Expectation that top management in companies – both in private and public sector – places on supply is growing exponentially, mainly because of the permanent drive to lower cost and retain competitive advantages on the market, but also to create additional value. Research has shown that the perception of impact of supply chains on the results of businesses will grow in the future, taking a more prominent role in company structures over time.
According to research conducted by Monczk (2010), there is a strong indication that top level managers will be included in the supply chain much more in the future, mainly in the form of adding value through supply than in cost reductions. Top companies are already focusing their efforts on supply chains in the process of making business plans, and consider that better supply management can lead to better results in all branches of the company (Kearney, 2002). According to Dwyer (2010) there is evidence to show that companies allocate larger amounts of expenditure towards supply. This means that supply chain, besides raw materials, maintenance materials and other functions takes an increasingly prominent role in decision making regarding machinery, construction/acquisition of property and related equipment procurement. Top management in leading companies, almost without exception, finalises decisions concerning supply in over 70% cases – excluding salaries – which led to nearly 10% cost reduction (Dwyer, 2010). When compared to companies where management finalises up to 40% of costs, the difference is obvious, the latter has shown only 1% cost reduction.
Supply is slowly coming to the forefront of business management, and corporate leaders everywhere begin to realize how beneficial it is for the success of their companies. This paper will try to evaluate how successful companies manage internal supply and external demand, and whether or not this has an impact on the final result of their companies. In line with the evidence found in the literature, this paper will try to prove that successful supply management results in better business results, and additionally significant cost reductions.
Supply – from operative to strategic business function
For a long time, most businesses regarded supply as a function that was meant to gather and process demands from other business functions – processing, manufacturing – summarize them, contact the supplies and choose the best offer from several on display. Considering the development of this branch of business, many authors developed different models which interpreted the shifting role of supply within the general business strategy. This summary will briefly look at two such models, that of Reck/Long and Stannack/Jones.
Model of development by Reck and Long (1988) states that the first development phase of supply chain focuses only on procurement of goods and services. In this phase, supply chain collects requests from other divisions/departments,...