Inventory Management to Procurement

In a previous post, I discussed supply chain and the complexity around defining it. It revolves around process improvement for all activities that move your product or service from infancy to the end-user as efficiently, safely, and cost-effectively as possible. Given the definition, supply chain becomes a mindset more than a department within a corporation. Its role in business is changing almost as quickly as the technology that it thrives on. There is a drastic need in this ever-growing field and a plethora of career paths and opportunities to choose from. Some areas within include inventory management, merchandising, lean, demand planning, sourcing/procurement, logistics, and category management and they work directly with manufacturing, engineering, and finance to improve the business. Where supply chain becomes even more exciting is when you have overlap and common goals between those departments. It can help the corporation drastically as well as the career paths of its individual employees.

               From my own experience, in wholesale, retail and consulting environments, I have found a direct correlation between inventory management and sourcing and would go as far to say that strategic sourcing can be considered the backbone of supply chain. The analytical capabilities gained in inventory management can help in any role but the strategy behind each move is key. When you consider forecasting, inventory turns, service level, space/order management, and product flow you build a basis for understanding the importance of budgeting and accountability. Often times there will be tension with how to best capture sales but it is ultimately the job of the inventory manager to promote sustainable growth.

This type of strategic capability can be used throughout the sourcing process as well; including data collection, research, RFx, negotiations, contracting, implementation and continuous improvement. Although the most basic functions within sourcing and inventory management can be tactical and tedious on the surface, in a holistic light they can be strategic. The ability to effectively negotiate the final stages of a sourcing initiative relies heavily on integrity of the data from the beginning stages. The analytics around the POS data in inventory management can be very similar to that of the cost of goods or services data in a sourcing project. With that said, an argument can be made that sourcing is the backbone of supply chain because the steps remain constant from category-to-category, business-to-business. There will be more variability between managing indirect vs. direct spend but sourcing, if done correctly, can be used at any company in any industry.

Again, supply chain isn’t going anywhere! Supply chain is a big bag of tricks and it’s best to see several of the different pieces. You’d be surprised just how much interconnection there is and how much easier change management becomes when you have prior experiences to look back on. For the departments to work cross-functionally there must be some commonality between them and understanding the point-of-view from many will aid in the understanding of the supply chain in its entirety. A separate part of the equation is understanding these concepts from several different business sectors and consulting can be a great approach!