2004's Supply Management Buzzwords

PurchTips edition #55


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Why Should You Know What These Terms Mean?

Here are three of this year's top buzzwords and insights into why you should know the concepts behind them.

RFID – This is an acronym for Radio Frequency Identification. RFID chips, which wirelessly transmit data to a receiver, are embedded into products or their packaging. Electronically reading the data from these chips allows for state-of-the-art inventory tracking. To reap various benefits and cost savings, organizations like Wal-Mart and the US Department of Defense have required their suppliers to adopt RFID technology. To serve its customers, your organization may someday adopt RFID. Suppliers now utilizing RFID can be a good resource for you to learn how to implement RFID.

Sarbanes-Oxley Act – This is an Act signed into US law in 2002, with provisions coming into effect as recently as July 2004. This law requires certain new accountability of publicly held companies. Several aspects of the law apply to supply management, specifically, accounting to shareholders for Off-Balance Sheet Obligations (e.g., long-term purchase agreements with suppliers) and Timely Reporting of Material Changes (e.g., a supplier's delay in providing a critical material that may cause your customers to cancel orders or pay later than expected). Though this law primarily applies to publicly-held organizations in the US, senior executives at many privately-held organizations have voluntarily decided to implement its procedures. Your purchasing department is one decision away from having to learn and comply with this Act.

Social Responsibility – Organizations have realized that they are responsible to not just shareholders, but also to the community, the environment, and human beings in general. Social responsibility is an institutionalized commitment to these constituencies. Socially responsible organizations utilize hiring practices that promote diversity, implement environmentally-friendly processes, refuse to make use of child labor, and engage in many other initiatives to maintain a high standard of ethical behavior. Purchasing organizations have begun to mandate that suppliers follow social responsibility rules either to support the purchaser's standards or to satisfy the requirements of the purchaser's customers.

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