1.The Supply chain
The planning, organizing and controlling of materials from demand through acquisition to utilization is fundamental to the success of any operational unit. The strategy that has evolved across the spectrum of business is the concept of Supply Chain Management (SCM). This approaches the supply chain process using a demand, supply, storage and distribution model and covers each stage in the process, from determining the need for materials and services to their eventual consumption. SCM is not just the responsibility of the procurement or stores departments, as it requires an effective working relationship between those who require the materials, those who obtain and administer the procurement, those who manage stock facilities and those who supply the goods and services.
SCM impacts the profitability of any materials dependent company. The metrics and numbers should be readily available as timely decisions are highly dependent on the quality of information and ready access to knowledge. This is as important to the supply chain process as to other corporate processes.An efficient organisation needs to be outward looking in terms of what others are doing, best practice, commercial awareness and sector knowledge. This is important in supply chain management where suppliers operate in a competitive marketplace and where the business needs are common across a wide range of the business spectrum.
An underlying principle is that those who need the materials should concentrate on specification, standards, quality, fitness for purpose, dates for consumption, funding and approvals. Those who supply and store them should concentrate on the rest. This requires different skills from a different profession. In this way value can be added on all fronts.
The planning of materials requirements, the agreement of specifications, the sourcing of the materials, the procurement, warehousing and movement of materials are all interrelated and the organisational structure must reflect this. This does not necessarily imply a move towards centralization but does mean a much greater integration of process and responsibility.
Materials Management is the key set of processes and accountabilities that link the demand side with the supply side of the materials supply chain. If all demand is known and predictable and all supply is 100% reliable and as specified, materials management processes can be streamlined and automated within control mechanisms. This is the direction in which manufacturing and retail businesses have been able to take their supply chain management with approaches that challenge traditional materials management practices.
The nature of Utilities business means that there is variability in the demand for materials and supply cannot always be within known and agreed parameters. This in turn means that materials management is key in managing this variability within the economic drivers and constraints of a modern Utility. It is an important consideration in the management of risk for the business. Processes can be efficient and automated but there is still the need for informed decision making and ancillary processes to ensure that the supply chain works and delivers in an efficient and optimum way.