Procurement Contract and Procurement the Supply Chain

Procurement

Contract and Procurement

The supply chain is one of the primary ways in which an organization adds value to the consumer. However, this process can be different based on the industry. For example, the service industry and manufacturing industry can add value through supply chain management in different ways. Value can come from design, quality, price, or efficiency. In a manufacturing environment most modern organizations tend to try to keep inventory levels as low as possible to reduce inventory overhead as well as the risk of obsolescence. However, in the service industry the supply chain may be optimized differently to ensure that the needed service supplies are always in stock without any real risk of stock-out.

Supply chain management has become a complex and technology-driven discipline yet many leaders pay little attention to SCM as a strategic concern and hire individuals with little SCM training, which limits the organizations ability to use this function to improve the overall performance of the organization (Slone, Mentzer, & Dittmann, 2007). One example of the technology driven procurement is the advancement of radio frequency identification (RFID) technology that has implications for any industry that deals with spoilage such as many of the food oriented businesses in the service industry. One interesting application for the use of RFID in these industries has been identified to be in the tracking of perishable items (Chande, et al. 2005). This allows managers to ensure that their products are fresh and minimize and risks of the inventory perishing. This could also be applicable to other service industries such as the medical industry that must ensure medical devices are protected and monitored at all times.

The manufacturing industry generally has different priorities. Although some procurement materials might be prone to spoilage, it is at a lessor rate than many businesses in the service industry. This industry has now tried to maintain as small as inventory as possible to minimize inventory holding costs as well as the inventory becoming outdated or obsolete. The manufacturing revolution began with total quality management and evolved into different ideas of the premises found in this manufacturing philosophy. In fact, in the beginning of Six Sigma's development, many business professional felt that it was just another fad that was that was built upon a model that was basically Total Quality Management (Basu & Wright, 2012).