Institute for Supply Management™
Official Position Statement
SUPPLY MANAGEMENT INPUT
CRITICAL TO BUSINESS SUCCESS
Official Position Statement:
Because of the important impact of supply management on business results, the top
supply management professional should be recognized as a key source of input and
included in the overall business strategy development.
Purchasing is still at the core of supply management. However, new and evolving roles
are being called for to meet the need for a more strategic approach to the role within
business and the increasingly competitive environment. Strategic supply management
provides that “edge.” It is estimated that 50% to 70% of an organization’s total cost
comes from external purchase of goods and services.
The efficient flow of materials, supplies, and services at the right time and place
streamlines the process and can significantly reduce cost.
Supply management professionals track trends in the marketplace and fluctuations in the
pricing and availability of materials and services. They also identify alternative sources
for supply and are in a better position to negotiate the most effective relationships with
suppliers.
In the more strategic role, the top supply management professional must be in a position
to identify new opportunities and seek supply options at an early stage in the process in
order to most effectively impact the strategic development of a product or service and
have the greatest ultimate impact on the bottom line as a result of strategic relationships
and cost saving materials and methods.
Definitions:
Supply Management – the identification, acquisition, access, positioning, and
management of resources the organization needs or potentially needs in the attainment of
its strategic objectives. Other key components of supply management are disposition,
distribution, inventory control, logistics, materials management, packaging, product or
service development, procurement, quality management, receiving, transportation and
shipping, and warehousing.
Access – gaining use or potential use of something of value. This is often a search and
interpretation role for potential suppliers, potential supply methods and services, and
technologies that could be competitively used by the organization rather than have them
go to competitors. It also means accessing resources and assets available in the market
that the organization either does not have or does not want to invest into in order to use
them.
Acquisition – the act of obtaining which is much broader than buying. It includes
identifying and creating strategies for seeking and using sources. It means developing
appropriate relationships, acquisitioning methods and chain processes that range from
traditional buying to that of enabling others in the organization to develop and manage
the process efficiently and effectively. It further extends to the creation and leadership
role of very broad organization-to-organization interactions (inside and outside the
organization).
Disposition – the act of removing fixed assets and/or inventory items from an
organization’s premises.
Distribution – activities and planning required to move product or service from the end
of production line or point of final development to the customer.
Identification – identifying opportunities in the market place, whether they are new
materials, new technologies, unknown suppliers, or even different paradigms for creating
the organization’s products and services.
Inventory control – the management of inventories, including decisions about which
items to stock at each location; how much stock to keep on hand at various levels or
operation; when to buy; how much to buy; controlling pilferage and damage; and
managing shortages and backorders.
Logistics – the process of planning, implementing, and controlling the efficient, cost-
effective flow and storage of raw materials, in-process inventory, finished goods, and
related information from point of origin to point of consumption for the purpose of
conforming to customer requirements.
Management of resources – by applying a single point of view across many
departments and corporate boundaries, costs, prices, systems and processes can be better
managed leading to improved business performance.
Materials management – a managerial and organizational approach used to integrate the
supply management functions in an organization. It involves the planning, acquisition,
flow, and distribution of production materials from the raw material state to the finished
product. Activities include procurement, inventory management, receiving, stores and
warehousing, in-plant materials handling, production planning and control, traffic, and
surplus and salvage.
Packaging – materials designed and used for production protection and/or consumer
marketing appeal.
Positioning – positioning the organization for marketplace competitive advantage is a
key strategic activity today. Like that of marketing and sales personnel who attempt to
position the organization competitively in the demand marketplace, a mirror role is also
needed on the supply side using macro- and micro-level marketplace intelligence, and
innovation access. This is a greatly enhanced role from that of narrow supply base
assessment, buying, and supplier management. Instead, this includes the leadership and
management of suppliers and extends to that of positively positioning the organization
favorably in the market.
Procurement – the function that includes specification development, value analysis,
supplier market research, negotiation, buying activities, contract administration,
inventory control, traffic, receiving, and stores.
Product/Service Development – functions and processes designed to create and bring
products and services to market.
Receiving – the function responsible for verifying that the goods received are the goods
the organization ordered.
Traffic – activity that controls buying, scheduling, auditing, and billing of common and
contract carriers.
Warehousing – place used for the reception and storage of goods.
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