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4.2: Features of Public Sector Supply Chains

Photo by Jacques Dillies from Unsplash, used under the Unsplash License.

There are enormous challenges in the application of SCM both in the private and the public
sector. Some of the challenges that need to be addressed for successful management of the public sector supply chains include:

  • tensions between citizen and customer requirements
  • cost pressure in public supply chains
  • complexity of multidimensional supply chains

Public sector SCM focuses on a network of enterprises, which are interlinked vertically and horizontally to add value in connection with enterprises at other levels. Characteristically, SCM takes place in the context of a multi-level network. Departing from established private SCM practices, this approach includes guidelines for both political governance and public administration.

Public sector SCM distinguishes between supply chain efficiency and supply chain effectiveness. This distinction results from the assumption that public spending is subjected to efficiency criteria. The concept of efficiency is a characteristic trait of public management. Public SCM supports this target by reorganizing and optimizing entire public supply chain networks. Efficiency in terms of public sector supply chains is targeted toward the demands of the end customer, the citizen.

Public sector SCM is considerably more complex than its counterpart in the private sector. In the public sector, citizens are considered to be ‘customers’ of the public supply chain network. With this outlook, a supply-chain-oriented approach to analyzing the flow of services, information and finance becomes possible. Customer demands come from stakeholders who are citizens with an interest in public goods.

It is more challenging to calculate and forecast customer demand in public procurement due to the characteristic peculiarities of public goods. The demands, instead, are communicated through the democratic principle via elected representatives. Delivered goods and services affect citizens’ needs and interests, for instance, by meeting their demand for peace and security.

Furthermore, working within the public sector requires knowledge beyond the supply chain. The multi-level regulations governing public purchasing require management of public procurement directives and an understanding of government policies. As head of the executive branch, the government represents the political disciplinary authority in an organizational sense; parliaments (legislative branch) provide checks and balances in terms of control and criticism of governmental activities. The SCM function takes the role of a strategic planner. It requires careful planning of administrative tasks and the implementation of decisions and regulations passed by the government and the legislature at the political network level. The administrative level is responsible for the outcomes of both demands and the budgetary restrictions imposed by the government at the political network level. The procurement level intersects the public sector and the network level of private enterprises, i.e., the suppliers.

Billions are spent on goods and services annually to support the needs of the government and the citizens. Public procurement is often responsible for the largest spending and thus can contribute to the economic development of countries. In the public sector context, SCM is a procurement tool that strategically integrates the entire procurement process. Proper SCM implementation ensures value for money, open and effective competition, ethics and fair dealings, accountability reporting and equity, thus creating uniformity in procurement practices and a high standard of governance.

Checkpoint 4.2


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The multiple choice questions in the Checkpoint boxes were created using the output from the Arizona State University Question Generator tool and are shared under the Creative Commons – CC0 1.0 Universal License.

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Introduction to Public Procurement Copyright © 2024 by Jennifer Misangyi is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.