The supply chain has the same objectives as the discipline of POM. This statement may appear like linguistic redundancy. But the point is that in a supply chain the very same objectives get accentuated. The objectives of a supply chain are,
1. Service orientation (i.e. service to the customer) and thus ensuring that the customers gets value,
2. Systems orientation i.e. looking at the supply chain as a whole and not in terms of its constituent parts (partner companies) and
3. Competitiveness and efficiency
The very basis of supply chains has been to provide superior customer service. Service is all about the value that the customer gets, which in turn depends upon his own perception about what constitutes ‘value’ The design, the alignment, the integration of the companies on the supply chain and the coordination between them are all for the customer – the ultimate customer, and these are performed as such.
Systems orientation is at the core of the existence of any supply chain. Synergy due to cooperation and coordination is the main gain of a supply chain. This entails that while getting optimal results for the chain as a whole, the results for the partners on the chain may not necessarily be optimal, these could be less than optimal. But as mentioned earlier, there are substantial gains for all the partners in working tighter. The apparent sub optimal gains for a company in the supply chain could be far better than if it were to operate independently outside of the chain. Moreover, no one is neglected; no one’s interests are undercut.
The supply chain is a business organization. It provides value to the customer while being competitive. Competitiveness is essential for it to healthily sustain itself in order to be able to provide increasing value to its customer. Efficiency is an important element of competitiveness.
Orientation and implementation of supply chain principles within a company:
While all the above discussion was directed at the team of organizations forming a supply chain, the principles mentioned are equally applicable to and should be adhered to by the various functional areas of management within the individual organizations. The intra-organizational principles to be followed are similar to the inter-organizational principles.
The coming together of various constituent organizations as a supply chain does not eliminate the need for the traditional functions within those organizations. These functions do not vanish; they remain. Purchasing function will remain; so would the materials planning and stock control function. Physical distribution management and logistics also has to be there. The need for the marketing function does not vanish just because the partner organizations are all connected. The need for human resources function remains.
The management tools, techniques and analyses discussed on these functions for the traditional (i.e. those that are not a part of a supply chain) would still be valid. The only difference may be that the validity of some of those tools/techniques/analysis could be for a lesser of higher degree for organizations that are in the supply chain. In short, the functions remain, the analytical considerations remain; what would change radically would be the channel relationships, the way the interfacing functions between the organizations on the supply chain would relate to each other (e.g. the way a purchasing function of a company would interact with the marketing function of a partner company in the chain). The intra-organizational functions’ relationships with one another would also have to change significantly.
Purchasing function and Supply Chain management:
Purchasing is one of those functions that are visible to all, as it is at the interface between two organizations. The inter-organizational relationship begins with this function. It has been rightly said that purchasing is the window to the external market. In many manufacturing companies, this is the only function that deals with the suppliers.
Ina supply chain, the interactions between a supplier company and the purchasing company are of tremendous significance. The strength of a supply chain depends upon these interface relationships i.e. between the supplying company and the purchasing company. Purchasing therefore has a major and active role in supply chain management. Hence, purchasing function needs to be revisited in the context of supply chain.