum resources you can get away with. There are countless examples of 'blitz' projects that yield fantastic results in a few short weeks. My advice would be to look a couple of months later and dig a little deeper into how the numbers consolidate into overall business performance. Once you've done this, ask yourself if this is really the most efficient way of working, and if the answer is yes, whether you could prove it to a sceptical board.
Getting there is a long journey and part of a much bigger methodology that encapsulates the whole organisation. Optimising supply management means not only applying lean principles to your own organisation, but also helping your suppliers (your extended enterprise) to apply them too, both autonomously and interdependently between customer and supplier.
When it comes to being lean, it appears that many organisations still have a lot to learn (and even more to gain).
