A supply chain is a network of individual functions within an organization that begins with the development of a strategic plan and ends with the delivery of a product or service. Those functions are listed below:
Demand Planning
Supply Management and Procurement
Inventory Management
Warehousing Operations
Manufacturing and Service Operations
Transportation Operations
Customer Service Operations
Supply Management and Procurement
The procurement organization is dependent on procurement requisitions that are fed from the demand planning organization. The demand plan tells or signals the procurement organization to initiate procurement of what is needed by transmitting the requirements in an ERP system. Without linkage to the demand plan, procurement would not know what to buy and when to buy it. The demand plan considers when items are needed in inventory against the supplier’s lead time (the time it takes for a supplier to deliver goods after a PO is placed).
Procurement personnel receive requirements on purchase requisitions, solicit suppliers for pricing and delivery, evaluate supplier responses using an evaluation process, negotiate to achieve best value, and make awards by issuing POs. POs are a company’s authorizing documents and financial commitments to buy products and services. The procurement organization makes sure products are accurately described by working with engineering and other internal organizations to avoid confusion about exactly what is needed.
Procurement is a function that interacts with suppliers globally to achieve the best value for an organization. Procurement personnel must consider the benefits and risks of working with suppliers in different countries. The specific issues must be managed across different time zones and cultures, and different approaches must be used to mitigate supplier disruptions like natural disasters, embargos, strikes, currency fluctuations, and military conflicts.
Procurement personnel must also manage suppliers after awarding a PO to ensure products and services are delivered on time, at the value stated on the PO, and at the correct quality level. If suppliers are not managed and open POs are not tracked, late deliveries could cause manufacturing disruptions and even delivery delays, resulting in lost sales.
Reference: Warehousing Operations Certification Track. LINCS in Supply Chain Management Consortium. May 2016. Version: v2.22. www.LINCSeducation.org.
Fahad Mahmud
Lecturer (Technical), Department of textiles at SKTEC
