Principles of Supply Chain Management

We talked about few Supply Chain Metrics in the last post and couple of my readers asked that other than metrics what are those other things that need to be kept in mind while approaching a supply chain problem. Do we need to go the textbook route or there are few practical tips that can help resolve or improve an SCM condition? Yes, why not. There are a lot of books, examples, and research data available on this widely discussed topic that can help them.

In addition of that, let us also discuss few basic principles that we should follow usually. These can be:
  • Segmenting your customers based on service needs
  • Customizing the logistics network
  • Keep an ear to signals of market demand and plan accordingly
  • Differentiate product closer to the customer
  • Source strategically
  • Develop a supply chain-wide technology strategy
  • Adopt channel-spanning performance measures
Managers increasingly find themselves assigned the role of the rope in a very real tug of war—pulled one way by customers' mounting demands and the opposite way by the company's need for growth and profitability. Many have discovered that they can keep the rope from snapping and, in fact, achieve profitable growth by treating supply chain management as a strategic variable.
These savvy managers recognize two important things. First, they think about the supply chain as a whole—all the links involved in managing the flow of products, services, and information from their suppliers' suppliers to their customers' customers (that is, channel customers, such as distributors and retailers). Second, they pursue tangible outcomes—focused on revenue growth, asset utilization, and cost reduction.

Rejecting the traditional view of a company and its component parts as distinct functional entities, these managers realize that the real measure of success is how well activities coordinate across the supply chain to create value for customers, while increasing the profitability of every link in the chain. The successful initiatives that have contributed to profitable growth share several themes. They are typically broad efforts, combining both strategic and tactical change. They also reflect a holistic approach, viewing the supply chain from end to end and orchestrating efforts so that the whole improvement achieved—in revenue, costs, and asset utilization—is greater than the sum of its parts.

Unsuccessful efforts likewise have a consistent profile. They tend to be functionally defined and narrowly focused, and they lack sustaining infrastructure. Uncoordinated change activity erupts in every department and function and puts the company in grave danger of "dying the death of a thousand initiatives." The source of failure is seldom management's difficulty identifying what needs fixing. The issue is determining how to develop and execute a supply chain transformation plan that can move multiple, complex operating entities (both internal and external) in the same direction.

The above said principles will help developing and executing a successful supply chain transformation plan. I know that just looking at these principles will not make much sense to newbies in this area and a little bit explanation is required so that actually these can be practiced. So, in my next post, I will explain in short on what they mean and how to practice them…


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