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Ask The Experts – Supply Chain Management in the public sector

Wednesday November 11th, 2009

By David Griffiths, PASS Consultant

PASS Consultant David Griffiths answers your queries on Supply Chain Management.

Q What is a supply chain?

The supply chain links suppliers, manufacturers, distributors and end customers together. Supply Chain Management (SCM) helps achieve competitive advantage through managing the entire flow of goods, services and information in the entire supply chain, through a number of value-adding processes. It is an effective tool for business process improvement and begins with the source of supply and ends at the point of consumption.

Q Why is it important?

The supply chain is an area of strategic importance to an organisation due to the significant percentage of overall cost it accounts for. But is it strategic? In the commercial world companies seek to create competitive advantage, lowering their cost base to contribute to their bottom line, ie profit. In the public sector the cost advantage gained through the procurement function contributes to lower costs for the organisation, enabling funds to be diverted to frontline services such as hospitals and schools. This means better value for money for public sector shareholders, ie taxpayers.

Q What is SCM?

SCM is more than managing logistical processes. It is a way of thinking about the business relationship. Some public sector organisations adopt isolated initiatives such as ‘just in time’ replenishment of stock or strategic sourcing without embracing the supply chain culture throughout the organisation. To really embrace SCM, organisations need to adopt best practice methodologies and a supply chain culture supported from the top down. This approach can make a positive impact on an organisation’s efficiency and effectiveness. SCM is more than a tool to simply manage the process. It takes into account all aspects of the events required to assist the organisation achieve its overall aims and objectives in the most efficient and cost-effective manner possible.

Q Where does the procurement strategy sit?

Procurement includes all the business activities from identifying a need through to the use, or disposal, of the goods or services concerned. This is referred to as the procurement lifecycle. Strategic procurement is about how the full life-cycle is managed. It means that procurement must be an integral part of an organisation’s business planning, designed to enhance the work of management and those who deliver services to customers.

Materials, equipment and skills are needed by every organisation to deliver services for their customers. Generally the public sector needs to rely on others for their supply. The role of procurement is to make sure they get the best value for the organisation and customers. SCM plays an integral part in this process.

Q What activities are targeted?

SCM targets specific activities. The primary activities are inventory (or stock), materials management, transportation/distribution, procurement, delivery, outsourcing and strategic supplier alliances. These activities should have specific goals – an objective with a measurable outcome. This can involve performance, cost savings, life-cycles, quality, and customer service, to name only a few. SCM has a record of demonstrating significant improvements in these activities.

Conclusion

It is now recognised and supported by academic research that SCM allows organisations to reduce costs, improve quality, reduce lead-times, and improve organisational effectiveness. A number of strategies act as key contributors to SCM success. These include the integration of logistical/procurement activities, collaboration with partners and others, and enhanced external supplier relationships with key suppliers creating long and lasting partnerships. Such strategies lead to an improvement in quality delivery, performance and customer service. SCM may, however, fail if control is retained by one organisation in the supply chain, if strategic fit is lacking, or if there is a lack of willingness to cooperate for the benefit of all.

By understanding and managing supply risks, implementing longer-term commitments and developing a professionally trained procurement team, senior management can use SCM as an effective and efficient tool contributing to the commercial and operational success of the organisation.

Profile…

David was Head of Supply Chain at the Driver and Vehicle Licensing Agency, and has spent some 25 years in purchasing and contracts within central government. He has been responsible for procurement policy and planning, including the contractual aspects of Better Quality Services, Supply Chain Management and the professional development of staff within DVLA. He is a graduate member of the Chartered Institute of Purchasing and Supply and a member of IPSERA. David also played a leading role in the early development and subsequent implementation of Supply2.gov.uk as a member of both the Project Board and Steering Board, and has accumulated a comprehensive knowledge of its progress from inception to completion.

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