Ten Steps to Better Procurements: Understanding

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Another in the series from our guest blogger Rusty Joerin:

#8 – Understand Your Supply Chain

Understanding your supply chain will avoid costs and political gaffs.

Some of the goods we buy are essential to have available at critical times or if not available essential services are interrupted and costly rush orders result. Many of us are concerned about the providence of the goods and services we buy.

A spend analysis will identify the items most critical to the functioning of the business and those most susceptible to logistical, ethical, and environmental issues. These are the priority commodities to begin an examination of the chain of supply from resource extraction to delivery.

It is probable that some of the issues resulting from the things you buy are not immediately obvious. For example, social networking firm Facebook was criticised for buying electricity from coal fired generators (Oregonian Feb 23, 2010). There are many questions you can ask about the component parts of the supply chain; here are a few of them:

Where are the raw materials mined? Are the workers treated fairly? Is the country politically stable? Are there toxic by-products from the refinement and how are they handled? Are there alternate sources of supply for key raw materials? Natural disasters and extreme weather events happen; do you have a back-up plan for supply?

How are the raw materials and component parts shipped to manufacturers and distributors? Through how many assemblers and distributors do your products pass and are you able to bypass some? Is child labour and/or sub standard work environment evident in the factories that make your products or provide your services? Are the companies involved in your supply chain financially stable?

To better understand your supply chain consider visiting your supplier’s factories and distributor facilities, run a credit check, and research your supplier and their supplier’s operations. A supply chain management professional will provide you with good advice.

Other Posts in the series: How to Add Value to Your Procurements
• Be Proactive
• Analyze what is required – bring clarity to the specification
• Understand the supply chain
• Align procurement strategies with corporate strategies
• Apply the highest standard of ethics
• Use the right tool for the job
• Plan contract management before there is a contract
• Learn from what was done
• Mitigate procurement risks
• Utilize the skills of supply management professionals

Over the coming year, Rusty Joerin, guest blogger, will expand on the above. Your comments are welcomed.

Rusty James Joerin, C.P.P. is a Supply Chain Management Professional and accredited by the Purchasing Management Association of Canada as a Certified Professional Purchaser. He offers procurement services primarily to public sector organizations that do not have a professional supply manager on staff and provides additional capacity to assist with project related supply for those organizations with purchasing specialists on staff.
Information about his experience and qualifications may be found at: www.woodsgift.com