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New Trends in Supply Chain Management

The eco system of business is changing every day in different aspects, and interruption in production and operations is now being recognised as the key contributor to losses both in the topline and bottomline.
Consequently, availability of material to ensure continuity of production and operations has gained utmost importance in strategic planning in recent times. New age business managers are in apt cognition of the fact that availability of materials is much more important than trivial savings in procurement. This applies more pertinently for low value operational and indirect consumables as against high value raw materials.

In due awareness of this fact, modern purchase managers have started considering supply chain management as a major component of sourcing strategy. In fact, supply chain management has become the prime mover in ensuring onsite availability of material. An efficient supply chain management (in abbreviation SCM), is now considered more significant, especially for low value indirect items. Companies have started investing a lot both in terms of capital and operation expenditure to attain an efficient supply chain management model for low value indirect items.

Larger teams empowered by various modern age IT tools were being deployed to incorporate higher efficiencies in supply chain management by large corporates since late nineties. The concepts of supply chain management came to be slowly understood and it was found to be a much larger subject than perceived earlier. Modern supply chain managers started searching for comprehensive techniques and concepts to manage the wider horizon of this supply management. The cost of managing on-time supplies were going up day by day. The challenge intensifies further, when it comes to managing the timely supplies of low value and indirect items. This is mostly attributed to the large spread of this spend across abundance of categories, geographies, suppliers etc.

The new generation extensive supply chain concepts, e.g., 3PL, procurement outsourcing, end to end ERP integration with suppliers & clients, pre-assembled kits, vendor managed inventory etc. was already in action since late nineties to replace the earlier concepts like two bin system, safety stock management, minimum order quantity and re-order level management etc. All these started adding additional service costs while incrementally improving the supply chain efficiency. But the business managers were yet to catch hold of a concept which would empower them with the required efficiency without adding extra service cost to the system.

The business managers of large corporates are now looking forward to global benchmarks in terms of a cost effective method to handle supply chain hassles of low value and indirect consumables efficiently. Eventually, a cost-effective solution has been identified to manage this toughest part of SCM, which will ensure timely availability of the large numbers of low value & indirect consumables. The large corporates in developed economics are now appointing an aggregated trader in between the buyer and the numerous suppliers of indirect consumables. These aggregators potentially deliver all the benefits of the profound supply chain management concepts like, 3PL, Procurement out sourcing, End to end ERP integration with suppliers and clients, vendor managed inventory etc. at no extra cost to the buyers.

This concept of appointing an aggregated trader is also gaining acceptance and experience much quickly amongst large corporates in the developing economies, owing to the higher cost sensitivity. Large corporate houses are also showing interest in investing resource and time to develop new business lines as aggregated suppliers. The time may not be far for supply chain mangers of large corporates to be free from transactional activities of managing supplies of low value indirect items and investing their rich experience in sourcing better and cheaper raw materials, adding significantly to the bottom line of their employers.

Authored by

Indranil Karak

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