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This is an excerpt of the original article. It was written for the December 2016 edition of Supply Chain Management Review. The full article is available to current subscribers.

December 2016

It’s December and thus time once again for our annual “Executive Guide to Supply Chain Resources.” This is a comprehensive guide to services, products and educational opportunities targeted specifically to supply chain professionals. As with years past, we’re also featuring several articles we trust will offer food for thought in your supply chain in the coming year.

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Supply chain management (SCM) has long been promoted by manufacturers as a way to reduce costs, improve value, and create mutual benefit, higher commitment and long-term viability. However, most organizations in the service sector have been slow to embrace the principles of supply chain management, especially when it comes to the procurement of goods and services. As a result, they leave money on the table by neglecting the numerous benefits that can accrue from carefully managing the supply chain.

In many service industries, procurement is the dominant paradigm for purchasing the items that are critical to delivering the services that define their businesses. But procurement is transactional: Rather than creating mutual benefit, a purchasing agent buys goods directly from a supplier, frequently on a low-cost basis, with little to no consideration to what happens down the supply chain beyond that direct supplier. In that model, negotiations, goods and money move solely between the supplier and the buyer.

SCM involves looking beyond that supplier to managing relationships and product flow with other members of the supply chain such as distributors, manufacturers and transportation providers. In SCM, negotiations, goods and money may move between various parties within the supply chain and not just the buyer and supplier. Incorporating principles of SCM in service supply relationships can increase the quality of the supply, reduce the risk of supply disruption and lower the total cost of materials.

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