It's a supply chain war
Doug Smock, Editor-in-Chief -- Purchasing, 7/15/2004 2:00:00 AM
"The real battle is between competitive supply chains, not just competitive companies and sourcing and logistics professionals," says Steve Rogers, former top buyer at Procter & Gamble. Supply chains are purchasing and logistics professionals working together toward common goals. And they are doing so more than ever, according to a new Purchasing survey (see cover story on page 44.)
Why? The opportunities for savings are probably greater in logistics than in any other single cost area. Logistics was always more of a tactical function and was often separated from purchasing, which in the past three years especially has become much more strategic.
Several other factors are also fueling the trend toward greater purchasing involvement in the transportation buy. One is soaring freight rates, triggered by increased demand and rising prices for fuel. Another factor is global sourcing. A third is availability of new technology that allows route simulation/optimization and expressive bidding on complicated freight lanes.
One of the top practitioners of the collaborative model is Quaker Chemical of Conshohocken, Pa., which launched an initiative called "Proactive Purchasing" that puts focus on evaluating and reducing the total cost of purchased products. There are three pillars to the program: initial piece price; holding costs; and freight savings that can be achieved through load consolidation to truckload, improvements in inventory costs or through other strategies. The project is driven by a new nine-person, cross-disciplinary team called Supply Chain Development that is headed up by Quaker's director of global purchasing and supply chain.
One advantage of the group is that it can examine trade-offs not possible when logistics is operated separately from purchasing. Example: Quaker may take a penalty on inventory costs by placing fewer and larger orders, but could possibly more than make it up through reduced freight charges.
Please also take a moment to read the article on contract management in this issue (starting on page 60). For those organizations that have spend and category management in good shape, it's important also to put in place a good contract management program. A good contract repository allows better enforcement and gives other divisions of your company, as well as legal and finance, visibility into contracts. Implementation of Sarbanes-Oxley anti-fraud legislation this year likely will also require better contract visibility.
Director of Supply Chain Development
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