Wal-Mart, the world's largest company, keeps an average of 12 hours worth of inventory in its warehouses. In 1998, when most PC firms turned over inventory every four weeks, Dell lowered its levels to just eight days. And thanks to greater efficiencies in its procurement system, Cisco Systems saves more than a half billion dollars annually.
The commercial sector has raised the standards for supply chain management so high, order-to-receipt time averages two days or less with near perfect probability. The key to these remarkable results, according to a new book on the subject, "has been internal and external digital integration, including new linkages between logistics, procurement and finance operations."
So why isn't the public sector benefiting from these changes? And what can be done to make it happen?
Transforming Government Supply Chain Management, edited by Jacques S. Gansler and Robert E. Luby Jr., seeks to explain why the business sector and government have diverged on this vital aspect of operations, and how the public sector can catch up.
The book, with chapters written by eight contributors, points out that not every government sector is lagging when it comes to managing supply chains. During Desert Storm in 1991, it took the Department of Defense five months to move its material into position. When war broke out with Iraq last year, the military positioned its supplies in half that time, due in large part to major changes in its supply chain. At the National Science Foundation, a new enterprise finance system cut order-to-receipt time from 20 days to 24 hours, saving the foundation an estimated $1.2 billion in four years.
But for the vast majority of the public sector, the inertia of bureaucracies and other barriers to logistics and supply chain processes have stymied the kind of innovation taking place in the commercial sector. Some of these barriers are cultural, some are legal and others relate to resources, according to the editors.
Part One of the book looks closely at the ingredients that make supply chain management today, how technology has enabled this transformation and the tools available to make it happen. Separate chapters examine the current barriers to transforming the supply chain in the public sector, and offer a vision for modernizing supply operations within government and a blueprint for overcoming the barriers that hold back change.
Part Two delivers 10 case studies on how organizations use supply chain management to drive efficiencies and cut costs. Several examples are from the public sector but are limited to two federal agencies: the Department of Defense and the National Science Foundation. While the editors acknowledge the limited scope of case studies covering the public sector, they point out that to date, there has not been a single governmentwide implementation or strategic planning for enterprise supply chain management. Nevertheless, they feel the lessons offered here -- ranging from General Electric, Boeing, Cisco Systems, Covisint and the Defense Logistics Agency, to name a few -- are valuable to the rest of the federal government, as well as to state and local governments.
Will the pace of change pick up in the public sector? Perhaps, but like so many other transformative issues hovering over government these days, modernizing supply chain management will require leadership at the top to embrace this initiative and give it the highest priority.
In the meantime, we have this detailed book to begin the process.