Roadmap to a Comprehensive Supply Management Strategy

Is your company getting the most from its supply management function? Here's a step-by-step look at how to phase in a successful "end-to-end" supply management strategy.


Next, launch procurement initiatives. Lowering the total delivered cost for any material depends on a number of factors, including the categorization of the material, the suppliers from whom that material is available, and the supply philosophy that will work to the organization's best advantage. Whether implementing the most simplistic supplier replacement or volume aggregation project, or employing reverse auctions and vendor managed inventory initiatives, be sure to keep track of "before" and "after" metrics to evaluate the efficacy of the program. Once implemented, be vigilant for "cost creep" that can undo the savings achieved.

Then develop supplier scorecards that represent a "360-degree evaluation" of supplier performance consistent with the contract period of performance. Obtain performance data from contract management personnel, end users of the supplier's products, and the suppliers themselves. Use these evaluations in annual or periodic negotiations with suppliers to set future pricing and performance metrics.

Finally, establish procurement competency grading programs. Similar to the Six Sigma Green Belt and Black Belt rankings, procurement professionals can be ranked based on their knowledge of procurement programs and their applications, their experience in negotiation with suppliers, the magnitude of contracts entrusted to their stewardship, and a variety of other factors affecting their seniority and stature in the organization. It becomes incumbent on higher ranks to formalize and pass on their knowledge to the acolytes.

It may seem a daunting task to design and implement a broad, all-inclusive supply management strategy. While it certainly is a significant effort, it can be simplified into a series of easily achieved phases that build upon each other. Start with the basics of understanding the processes and spend, and move toward comprehensive programs that identify the global sources of supply for all commodities that represent the lowest total cost based on material specifications and market forces. And, believe me, it's a lot easier than growing grass in New England.

About the Author: Eliot Madow is an independent consultant with over 30 years experience in supply chain, supply management and information technology. He can be reached at eliot@madow.org.

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