The whole world is a family, Indian philosophy stretches it to that extent. Perhaps globalization of business may have been the trigger that caused it. Philosophers all over the world and across the ages have often opined that the whole world is interlinked. A light brush of this philosophical thinking is seen in supply chain management.
It is quite obvious to anybody that a manufacturing factory (or even a service centre) needs to coordinate with its suppliers in order to ensure that it is able or serve its customers. Supply of components, parts and/or services are essential to the running of operations in any business. Such chains of suppliers to factory to customer of the factory have always excited. Even in this 21st century, the traditional tasks will retain their importance as long as a factory (or a service center) has to cater to its customers.
However, what is new is that, currently a huge emphasis is placed on the linkages or ‘chain’ aspect of the process. It is being increasingly realized that unless these chains are strengthened, a company cannot serve its customers and satisfy then and thus remain competitive for long. The coordination of materials, information and financial flows that is seen today has not been experienced in this magnitude before. Coordination upstream and downstream have been there earlier too, but not to this extent.
Supply chains always exited; what is different today is the ‘supply chain thinking’. What happens to the supplier is of as much importance as what happens to the factory itself. So, today one likes to know about his supplier’s problem. One would also like to consider the requirements of the customer’s customer. Only then could one deliver superior service. One would not only like to know about these, but also do something about it. That, is a company would know as to what its supply chain is and then mange it for optimal results for also the chain.
Supplier’s supplier > manufacturing company > customer > customer’s customers > supplier
All the companies in the chain have to gain. Neither can it be solo performance nor can only few benefit, while the others do not. It has to be a win-win situation for all the chain. Competitiveness is not only about an individual company’s performance, but between supply chains.
However, it ought to be emphasized that the traditional functions do not vanish. They do remain. Purchasing has to be there and will be there. Inventory control will be there. Managing depots and warehouses will be there. So will materials handling, transportation and logistics. What changes is the orientation a new outlook of teamwork, the way the managers would look at the participants in supply chain. Managers now look at various functions within the company as linked and not as isolated ones. With this new outlook the insular attitude would go and with it would come needed changes in the systems and procedure that would support the new business logic – the logic of mutual dependency, of partnership and of supporting each other for the greater good of the whole.
Since the traditional functions do remain they will be discussed individually. The techniques tools and issues described therein would be relevant now. However, with the supply chain orientation, there would be a change in the way the managers deal with the issues. Supply chain management is all about realizing that indeed it is ‘chain’ and therefore applying the time tested techniques and procedures with the ‘chain’ in view.
For an organization, purchasing is a window to the outside world. The prime function of purchasing is that of being sensitive to the external supply market situation and also of feeding back this information to the other functions of the organization.