Matt Narens is a Category Development Manager within the Facilities Vertical at Corporate United and was recently named a 2017 Pro to Know by Supply & Demand Chain Executive.
The supply chain community is faced with both industry challenges and internal challenges within their own facilities. Inventory and supplier management are central themes that facilities and their supply chains will continue to try to improve upon this year. Two important factors will make this even more challenging in the near future:
- Limited internal resources
- Uncertainty surrounding the new president and his administration.
MAKING THE MOST OF YOUR RESOURCES
Additional internal resources will be hard to come by for supply chain departments in 2017. Supply chain will continue to be expected to do more with less and to show large return on investment with the resources that they currently have. Directives from C-Suites across corporate America are calling for increasing ROI from existing assets.
Managing indirect spend is an area that tends to be an afterthought and is often left unmanaged. If supply chain is to align with broader corporate strategy, this can no longer be the case.
Areas like MRO and energy for instance, can and should be managed more strategically. Even with limited internal resources, supply chains can leverage their suppliers as partners to create opportunity for savings and efficiencies. The resulting increased margins and improved cash flow will transform these areas from drains on resources into examples of increasing supply chain’s ROI.
In energy, utilizing a strategic partner to perform supply audits and rate reviews provides immediate and long-term savings by ensuring that utility rates are appropriate for load profiles. Additionally, they ensure that only appropriate taxes are being paid. Working with a partner on peak load, or demand management, can result in long-term savings in exchange for scaling back energy use on just a handful of summer days. A qualified partner will advise supply chain on exactly when these opportunities exist and how to take advantage of them.
As is common during an election, major corporate investments are often put on hold pending the results of the election. As President Trump’s policies will be dramatically different from those of the previous administration, the theme of “wait and see” before making investments will likely hold through 2017. Given this environment, it is more important than ever to manage programs within supply chains that leverage each of the involved parties’ core competencies.
Within MRO, for example, tail spend is a big challenge and leads to increased costs of inventory. Advancements in MRO, such as vending and onsite solutions offer decreases in inventory consumption of over 30% and have the advantage of suppliers carrying the inventory cost on their books until the time of consumption. Again, this allows facilities to focus on their core competency, which is especially important in this uncertain environment.
These types of projects not only help supply chain teams focus on areas more central to their business, but they also result in hard dollar savings and smarter buying.
ALIGNING STRATEGIES TO CREATE OPPORTUNITY
These initiatives can be undertaken without cost through effective supplier relationship management. When suppliers innovate, both the procurement department and the spend stakeholder end up with available resources. Leveraging a GPO to perform this type of supplier relationship management further reduces the impact on supply chain’s resources, thus increasing ROI; a perfect fit for today’s broader corporate strategies.
When a group purchasing organization is particularly adept at leveraging supplier innovations and managing the full category lifecycle, members will effectively reduce the burden of program management that so often ties up supply chain resources.