Supply Management

The term supply management refers to the act of identifying, acquiring, and managing resources and suppliers that are essential to the operations of an organization. Also known as procurement, supply management includes the purchase of physical goods, information, services, and any other necessary resources that enable a company to continue operating and growing.

Most people consider supply chain management as the way corporations buy raw materials and finished goods. But supply management is more than simply buying products and contracting for services. It is a systematic business process that goes further than procurement to include the coordination of pre-production logistics and inventory management, along with budgeting, employees, and other key information to keep the business running smoothly.

The main goals within supply management are cost control, the efficient allocation of resources, risk management, and the effective gathering of information to be used in strategic business decisions.

Oversight and management of suppliers and their contributions to a company’s operations, for example, should be of paramount importance. Supply management personnel within a company or institution are generally responsible for the following:

• Identifying, sourcing, negotiating, and procuring a service or good that is essential to a company’s ongoing operations according to the wishes of the organization’s leaders and supervisors
• Formulating a strategy for developing and maintaining relationships with suppliers and then executing on it as well as holding suppliers accountable
• Utilizing technology and procedures that facilitate the procurement process
• Considering the theories of supply and demand and what influence they have on supply management.

In many organizations, acquisition or buying of services is called contracting, while that of goods is called purchasing or procurement. The supply management function of an organization is responsible for various aspects of these acquisitions:

• Working with business leaders who have identified a business need or requirement to identify, source, contract, and procure the needed good or service from qualified suppliers
• Managing supplier performance
• Implementing technologies, processes, policies, and procedures to support the purchasing process (Supplier Relationship Management).
• The supplier relationship management process: a process for providing the structure for how relationships with suppliers will be developed and maintained.
• Economic theories of supply and demand

Supply management is generally regarded as a systematic business process that includes more functions than traditional buying, such as coordinating inbound and internal pre-production logistics and managing inventory.

Supply management deals primarily with the oversight and management of materials and services inputs, management of the suppliers who provide those inputs, and support of the process of acquiring those inputs. The performance of supply management departments and supply management professionals is commonly measured in terms of amount of money saved for the organization. However, managing risk is another aspect of supply management, with the risk of non-availability at the required time of quality goods and services for an organization’s survival and growth.

Groups and certifications

Numerous professional organizations have formed to address the need for higher levels of supply management skill and expertise. One of the largest of these is the Institute for Supply Management, a United States not-for-profit association that includes more than 40,000 members. It is affiliated with the International Federation of Purchasing and Supply Management, a union of local and national purchasing associations with approximately 200,000 members.

For companies seeking to fulfill diversity supplier spend commitments, the National Minority Supplier Development Council with 37 affiliated regional councils, was established in 1972 to assist in promoting supplier development of Asian, Black, Hispanic and Native American-owned businesses, and providing management training and capacity-building to minority business enterprises and corporate program staff.

Many certification programs are relevant to the supply management profession. Some are offered through non-profit associations, such as the Certified Professional in Supply Management (CPSM) through the Institute for Supply Management. There are also for-profit companies who offer certification programs, such as Next Level Purchasing Association, who offers the Senior Professional in Supply Management® (SPSM®) Certification.

Supply management is different from supply chain management, though it can be considered a component of supply chain management. Conversely, where the supply management function is established as a C-level strategic effort, supply chain management is but one component of an overall strategic supply management approach. Supply management is a complementary discipline that encompasses the alignment of organizations, processes, and systems for strategic sourcing, contract management, supplier management, spend analysis to continuously improve global supply for best-value performance in support of the strategic objectives of the business.