The role of supply chain management in national and corporate competitiveness
Many nations worry about insufficient funding to actualise their development plans. Corporate entities also face dwindling profits due to stiff competition in the market place. Nigeria’s 2018 budget stood at N9.12trillion after being raised by the National Assembly from N8.61trillion. However, this improved budget compared to the developed countries is grossly insufficient to deliver developmental projects to the citizenry. This is why government is making efforts at diversifying our economy to increase the GDP of the country.
Empirical evidence has shown that up to 75percent of this sum is spent on the acquisition of goods & services. Funds that we need will never be enough but what is paramount is the need to spend what we have in the most prudent manner, culminating in strong cost control and robust financial discipline. That is what makes good governance and by extension engenders success of a nation. In other words, cost reduction is of necessity in the face of inadequate funds. As it is in matured economies, the supply chain practitioners are playing prominent roles and being challenged to develop strategies capable of reducing cost and improving positive margins. The primary focus of this article therefore, is to demonstrate how Supply Chain Management (SCM) practitioners can play such roles effectively in their respective organisations and institutions.
In today’s world, what keeps most CEOs awake are the challenges of increasing value creation, growing the business, higher profit potentials, reducing costs, managing stakeholders and ensuring sustainability. These challenges are the cornerstone of SCM job descriptions.
In the not too distant past, Procurement and Logistics experts were looked down upon as a cog in the wheel of progress of most companies thereby non-performers were placed at the heart of the company’s business. Procurement practitioners were perceived as merely price cutters, stock keepers and disposal officers. In today’s world however, the trend is vastly reversing because of the huge sums entrusted into the acquisition of goods, works and services and the need to be prudent so that little funds can deliver mighty works. SCM professionals and practitioners are now at the helm of affairs of many blue chip companies making serious decisions and partaking in corporate politics. They have become the anchor to success of their organisations. Today’s practitioners must therefore have sufficient skill set and product knowledge to excel in their trade and gain respect of their counterparts in other professional departments in the company. This is the whole essence of Category Management and Integrated Supply Chain Management. Seasoned SCM practitioners should continuously create value to the business through a number of critical paths:
a) Ensuring sustainability of the supply base
When an average citizen eats a bar of chocolate what does he worry about? Many will argue that he worries about the taste. Well, the Category Manager will worry about the continuity of supply and how the cocoa producer can keep the quality in his faraway country. In the event of a political crisis in the source country, there will be no chocolate to produce by the manufacturer if total reliance is kept on that grade and type of cocoa without ensuring continuity of the supply base. A competent SCM practitioner will worry about how to support the farmer to avoid drought in his farm land. He must assist the Production Director to ensure consistency in the same taste profile irrespective of where the cocoa beans are grown. Conversely, the interest of the farmer has to be sustained because as time passes by, he may no longer see cocoa as a profitable business thus he might diversify into growing another crop. The role of the SCM practitioner in this stead is to focus beyond reducing cost but ensuring that the company remains a going concern. In other words, he will ensure that the manufacturer does not stop producing.
b) Managing supplier risk index
Globalization has added another complexity to the growing trend in supplier risks management. The increased focus on sustainability and regional regulations undermines perceived benefits in the local market because trading in the international plane had widened the gap of price and quality of service.
c) Driving efficiency through the value chain
National development cannot be achieved in quality time if in most government entities non procurement experts are responsible for managing budgets which in turn leads to low budget performance. This is a fundamental issue with service delivery. Empirical evidence suggests that the Nigerian budget is usually not released until late Q’1 or Q’2 in most years. This leaves only six months or so to deliver contracts. In some instances, it takes an average of four months from enquiry to goods delivery; therefore the people suffer due to poor budget performance.
One of our greatest problems today in Nigeria is non-coordinated supply chain. The provision of road transport is not seamlessly linked with nodal networks like rail and marine transportation. Integrated supply chain is somewhat missing in our developmental chart. A big contrast is in the developed world. Preparation for the London Olympics, for instance, started even before the UK gained the rights to host the event. For those conversant with London, you will notice that the Mayor introduced a pay to train system whereby you park your bike at the tube station and retrieve it at the close of business. Similarly, people are encouraged to bike within the city, to keep fit and healthy, save cost, reduce congestion and reduce pollution. The benefit of this singular idea makes a greener, cleaner and healthier city.
The Supply Chain profession is gaining steady strides in matured economies globally. The UK government in 2010 appointed a senior cabinet member directly responsible for government spending. The Prime Minister was quoted as saying that “procurement is in the heart of government business and efficiency drive’. Former US President, Barak Obama acted in similar manner by appointing a minister to manage Procurement Spend. The closest role to these in Nigeria is the seat of the DG Bureau of Public Procurement (BPP). However, the BPP should be empowered to play the role of national custodian of professional supply chain management.
Furthermore, the Public Procurement Act 2007 needs to be fully implemented. A fundamental requirement of the Act is the establishment of the National Council of Public Procurement whose mandate is to set policies on public procurement, consider, approve and amend monetary threshold. The Federal Executive Council regularly plays this role.
…. To be continued
Bola Afolabi, PhD, FCArb, FCIPS
Bola Afolabi is a Supply Chain Management Leader. He is a Fellow of Chartered Institute of Procurement and Supply, CIPS and also Fellow of Institute of Chartered Arbitrators. He is the President/CEO of Canal International Services