Bending the Chain - The Surprising Challenge of Integrating Purchasing & Logistics

Over the last several decades, supply chain (SC) professionals have focused on performance issues that have emerged from a lack of commercial/business alignment with supply chain operations.

Significant improvements have been made, and systemic processes (IBP—integrated business planning—and S&OP—sales and operations planning) have been developed to drive a fully integrated business. As business integration has continued to improve, the biggest SC opportunities have shifted.

Every year, the University of Tennessee’s Global Supply Chain Institute networks with hundreds of companies, requesting information on emerging supply chain issues. Our recent research shows that one of the greatest business integration opportunities is found within the traditional supply chain functions themselves. (“We have met the enemy and he is us!”).

Specifically, we believe a major strategic integration opportunity exists between purchasing and logistics, and failing to capitalize on this opportunity is very clearly causing many firms to miss important opportunities to create value.

Based on our research, we believe it is probable that your firm is organized, measured, and incentivized in ways that essentially prevent you from deriving the full benefits of collaboration. In fact, it is highly likely that your company encourages behaviors that destroy value, both in the short term by sub-optimizing total system costs and in the long term by generating superficial gains from functional cost reductions while failing to leverage asset investments.