Logistics and Supply Chain Management.
Logistics and Supply Chain Management has been discussed in trade books and textbooks since the past two centuries. The concept of evolution of logistics and supply chain management is of recent origin and has roots in USA.
The first college textbook on purchasing was authored by prof. Howard t. Lewis of Harvard business school in 1933. Prof. Howard t. Lewis also envisaged in large companies need for creation of separate senior level post for control of materials function covering areas like purchasing, inventory control, receiving, inspection, warehousing, etc.
The importance of materials management, improved means of transportation and communication and technological changes in industries brought in the concept of ‘scientific management’ in USA.
Statistical quality control that is SQC found increasing use as the industries started mass production. SQC was adopted by industries in Britain in 1930’s while japan started to use the same after few years.
However, it was observed that senior management of the company is concentrated on other department like marketing, finance, R&D etc. Rather than purchasing, similarly skill staff was also not made available even though purchasing was responsible for chunk of the cost of the goods sold.
The quality of finished product was dependent upon the purchased materials, which in turn also have an impact in the profit of the company.
Between 1960’s and 1970’s is inventory was managed by using “Kardex” system. During this period buyer was mainly focus on “purchase price” and was concerned for continuous production rather than management of inventory.
In the beginning of 1980’s the company started marketing and procuring on international scale. The use of computers was started for the management of inventory. Management started understanding importance of controlling the cost of materials and reducing the overall cost of the product through automation of production process.
Due to this transitions role of purchasing and evolution of logistics and supply chain management function increased in organization. Inventory control leads to increase in profits of many companies. The inventory was control by using technique like just in time (JIT) and computerized materials requirement planning (MRP).
Skilled staff was now being assigned to materials function. MRP action reports replaced Kardex cards. In nutshell, the importance of materials management function was duly understood for the functional success of the organization.
Purchase management started increasing use of electronic purchasing system and Japanese system like kaizen, Kanban, quality circle, etc. Along with this, materials department started having first group of people.
who were mainly responsible for operational part of purchasing and another group of people who were responsible for department of supply function. these second group viz.,
supply managers started taking care of new product development, selecting sources, managing costs and developing strategic alliance with suppliers.
Sometimes, supply managers also participate in strategic planning of an organization. Supply strategy is one of the important strategy for formulating business plan of an organization along with other three strategies viz. Production, marketing and finance.
Objectives of logistics and supply chain management.
In earlier days performance of purchase department was measured on the basis of the change in the purchase price of materials, success in continuously feeding materials to production department and cost of running own department. However nowadays purchase and supply function is also expected to take care of such as,
Procuring defect free materials.
Reducing overall costs of acquiring, moving, holding, and converting purchased products and services.
Reducing the time required to bring new product to the market.
Providing appropriate technology on time and controlling the technology when dealing with outside suppliers.
Continuity of Supply.
Maintaining study materials to avoid in an uninterrupted supply
To sum of materials management is also related to other field of business activities and the other departments in the company.
Hence, materials management staff requires combination of technical expertise, and leadership communication and team skills, which help to achieve common goals set by organization.