Five Questions I Wished People Asked Me About Public Sector Supply Chains

Special Guest Blog Post written by Gary Smith, CPIM-F, CSCP-F, CLTD-F, Author of “The Bridge,” Supply Chain Engineer, and Educator 

1. Do Supply Chains exist in the public sector?

The short answer is “YES!” I spent the first 25 years of my career in the private sector where I worked in warehouse operations, industrial engineering, and consulting, all in the logistics andsupply chain area. I cut my teeth on retail, automotive, chemical, food and beverage, publishing, and manufacturing. During that time, I also completed projects for the public sector in education and for the Department of Defense. In 2005 I was named Director of Supply Chain Operations for the New York City Housing Authority (NYCHA). We operated a 200,000 sq. ft. warehouse that shipped repair material to 335 developments in New York’s five boroughs. In 2013, I was named Vice President of Supply Logistics for New York City Transit, the largest public transportation organization in North America. We operated over 1.5 million sq. ft. of warehouse space covering all of New York City.

Several years ago, I was on a national committee for the Association for Supply Chain Management (ASCM). We created this elevator speech to describe Supply Chain Management.

“Every organization has a supply chain.  The most effective and efficient ones are closed-loop systems for moving, storing, and configuring products starting with raw materials and ending with a satisfied customer.  Whether it is moving information or physical goods, nothing happens until something moves.”

I think it fits the bill.

2. What problems do public sector supply chains experience?

Public and private sector supply chains face similar problems. All businesses operate on three levels, tactical, operational, and strategic. Tactical management focuses on those issues that occur day to day or are less than a year in length. Operational management concerns itself with the areas of business that affect efficiency and organization. Strategic management defines the organization’s goals and develops plans to attain them over the long term. Tactically public sector supply chains deal with budgets, inventory accuracy and investment, and workplace safety. Productivity is managed through budgets. Inventory accuracy, investment and safety programs provide guardrails to ensure that corners were not cut. Operational level supply chain management focuses on risk and customer satisfaction by making sure that material is received and orders are delivered on time. Finally, strategies are built around retaining good people and implementing change that lasts. The best way to keep good employees is to maintain a high level of engagement. Public sector managers can do this by keeping people well trained and promoting them from within whenever possible. Real change, change that endures, it cannot be implemented from the top down, it must be believed in and accepted by the people that are charged with implementing it. Once that happens lasting change is given. Again, this starts with education and communication. Managers must be both the communicators of change and the teachers.

3. What type of training would you like to see in public sector supply chains?

When I was at NYCHA and the NYCT we had some very dedicated professional trainers.

However they were focused on soft skills such as conflict resolution, managing across cultures, clerical skills, and office management. The hard skills they taught included budgeting, timekeeping, safety management, and customer service skills. None of the courses they offered had anything to do with the supply chain or even how to use our software. Supply chain employees at both NYCHA and at NYCT did not even realize that what they were doing was supply chain management. When I was able to arrange for outside training from ASCM and the Institute of Supply Management (ISM), a professional organization focused on procurement, they were amazed that companies in the private sector had problems like theirs.

Public sector organizations need to see the value of professional organizations such as ASCM, ISM, and CSCMP. Public and private sector organizations and their employees need to learn the value of professional organizations. They are a great source of training. Today change occurs at an exponential rate and the skills we learn today are outdated in a few years. It is important for people to improve and reskill themselves and for companies in both sectors to support their employees by keeping them well trained and engaged.

4. What incentive does the public sector have to be efficient?

One of the first books I read about the public sector was “We Don’t Make Widgets” by Ken Miller. In it he makes the case for better productivity in government by dispelling three myths that many people believe. They are, 1) “We don’t make widgets.” 2) “We don’t have customers.” and 3) “We’re not here to make a profit.” While all may seem true on the surface, they are all myths.

Myth #1 is the simplest to bust. Even in the public sector there is usually a warehouse where material is received, stored, picked, packed, and shipped. It is easy to show that these operations are nearly identical to the SCOR model (Plan, Source, Make, Deliver, Return Enable) that is promoted by ASCM. Myth #2 can similarly be eliminated by discussing customer service and the importance of internal and external customers with employees. Myth #3, however, takes a little more explanation.

Profit is what is realized after an organization deducts all its expenses from its total revenue for a given period, generally one year. These are their results. Public sector organizations do not measure profit, but they do measure results. Businesses are responsible for their stockholders; government is responsible for their taxpayers. At the supply chain level, both public and private sector organizations measure productivity in their budgets, inventory turns, inventory investment, stockout rate, and line items picked or shipped per employee.

5. Are there other major differences between public and private supply chains, other than the profit motive?

Yes, several. First, government entities are guided by procurement laws. These could be local, state, or federal, sometimes all three. While running afoul of procurement rules in the private sector might get someone fired, in the public sector it could mean jail time. Another issue is that the procurement laws, regardless of their origin, are nearly always based on the lowest bidder winning the bid. This kind of thinking has its roots in post WWII purchasing and went out of style along with green eyeshades and sleeve garters. Today, goods purchased in the private sector are rarely purchased based on price alone; product quality and delivery deadlines are usually part of selection criteria.

Another difference is that in the private sector suppliers and customers often work together to reduce costs. This is frowned upon in the public sector and is often looked upon as collusion, which is illegal. Again, it is the result of that green eyeshade and sleeve garter thinking.

Finally, the major difference between public and private sector supply chains is the importance of the supply chain itself. Private sector companies see the benefits in their supply chains. They invest in them by continuously upgrading their infrastructure by making huge expenditures in Artificial Intelligence (AI) and digitization. But since the average taxpayer is not aware of these benefits, most public sector supply chains are at least a generation behind in their technology and infrastructure. That is why New York’s Metropolitan Transit Authority’s passenger trains and buses have Wi-Fi and USB ports, while the software system used to manage the nearly $800 million in repair parts and material inventory is a legacy system that was written in COBOL in 1985.

It’s what the public sees that counts.