Procurement Viewpoint

From the major supplier s/OEM point of view, some would refer to the upstream side as the supply chain and the downstream side as the demand chain. This viewpoint is company-centric and should be discouraged. However, it is quite common for companies holding the procurement viewpoint for SCM. It emphasizes, often unrealistically, the company s own importance in the supply chain and overlooks the impact of competitors and multiple pathways to reach a wide range of end-user market segments. 

The logistics view often addresses the outbound downstream side in much the same way as the procurement viewpoint worked with the inbound side. Supply chain improvement focuses on cost reduction aimed at incremental improvements in profit. Typical activities include modeling or automating warehouses, distribution centers, and transportation networks to reduce cost. 

The typical mindset lags far behind what is needed to build great supply chains. First, the supply chain is not usually seen as a source of strategic advantage. But the functions that comprise the supply chain, such as procurement, manufacturing, and distribution, do contribute their pieces to their strategic plans. They do so, however, as functions and not with an integrated supply chain viewpoint. 

His situation calls to mind the discussion in Section 2.1 about different industry supply chain viewpoints. These begin with lip service, where the supply chain label is placed on an existing department with no real change in the scope of responsibility. Other viewpoints do have expanded roles but tend to focus on either procurement or distribution, functions associated with purchasing, warehouses, and transportation. 

Often, the move away from the fxmctional viewpoint begins with efforts to lower the cost of materials. This viewpoint gave rise to the "supply" in "supply chain." In many product-making organizations today, the cost of material is the largest cost component. So, to quote a famous bank robber, management focuses its efforts "where the money is." When you talk of the supply chain, these companies think of suppliers and procurement. 

From the viewpoint of quality, the construction phase is the project crossroads, for it is here that design and procurement activities come to fruition as the plant progressively assumes its physical existence and identity. 

From the customer s viewpoint there is only one lead time the elapsed time from order to delivery. Clearly this is a crucial competitive variable as more and more markets become increasingly time competitive. Nevertheless it represents only a partial view of lead time. Just as important, from the supplier s perspective, is the time it takes to convert an order into cash and, indeed, the total time that working capital is committed from when materials are first procured through to when the customer s payment is received. 

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