ABSTRACT
The acquisition of the raw materials, components, and Þnished goods necessary to service channel network and end-customer demand resides at the very core of supply chain management. Whether manufacturer or distributor, the timely acquisition of inventory is fundamental to competitive advantage. Without sufÞcient inventories the wheels of manufacturing would slowly grind to a halt, and distribution pipelines would quickly run dry. Besides providing the goods necessary to meet customer demand, the procurement of inventories also directly affects company Þnancial stability and proÞtability. Depending on the nature of the business, procurement and services costs can range from 40 to 80% of each sales dollar. To understand the impact of these costs, if, for instance, a Þve percent overall reduction in the procurement costs of a typical company could be achieved, it could represent as much as a 50% improvement to the bottom line. To achieve a similar impact, the same company would have to increase sales by 50%, cut overheads by almost 20%, or dramatically cut staff. From such Þgures it is easy to deduce that the effective management of procurement transcends the traditional mechanics of supplier sourcing, buying, and receiving: procurement is a strategic supply chain function that seeks to integrate and synchronize individual company inventory needs with total channel material ßows, trading partner productive capacities, transportation, quality, marketing, Þnance, and global sources of supply.
