Supply management (procurement)

The term supply management describes the methods and processes of modern corporate or institutional buying. This may be for the purchasing of supplies for internal use referred to as indirect goods and services, purchasing raw materials for the consumption during the manufacturing process, or for the purchasing of goods for inventory to be resold as products in the distribution and retail process.

In many organizations, acquisition or buying of services is called contracting, while that of goods is called purchasing or procurement. The supply management function of an organization is responsible for various aspects of these acquisitions:

Supply management is generally regarded as a systematic business process that includes more functions than traditional buying, such as coordinating inbound and internal pre-production logistics and managing inventory.

Supply management deals primarily with the oversight and management of materials and services inputs, management of the suppliers who provide those inputs, and support of the process of acquiring those inputs. The performance of supply management departments and supply management professionals is commonly measured in terms of amount of money saved for the organization. However, managing risk is one of the other critical aspects of supply management; especially the risk of non-availability at the required time of quality goods and services critical for an organization's survival and growth.

The importance of supply management in global business has prompted the formation of professional organizations to address the need for higher levels of supply management skill and expertise. One of the largest of these is the Institute for Supply Management, a United States not-for-profit association that includes more than 40,000 members. It is affiliated with the International Federation of Purchasing and Supply Management, a union of local and national purchasing associations with approximately 200,000 members.

For companies seeking to fulfill diversity supplier spend commitments, the National Minority Supplier Development Council with 37 affiliated regional councils, was established in 1972 to assist in promoting supplier development of Asian, Black, Hispanic and Native American-owned businesses, and providing management training and capacity-building to minority business enterprises and corporate program staff.

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