Supply Chain Management…
The essence of business efficiency, cost saving
SUPPLY Chain Management (SCM) is not a new concept.  It has been researched and refined over the past two decades by a plethora of universities and business management pundits around the world.  SCM gained significant momentum at the turn of this century when the Geneva based International Trade Centre (ITC) introduced its Modular Learning System in 34 countries around the world. This system was designed by the ITC specifically to train professionals involved in local and global purchasing, warehousing and inventory logistics to transform the systems they use into a cost efficient operation guaranteed to save a company millions of dollars annually. 

The fierce competition in today’s market is led by advances in industrial technology, increased globalization, and tremendous improvement in information availability.  Modern competition has become competition among enterprises and their purchasing techniques and strategies that are dependent upon the way suppliers are integrated with manufacturers, distributors and retailers.  The key is faster response time to internal needs, or customer demands, or a company’s ability to sustain its services so seamlessly that the end user remains unaware of material changes, of new alliances and partnerships.  

Effective, proactive Supply Chain Management ensures the availability and flexibility of raw material supply and consumables.  A firm gains competitive advantages by performing strategically important activities much more cheaply and better than its competitors, and it becomes able to ‘surprise’ its customers with incrementally better services.  In short, effective Supply Chain Management saves on operational costs, and prevents ‘urgent buying’ at high prices because all purchases would have been planned and researched.

Terms such as coordination, collaboration, agility, supply chain flow cycles, supply chain synergy, flexibility at all levels, intra-organization and inter-organization information flows have become important when managing purchases in today’s business environment.  They have a direct bearing on product quality, delivery lead times and the ability to access more modern equipment and materials. 

Supply Chain Management and Supply Chain Competitiveness have been defined many times over, but those that apply to Guyana’s economic ‘model’ refer to networks of organizations that are linked upstream and downstream in different processes and activities.  SCM also refers to the alignment of firms involved in particular supply CHAINS that bring products or services to the market place.

Competitive edge

Over the years, researchers have concocted a medley of terms and descriptions for Supply Chain Management and Competitiveness.   Gruen (1997) argued that companies may compete if they develop and manage cooperation and collaborative partnerships.  Bernard J. La Londe (1997) identified the customer as the real power broker in the milieu of purchasing, and suggested in a 1993 article in the International Journal of Logistics Management, that intra and inter company information and communication are the most profound and influential changes that affect companies.   He was a strong advocate for the use of the internet and other communications networks to boost competitiveness, and advocated for organizations to be quick, agile and flexible in their coordination with other companies in order to compete efficiently.  Then J.T. Mentzer (2004) posited in his publication, “Fundamentals of Supply Chain Management-Twelve Drivers of Competitive Advantages”, University of Tennessee that competitive advantages could be gained not just through the products sold, but also via the ways in which a firm manages the inflows and outflows of materials in a supply chain. 

It is obvious that a company would not achieve competitive advantages acting alone.  The roles of suppliers, manufacturers, distributors and retailers, information technology specialists and environmental agencies become inimical to business success.

Role of players in the chain

Typically, suppliers operate at the head of the chain to provide transportation facilities, machinery and equipment, consumables and services.  In a functional supply chain, these services must be provided with excellent delivery performance that is based on specified time agreements and consistently improving lead times.  Their stock or inventory must be kept updated and up-to-date in order to fulfill demands and requirements.  Their information technology tools should also be able to evade information fluctuations and enable real-time communication.

Management of time is vital to the manufacturing industry as is the need to maintain production of high quality goods/equipment in pre-set quantities, to create new designs and anticipate the changing needs of their customers.  Manufacturers must also work with state-of-the-art IT systems to control their own operations, identify areas for staff training and reinforcement, and communicate in real time with other players in their supply chains.

Transportation is the main element at the end of the spectrum where distributors and retailers operate.  It is imperative to own or have access to multiple channel transportation as well as emergency facilities in the event of infrastructural failures (roads, bridges) or acts of nature.  Anticipation is also key in the area of storage and inventory that requires well-stocked bonds and modern material handling systems to enable on-time delivery in the right quantities. 

A Thai success story

Chatchai Supprapruth is the first candidate to have obtained the Purchasing and Supply Management Diploma (2003) after passing 15 examinations.  Today he is the Supply Manager at airline caterer Gate Gourmet (Thailand) Ltd.  When he took up this position in 2003 he was handed a formidable task to optimize his company’s purchasing and supply of food and non food items, and increase its competitiveness in a declining market affected at the time by the Severe Acute Respiratory Syndrome (SARS) outbreak.

He undertook a thorough review of the supply situation based on the knowledge that a periodic review of each purchased item is critical. He applied the Supply Positioning Model to reduce costs, leverage purchases and guarantee availability.  This model helps to establish certain strategies for separate items and determine supply risk.  The Thai company recorded significant savings at the end of 2003.

He also applied a standard model to analyse inventory and prioritise certain operations to reduce inventory levels and costs while maintaining a superior service to customers.  His actions solved the problem of excess stock that resulted from a lack of inventory monitoring and the concomitant decline in passenger travel because of the SARS outbreak.  Finally he applied the “Make or Buy” strategy that determined whether it was more cost effective to continue making certain items in-house or to purchase externally.  Outsourcing carrot-based food products from a new supplier saved Gate Gourmet 6% of supply expenditure.  Overall the company was able to save 16% annually that went directly to their bottom line.

Local training for ITC certification

EMPRETEC Guyana began to train Guyanese Purchasing Managers in 2010 to change the fortunes of the public and private sector companies and institutions they work for.  Malcolm Watkins, Procurement Manager and Deputy Director of the Materials Management Unit, Ministry of Health, already has the honour of being the first local professional to hold the MLS-SCM Diploma.  He is responsible for procurement of all health-related products and amenities at the Health Ministry, and manages the Ministry’s warehousing and distribution operations.  Watkins’ ITC MLS-SCM International Diploma qualifies him to pursue an Executive MBA in Purchasing Management offered through the European Institute of Purchasing Management. 

In the meantime, another batch of Guyanese Procurement Managers is preparing to write the September 2011 examinations for the International Supply Chain Management Certificate.   EMPRETEC Guyana is the local organization authorized to conduct the modular courses and Examinations.  EMPRETEC is currently accepting applications for the September 2011 MLS-SCM certificate course which will culminate with examinations in March 2012.