The supply or provisioning is the logistical function by means of which a company is provided with all the material necessary for its operation.
Its concept is synonymous with provision or supply. The activities included in this process are the following:
(a) Calculation of needs: It is an activity typical of logistics planning. The supply needs involve everything that is required for the operation of the company, in specific quantities for a certain period of time, for a specific date, or to complete a certain project. The calculation of the needs is materialized with the orders or the requisition. The supply needs for a given company can be for consumption, replacement, reserve or security, initial needs and needs for the project. Within this activity, the time factor must be considered.
(b) Purchase or acquisition: This activity aims to carry out the procurement of materials in the necessary and economical quantities in the appropriate quality for the intended use, at the right time and at the most convenient total price. The main specific objectives of this activity are: - Maintain continuity of supply; - Pay fair prices, but reasonably low for adequate quality; - Maintain economic stocks compatible with safety and without prejudice to the company; - Avoid deterioration, duplication, waste, etc., looking for adequate quality; - Search sources of supplies, alternatives and locate new products and materials; - Keep costs low in the department, without deteriorating performance; - Study and research new procedures continuously;worry about the permanent training of the personnel; and, keep the logistics manager or general manager informed about the progress of the department.
(c) Obtaining: Obtaining begins with the order and is intended to contribute to the continuity of activities, avoiding delays and stoppages, verifying the accuracy and quality of what is received.
(d) Storage: This involves the location or disposition, as well as the custody of all the items in the warehouse, which is the activity of storing items or materials from when they are produced or received until they are needed or delivered. The main aspects of this activity are:
- Checking the accuracy of your stocks; Maintaining security; Preserving materials; and, timely replacement.
(e) Dispatch or distribution: Consists of meeting the user's requirements, taking care of the distribution or delivery of the requested merchandise. In order for the requirements of the users to be attended to promptly, it is necessary to have the packaging to ensure that the quantities and qualities of the articles or materials are correct. It is equally important in this function to ensure control of the accuracy of the items that are dispatched, as well as the speed of their execution to meet the requested deadlines.
(f) Stock control: As an objective of this activity, we must consider ensuring an exact quantity of supply in the right place and time, without exceeding the installation capacity. Accurate and precise control ensures effective control of all supply items.
(g) Use of waste: This in order to take the most advantageous measures for the company.
Importance
The provisioning function exists from the moment an object or service must be searched outside the company. Among the main objectives we have the following:
- Provide an uninterrupted flow of materials, supplies, services necessary for the operation of the organization; Maintain investments in inventories and reduce their losses to a minimum level; Maintain adequate quality standards; Find and maintain competent suppliers; Standardize items that are acquired; Buy the necessary elements and services at the lowest possible price; Maintain the organization's competitive position; Achieve the supply objectives, ensuring that the administrative costs are as low as possible.
Provisioning
Organizing companies to achieve these goals is difficult because not only do you have to take into account internal needs, but also those of the outside world. Both the procurement department and the traffic of materials have a direct contact in the market and have to respond to your solution.
The fundamental task of the supply manager is to locate reliable and progressive sources of supply, to ensure and maintain their cooperation and interest.
Provisioning considers two important points:
(1) The forecasts in a general plan; and, (2) The terms in the particular cases. Both are reduced to a single factor, time.
In most organizations, supplies consume approximately 20% to 50% of the company's total revenue in merchandise and services. When an organization spends such large amounts of its revenue in a single area, it is important that you receive good compensation for the funds committed. The leveraging effect of the benefits that purchases achieve, acts as a powerful stimulus to rationalize supply.
In every company of certain proportions, there must be a boss or manager of supply (or purchases). The supply manager should focus his work towards the development of strategies, directed towards purchases, the development of suppliers and negotiations, that are consistent with the objectives and strategies of the organization, both in the short and long term.
In the supply area, the manager must be responsible for planning and controlling materials, as well as scheduling production or researching materials and scheduling purchases, inbound and outbound traffic. warehouses, and the elimination of waste, scrap metal or surplus waste, in a way that allows the operation of the company, according to the objectives set. The work of the supply manager should be oriented to seek the maximum use and conservation of supplies. These are obtained through the training and continuous application of a series of standards up to the conservation, maintenance, recovery and the correct distribution and use of all the articles used by the company.
Your needs
Regarding the calculation of needs, the supply manager must consider the company's policy to define on the following points:
(a) Employing foreign or domestic materials in production;
(b) Having or not having stored the raw material to be used or the articles that are produced; and, (c) Apply a purchase system exclusively for cash or credit.
You should also consider the economic or financial capacity of the company to determine higher or lower levels of supply, consumption or reserve, the installed capacity of the company and its level of use, the available labor and the level of installation..
To determine the needs, the supply manager must coordinate with different levels, mainly because this need originates from other dependencies of the company:
With the Production manager to determine:
a) The products that will be required for production operations in the expected volume
b) Frequency with which these products are required, in order to determine when to place orders
c) The quality and type of each item or material to be purchased.
With the Logistics manager to determine:
a) Quantity of items that are in high stock
b) Total and available storage capacity for each item
c) New needs or new forms of product storage
d) Equipment and material necessary for maintenance
e) Capacity of equipment and material for transportation
f) New equipment and material to operate in warehouses
With the purchasing manager to define:
a) Way of maintaining continuity of supply
b) The adequate quality of the items to be purchased
c) Location of new products, materials and supply sources
With the Sales or Marketing manager to:
a) Provide planning data for finished items
b) Necessary dates for each of them
With Accounting with the purpose of knowing:
a) The inventory records that are made to determine the assets of the company;
b) The reconciliation carried out in the inventories
c) The facilities you need each time inventories are made
The Supply Manager must determine the responsibility that corresponds to the purchasing element, as well as the way to carry out the acquisitions with regard to:
(1) Manufacturing during a certain period
(2) Compliance with a certain materials acquisition program
(3) A specific purchase order
(4) The acquisition of certain material that must be kept in stock
(5) Certain volume of money to be spent on a single purchase.
Conclusions
Procurement is one of the basic common functions of any organization, since each of them depends - although to a greater or lesser degree - on the materials and supplies of other companies. No organization is self-sufficient.
Additionally, the person in charge of the supply must have a clear understanding of the role of a purchasing element to make an adequate purchase.
Another fundamental aspect is the selection of suppliers, and for this it is advisable to have clear and above all objective policies. By trying to favor someone we may be putting the continuity of operations at risk.
Finally, it is clear that the supply area of any company plays an important role, and that, above all, it influences in a relevant way its costs and, consequently, its prices, which, in turn, affects the ability to stay in the market and compete. The success of a company, created to offer products on the market, depends to a great extent on the fact that it can achieve a reasonable combination of the quantity, quality, opportunity and cost of the goods or services it produces.
