Purchasing directors tend to focus on price. Logistics managers think mostly about uptime, efficiency and responsiveness.
Those two polar opposite priorities can often lead to operational inefficiencies and reduced productive capability, according to a new report issued this month by a materials handling watchdog group.
The report, entitled “Bending the Chain: The Surprising Challenge of Integrating Purchasing and Logistics” was complied by the Global Supply Chain Institute, which is based at the University of Tennessee at Knoxville. Researchers interviewed more than 180 purchasing agents, logistics managers and other supply chain professionals.
Not Speaking the Same Language
What they found is that purchasing and logistics often aren’t talking to each other, according to Mike Burnette, supply chain executive for GSCI. And even when they are, they often are speaking the same language.
“This research suggests that some of the silos have stubbornly persisted,” Burnette told Modern Materials Handling. “This is particularly true with regard to supply chain integration and especially the connection between purchasing and logistics functions. Some companies even still have separate budget lines for the two, which was surprising for me. I didn’t think anyone did that anymore.”
The most efficient companies can minimize their supply chain losses — such as carrying too much inventory, lost time, lack of responsiveness to demand — by incorporating end-to-end supply chain integration that includes purchasing, planning, transportation, warehousing, engineering, order management and quality assurance all under the same umbrella.
This model works for both regional and global operations, where streamlined transportation is even more critical to controlling costs, according to Burnette.
“The best case scenario is that stakeholders in each area all report to the same person and work with common metrics, vision and culture,” Burnette said. “It should all roll up to the same scorecard.”
If that’s not practical, companies should require purchasing directors and logistics managers to at least agree to the same metrics, visions and reward systems.
“This can and should be a short-term solution, since companies are compelled to publish and pursue these practices,” Burnette said. “That way if a champion leaves the role there won’t be any hiccups.”
Getting Everybody on the Same Team
The key is getting purchasing and logistics to work together toward the same goals.
“Some organizations have a sense that warehousing and transportation are on one end of the chain and purchasing is on the other,” Burnette said. “The study’s title reflects an effort to bend those two ends together. We would love to see a holistic solution that makes the supply chain more balanced, efficient and responsive.”
The report found that companies with fully integrated purchasing and logistics share some common qualities:
- They fully integrate all of the functions in the supply chain organization an use the same metrics throughout
- They create a talented supply chain organization that rewards and recognizes those people who show an in-depth mastery of a specific functional area as well as a broad range of skills
- They create purchasing and logistics networks that use decision framework where the best end result is the objective
- They utilize information systems and work process that provide multifunctional supply chain teams with the right tools and data to promote the best bottom-line results.