Briefly discuss the three trends that make supply management so critical in today's business climate

Question

What will be an ideal response?

Answer 1

Answer: Several trends have pushed supply management to the forefront of the business consciousness: the changing global competitive landscape, the financial impact of supply management, and its impact on performance dimensions.
The first trend, the changing global competitive landscape, is best summarized by the statement that firms do not compete only against global competitors, but also against their competitors' supply chains. In order to compete globally, you must purchase globally from world-class suppliers. The financial impact of supply management is best illustrated by two numbers, the percentage of purchased materials that go into shipped materials and the profit leverage effect. For most manufacturers, over 50% of the value of shipments comes from materials, and for some services, the number is much higher. The profit leverage effect illustrates the value of not spending a dollar; the firm needs to sell far more than a dollar to make up for a dollar spent due to taxes. Finally, purchased goods and services can have a major effect on other performance dimensions such as quality, delivery, and the ability of companies to exploit new technologies. Purchasing can also help an organization incorporate state-of-the-art technologies into its products and services.