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Supply Chain Management Doesn’t Belong in the Finance Department

Supplier capability can’t be summarized by a small group of performance numbers reviewed on a spreadsheet, from behind a desk.


SUPPLY CHAIN INITIATIVE-At a recent manufacturing event, I sat in on a presentation that focused on the need for supply management to communicate and coordinate with other parts of the company.

The speakers made a lot of good points. I agree that communication is important. But in my experience, that puts the onus for better collaboration on the wrong foot.

I’ve seen supply chain managers make the effort to reach out to other company leaders, but the love doesn’t flow in the other direction. Outreach from other functional areas tends to be scarce. Why? Because purchasing tends to be regarded as tactical; its leaders don’t have a seat at the strategic-planning table. Consequently, any effort on purchasing’s part to reach out tends to be stonewalled or otherwise disregarded.

This lack of collaboration is based on thinking that purchasing tends to need only a sole focus on piece price and for this reason can only provide incremental (at best) financial impact to company financials.

If you are a regular reader of my columns, you see I believe this needs to change for organizations to maximize purchasing’s positive impact.

The presenters also said that some of the best supply chain leaders are found in the finance department, noting that only supply chain and finance have end-to-end visibility of a company’s entire value stream.

I would argue that the visibility finance has into their company’s value stream is very limited. Why? In most organizations—again, from my experience—finance only submits executive-level financial exhibits related to piece-price reduction, internal costs due to poor quality and costs associated with operational downtime due to late shipments.

Purchasing professionals know that these three metrics give very little visibility in the actual capability of individual suppliers, particularly since those metrics can be “gamed.”

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Article Credit: IW

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