Procurement Management
Despite some disagreement on the exact nature of the future of supply chain management development, it would appear inarguable that as corporations continue their preparations to enter the new millennium, the global environment will increasingly serve as a critical element in the value creation process of supply chain management.
International trade will exceed $17 trillion by 2020. Global logistics represents nearly 20% of the world’s gross national product. A corporation’s success in the global marketplace depends largely on its capabilities in global logistics. Unfortunately, the general level of understanding of global logistics is low. International trade professionals and mangers do not typically include general logistics principles in their planning and conversely logistics professionals and managers do not generally include trade principles in theirs.
Due to the lack of mutual understanding, corporate global logistics costs including in-transit inventory, international transportation, and financial transactions, payment delays, and duty drawbacks are often 30% to 50% higher than necessary. In addition, without worldwide inventory and order visibility, intelligent mode selection, customer service suffers.
In addition, advances in information and logistics technologies have made political boundaries obsolete in terms of markets, sourcing, and societal requirements; and domestic companies vulnerable to global competitive and economic forces.
To better understand this critical linkage, the first question one needs to ask is: Why should senior management care about them? Developments during just the past two years at three major U.S. corporations provide the answer, boldly underscoring the impact of supply chain management on modern business:
n Dell Computer, founded on a vision of customer-responsive order fulfillment, has seen its stock price mushroom nearly 200-fold since 1990. "We already have a quick-ship plan for large customers where we can deliver a machine within 48 hours of an order," offered Michael Dell, the founder and chairman of the computer manufacturer. (Serwer, pg 34)
n Boeing Aircraft, one of America's leading capital-goods producers and top exporters, was forced to announce writedowns of $2.6 billion in October. The reason? "It is blaming 'raw-material shortages, internal and supplier parts shortages, and productivity inefficiencies....'" (The Wall Street Journal, Pg. A2)
n Procter & Gamble, long revered for its marketing acumen, also drives its supply chain hard. The company estimates it saved retail customers $65 million through logistics gains over the past 18 months." According to P&G, the essence of its approach 'lies in manufacturers and suppliers working closely together...jointly creating business plans to eliminate the source of wasteful practices across the entire supply chain.'" (Carson, pg. 28)
Clearly, supply chain management - good or bad - directly affects corporate performance. However, considerable disagreement exists over the future of supply chain design and deployment in the global marketplace.
When queried, senior supply chain professionals express a broad range of views on their future role, despite current widespread recognition of the field's growing importance. In fact, in one recent conference sponsored by Mercer Management Consulting, the MIT Center for Transportation Studies and Logistics Management & Distribution Report magazine leading corporate supply chain executives agreed on only a few key points when asked to predict supply chain management's role in the 21st century. (Logistics Management & Distribution Report's, pg.13.)
First, supply chain executives were nearly unanimous in their belief that in the future, the emphasis will shift to the broader supply chain from the narrower logistics discipline, to derive the greatest value. Second, supply chain management will provide true competitive advantage only when new concepts, practices, and performance are combined to sharply affect companies' and customers' bottom lines. Third, supply chain managers must harness the leading external drivers of change, including rising consumer demands, globalization, and information/communication. Fourth, the future responsibilities of the supply chain manager will change, although his or her organizational level may be similar to today’s.
Building on this lively debate on the future role of supply chain management, this author would emphasize that it is particularly critical for corporations seeking to maintain competitiveness in the global marketplace as we enter the next millennium to closely examine the role of supply chain management. Furthermore, while most procurement management analysts are firmly bullish on the future role of supply chain management in providing a competitive edge – nevertheless, most believe achieving this edge will pose a major challenge for most companies.
Finally, in addition to the changes that will need