What is Supply Management?

Supply management is a term that is used to describe the processes used by many companies to acquire, inventory and distribute items that are used in the ongoing operations of the business. The process of supply management is concerned with the raw materials used in production as well as office supplies, components for machine repair, and any other items that are used internally for the ongoing function of the company. A major goal of effective supply chain management is to balance the need to have items on hand when required with maintaining a smaller inventory, allowing the company to carry less overhead.

For many companies, the supply management process begins with a central purchasing department or group. This group actively coordinates the purchase of raw materials, replacement parts and supplies, and even items such as copy paper, pencils and printer cartridges. A purchasing group will seek to find cost efficient vendors and establish relationships that allow the company to purchase items either on an as-needed basis or on a pre-determined schedule that can be amended if necessary. The group then coordinates delivery of the items so that they arrive at plant facilities shortly before they are needed.

For many people engaged in supply management, a time-honored concept that governs the overall process is known simply as usage. Usage refers to the number of units of a given item that are routinely used within a given time frame, such as one calendar month. Determining the average usage is helpful to the supply manager, as it makes it possible to project when the current supply will be exhausted and it will be necessary to order more units for delivery shortly before they are needed.

By coordinating the purchasing with usage, the supply management process accomplishes two things. First, the process makes it possible to design and remain in a workable budget, ensuring that the materials and other items needed to keep the company functional are always present. Second, effective supply management also makes it easy to practice responsible inventory control, keeping the number of units on hand of any given item within a certain level and thus minimizing the tax burden companies pay on raw materials, goods in process, and finished goods.

In times past, the supply management process relied heavily on a manual recordkeeping process that tracked the ordering, reception and disbursement of every item acquired for company use. As part of these manual records, calculating usage based on the issue dates to different departments within the company was essential. Today, supply management software handles many of the calculations automatically as receipts and disbursals are posted into the database. This makes it possible for supply managers to quickly run reports that indicate what items should be reordered over the next week and how many units of each item should be ordered.

Some of the more robust supply management software programs are even capable of creating electronic and hard copy internal order approval forms, such as requisitions that are forwarded to a central purchasing department and assigned an invoice number to be referenced on the actual order. Software of this type can often create order fulfillment forms and distribute copies to authorized departments once the materials are actually received at the site where they will be used.