Driving down supply chain costs will remain a key focus for the Postal Service’s Supply Management group, according to the newly released Supply Management Three-Year Strategic Plan 2010 – 2012 [pdf]. The group set ambitious goals for the next three years, including an annual “SCM impact” of at least 6 percent of total spend and improvement in “operational efficiency” by 15 percent. Perhaps most intriguing to suppliers is the group’s assessment of its Strengths, Weaknesses, Opportunities, and Threats over the next three years. Read on to see those details.
Supply Management used a SWOT (Strengths-Weaknesses-Opportunities-Threats) analysis to conduct an internal assessment. The results are shown below:
Supply Management SWOT chart.pdf
Key among Supply Management’s perceived strengths are its e-commerce process, green purchasing program, spend leverage, streamlined purchasing regulations, and best value purchasing process. For suppliers, the biggest take-away here is “spend leverage.” The Postal Service believes that bigger is better, and that by consolidating its requirements it obtains maximum benefits.
On the weaknesses side, the group lists a variety of ills, including: contract management consistency, internal controls, data capture, employee turnover, failure to take full advantage of flexible purchasing policies, and slow capture of supplier innovation. On the perceived weakness of “not taking full advantage of flexible purchasing policies,” it is hard to imagine how much greater advantage it could take. The Postal Service’s purchasing policies were not issued as regulations and the agency does not believe it is required to comply with them.
Opportunities in the SWOT analysis include: aggressive cost reductions, capitalizing on strategic alliances, and maximizing eco-efficiency in purchasing practices. Contractors are all too familiar with USPS initiatives to reduce supply costs, including the recent Rapid Renegotiation effort which sought price reductions from the Postal Service’s top suppliers. With respect to eco-efficiency in purchasing, the agency’s Green Purchasing Program is likely to become more active in the future.
Finally, key threats listed include: fluctuating fuel and raw material prices, limited competition, supply base reduction in certain market sectors, and negative impacts of reduced budgets on key suppliers. These items demonstrate the Postal Service’s recognition that suppliers have also been stressed by the current economic downturn and years of cost-cutting.