Supply Chain Management (SCM)

Subject: Supply Management

Case Study by Thomas Kingsley

Supply management can be negatively impacted by various factors. For instance, poor inventory management can lead to overspending or waste from obsolete or expired stock. This typically happens when individuals lack the expertise to accurately assess, adjust, and maintain inventory levels that align with organizational demand while staying within budget.

Company Profile:

The company is a small organization with 200 employees. Its main location consists of four buildings, while it also operates three remote offices across two additional counties.

Issue:

Supplies were dispersed across the buildings and offices, with no clear inventory count or understanding of the financial investment tied up in them.

Resolution:

1. Reviewed Inventory Processes:
   • Thomas found excess supplies at some locations and offices, while others had insufficient supplies.
   • In this instance, many individuals were ordering supplies with lack of experience in inventory management.
2. Centralized Inventory:
   • Thomas created space to store the entire inventory at the primary location.
3. Reviewed The Inventory After The Consolidation Of Supplies:
   • Once all supplies were centralized, Thomas categorized and counted the items on hand.
   • Thomas found printer toner that was no longer used because of hardware upgrades. The value of surplus toner was in excess of $30K. Since most of the surplus toner was expired (some expired by several years), this resulted in a loss of capital because the toner can no longer be returned to the vendor for credit.
   • In addition to the excess toner, other supplies were either short on supply or there was an overabundance thus further revealing a broken inventory process.
4. Reviewed Costs With Vendor Account Manager:
   • Thomas scheduled a meeting the vendor to discuss cost. He learned the previous manager never had a meeting to discuss cost since the inception of the relationship. Thomas was able to attain lower supply pricing by simply having a conversation with the vendor to discuss current purchasing levels.
   • After the meeting, Thomas also contacted a General Purchasing Organization (GPO) to discuss supply needs. Since the buying power of a GPO capitalizes on the total number of companies who purchase from them to leverage lower pricing, Thomas was able to reduce supply expense 40% using the GPO. The change in vendor saved his organization $60K annually. The result provided Thomas the money he needed to purchase the tools and supplies the company desperately needed.
5. Built A Standard Operating Procedure (SOP) For Inventory Management
   • Thomas built an inventory management process to ensure supply levels do not fall out of protocol and cost the company excess money.
   • Inventory is now centralized and dispensed in accordance to protocol, and delivered by office delivery personnel.
   • The organization is no longer paying shipping costs to multiple offices, thus saving the organization additional money.

Conclusion:

In this case study, the organization had inexperienced individuals managing the ordering process without oversight, and lacked proper protocols to maintain adequate supply levels. As a result, this led to overspending and waste from outdated inventory that could no longer be used.

Every organization should document its processes through Standard Operating Procedures (SOPs) to ensure consistent and accurate execution each time. In this case study, having proper process documentation and fostering interdepartmental communication would have helped the organization avoid unnecessary spending on supplies. Improved supply management and communication would ensure that funds are allocated effectively for the supplies and tools the organization truly needs.

Another crucial aspect of supply management is the client/vendor relationship. In this case, the lack of communication between the client and vendor led to missed opportunities for securing lower pricing. The failure to recognize the importance of renegotiating supply costs resulted in a significant loss of funds that could have been better allocated to other organizational needs.

Additionally, it’s essential to have cost discussions with vendors at least annually. If there is a significant or steady increase in volume, these conversations can be initiated more frequently. It’s also important for individuals to understand their vendor’s pricing structure, as many offer volume-based discounts. If the contract doesn’t specify volume-based pricing, it’s worth inquiring about it.

Supply management involves analyzing, adjusting, and maintaining accurate inventory levels that align with organizational demand while staying within budget.