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The key objective of the current paper is to consider the concept of supply chain management and its usage for procurement. It should be noted that each product or service that is delivered to the final consumer represents the efforts of many organizations. The sum of these organizations is considered as the company’s supply chain. It should also be mentioned that most companies do not pay attention to the importance of supply chain, focusing on their internal environment. Many companies do not understand the entire range of supply chain activities.
Therefore, supply chain management refers to the work of responsible people to manage the entire range of supply chain activities in order to maximize the company’s income and achieve long-term competitive advantages. It means that the supply chain companies purposely organize and develop supply chain activities to maximize the customer’s value.
“Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities” (Handfield, 2011).
It is also noteworthy that the companies included in the supply chain are connected by physical and information flows. Physical flows are the visible side of supply chain activities. “Physical flows involve the transformation, movement, and storage of goods and materials” (Handfield, 2011). Informational flows are also very important since they allow companies to coordinate their efforts to manage the supply chain in the most effective way. As it is known, each company has to consider a lot of production factors to start its activity. These factors include land, capital, labor, and entrepreneurship talent. Thus, the process of buying products or services is often called procurement. “The process includes preparation and processing of a demand as well as the end receipt and approval of payment” (“Procurement”, 2014).
This process commonly involves such stages as planning of purchases, determination of products’ characteristics, research of available suppliers and their selection, value analysis, etc. That is why the process of procurement is very important since the company needs to find reliable suppliers, which provide high-quality materials and products. In order to organize the process of procurement, the supply chain management is often used. It usually consists of several stages, including analysis of accessible suppliers, evaluating each supplier in terms of general company’s efficiency, choosing the most attractive suppliers, and others.
It is also noted that the suppliers’ location is very important for the company’s management team final decision. The company needs to organize the supply chain for procurement in order to minimize the transportation costs. The quality of products provided by suppliers is also important in the process of making a decision.
At the first stage, the company’s management team should evaluate the quality and quantity of required materials. This analysis should be based on the forecasted demand for the company’s products and, as a result, the future total sales. The supply chain management for procurement should also be based on the company’s general business strategy that clearly identifies the company’s mission, long-term objectives, and future company’s position at the certain market.
After identifying the amount and quality of required materials, the process of finding the needed suppliers begins. Many indicators are used to choose the most attractive suppliers for the certain company.
To conclude, it is noteworthy that the supply chain management for procurement is a difficult process that may significantly affect the company’s future effectiveness and its profitability. Therefore, there are many specialized companies that provide such services in order to organize the client’s supply chain management in the best possible way.
Handfield, R. (2011). What is supply chain management? NC State University. Retrieved from http://scm.ncsu.edu/scm-articles/article/what-is-supply-chain-management
Procurement. (2014). Business Dictionary. Retrieved from http://www.businessdictionary.com/definition/procurement.html