Placement of Supply Management within the Organization

Placement of Supply Management within the Organization

 

Where should the supply management function fit in a firm’s organizational structure?  The location of the supply management department within an entity’s organizational structure greatly influences that department’s ability to function optimally and influence the decision making process involved in effective procurement.  The importance of supply management is determined by four factors:

  • Availability of materials and services – If material is of a strategic nature and its market is volatile, then the group will be give the top level support needed to carry out its functions.
  • Absolute dollar value of purchases – If supply management can impact the bottom line in a profound manner by dollar amount, then it will receive top priority and preferred placement in an organization.
  • Percent of product cost represented by materials and services – similar impact as the absolute dollar amount of purchases
  • Types of materials and services purchased – If material and services are of a strategic nature, they will receive more emphasis by a firm looking to control its costs.