By APICS CEO Abe Eshkenazi, CSCP, CPA, CAE | 0 | 0 | May 23, 2014
A new study out from the University of Tennessee (UT) and IBM underscores something many of you have known for a long time: Integrating purchasing and logistics improves business performance. The study also points out that many organizations don’t exploit this potential, instead keeping purchasing and logistics in separate silos.
“Together, purchasing and logistics can account for 70 percent of an organization’s costs and influence 80 percent of its working capital through inventory and accounts payable,” says Ted Stank, UT Bruce Chair of Excellence and an author on the study. “Clearly, purchasing and logistics have a huge impact but often won’t collaborate with each other to make decisions that will positively impact the firm’s overall performance.”
The study, “Bending the Chain: The Surprising Challenge of Integrating Purchasing and Logistics,” included information from 180 supply chain professionals working in a variety of industries in companies that ranged in size from $20 billion to $100 billion.
“Bending the Chain” unveils four best practices from supply chain leaders who have successfully integrated their purchasing and logistics functions:
- Fully integrate all of the functions in the supply chain organization and use common metrics throughout.
- Create a talented supply chain organization that rewards people for in-depth mastery of a specific functional area as well as a broad range of skills that demonstrate a keen understanding of how the entire supply chain operates.
- Create a purchasing and logistics network that uses a decision framework where the overall good of the firm is paramount.
- Use effective information systems and work processes that provide multifunctional supply chain teams the proper tools and information to foster superior business results.
“High-performing companies are able to bend the chain—whose links include planning, sourcing, making, and delivering—to better align the purchasing and logistics functions,” Stank says. “As a result, they are able to serve their customers better.”
Bending and integrating
While you are probably not surprised by the findings of the UT study, how many of the previous best practices are used in your business? The APICS Operations Management Body Of Knowledge Framework describes integration of suppliers, internal supply chains, and customer systems as follows: “The integration of supply chain elements is the essence of an effective supply network. Collaborative planning and sharing of information and data is critical to synchronized, efficient flow of material to the end user of the supply chain.”
If you are not taking advantage of the UT study’s best practices, APICS can help you get started. The APICS Certified Supply Chain Professional (CSCP) designation demonstrates your knowledge and organizational skills for developing more streamlined operations. Consider that since its launch in 2006, more than 13,000 professionals in 77 countries have earned the APICS CSCP designation.
Another important resource for measuring supply chain management performance is the Supply Chain Operations Reference (SCOR®) framework, which was developed by the Supply Chain Council (SCC), and encompasses the plan, source, make, and deliver aspects of the supply chain. I anticipate the merger between APICS and SCC will be final in July, but we already have started planning how the partnership will enable greater access to the SCC SCOR model and its training programs that can greatly benefit supply chain processes.
It’s time for you to take the next step in your career while helping your business’s performance. Visit apics.org today to find out more.