NAPM InfoEdge
March 1998, Vol. 3 No. 7

Understanding Supply Chain Management

Table of Contents
  • Defining and Understanding Supply Chain Management Members Only Content
    What is supply chain management (SCM)? It’s important to have a common definition of supply chain management. The NAPM Glossary of Key Purchasing Terms offers the following definitions:

  • Strategic Considerations Members Only Content
    There must be a close tie between overall organizational objectives and the objectives of the supply chain. To better demonstrate this point, it is helpful to consider the book, The Discipline of Market Leaders, by Michael Treacy and Fred Wiersema. This book describes three distinct ways in which companies compete; these factors can be taken into account when forming the supply chain team. They include:

  • Adding Value in the Supply Chain Members Only Content
    Once you have laid the groundwork of establishing business plans, obtained senior management support, defined the roles of the players, and determined which supply chain commodities or services to address first, it’s time to begin defining your key cost drivers. The objective of defining the cost drivers in the supply chain is to allow the team to focus on those areas that present the greatest potential for success. A tool called the "Two-Way Supply Chain Matrix" can assist in this effort. Each matrix would have different elements, but the exampleson page 10 and 11 cover some of the typical key cost drivers for materials and services. To complete these, get your team together and ask questions about the cost drivers that occur across and down the entire supply chain. Be sure to include input from your first- and second-tier suppliers. You may not be able to quantify the actual costs in each of these areas, but identifying the most significant ones is critical.

  • Measuring Performance throughout the Supply Chain Members Only Content
    A measurement system must contain several critical elements to be effective. These include:


Stephen L. Kesinger, C.P.M.
Stephen Kesinger founded The Kesinger Group in April 1997. The firm’s areas of specialty include procurement training, leadership and facilitation for cross-functional supply chain teams, process analysis, and strategic alliance development and implementation.

Mr. Kesinger was formerly director of procurement for Houston-based American Ref-Fuel Company, and from 1994-96, he served a dual role, also serving as director, management information systems. Mr. Kesinger also worked for Shell Oil Company, where he received a special recognition award for his efforts in developing and implementing world-class procurement.

Mr. Kesinger holds a bachelor’s degree in business management from Eastern Illinois University and is currently pursuing a Ph.D. in business management from LaSalle University, which he expects to complete in 1998.


Schneider, W. The Re-engineering Alternative, Irwin Professional Publishing, 1994

Treacy, M. and Wiersema, F. The Discipline of Market Leaders, Addison Wesley Publishing, 1995


Block, P. Flawless Consulting, Pfeiffer and Company, 1981

Lewis, J. The Connected Corporation, The Free Press, 1995

Ostrega, M. The Ernst and Young Guide to Total Cost Management, John Wiley and Sons, 1992

Purchasing Today®, October 1996, November 1997, and March 1998.

Schwartz, P. The Art of the Long View, Doubleday Currency, 1991


The Internet is an excellent tool for helping to improve supply chain performance. The Internet can be used in supply chain management to assess supplier financial condition, to research best practices, to obtain marketplace data and trends, to find potential suppliers, and a variety of other information.

NAPM’s Web site ( contains a searchable database of articles. From the Home page, click on "Members Only" and then on "Articles." From there, you can search for articles of interest on supply chain management and other topics.

Following are some additional Internet sites:

Supplier information:

Miscellaneous: (Association of Contractors and Builders) (American Metals Market) (price/cost data) (best practices) (the Competitive Intelligence Guide) (Bureau of Economic Research) (the Society of Competitive Intelligence Professionals) (the Supply Chain Council)

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