8 Essential Supply Chain Management Principles

1. 8 Essential Supply Chain Management Principles (SCM)

2. The process of planning and coordinating all of the people, resources, and technology that contribute to a company's value creation is known as supply chain management. Price negotiations, manufacturing scheduling, and logistics management all have an impact on a company's value equation and are critical components of a supply chain. Because they are so interdependent, managing them in silos is not a good idea. As companies grow in size, their supply chains lengthen and their business cycles shorten, making it even more critical to keep the various operations in a supply chain aligned. Some supply chain management professionals are generalists, while others are specialists. Generalist professionals look at the big picture, whereas specialists focus on a single stage of the supply chain. Consider the eight principles listed below as a starting point for your supply chain management education. 2

3. 1. Customer Focus Supply chain management begins with a thorough understanding of your consumers and the reasons they buy your product or service. People who buy your products are solving a problem or meeting a need. Supply chain managers must understand the customer's problem or demand and ensure that their companies can address it more effectively, quickly, and affordably than competitors. SCM necessitates an understanding of the end-to-end system - the collection of people, processes, and technology that must all work together to deliver your product or service. Understanding the series of causal linkages that occur throughout a supply chain is part of systems thinking. Because supply chains are complex systems, they can behave erratically, and minor changes in one section of the system can have a significant impact on others.

4. 2. Innovation The business world is changing at breakneck speed, and supply chains must adapt by innovating. To stay ahead of the competition, continuous process improvement and long-term innovation are required. Lean, Six Sigma, and the Theory of Constraints are all process improvement methodologies that can help in this endeavour. Because new technologies have the potential to disrupt entire industries, continuous process improvement is insufficient. It is known as disruptive innovation. When a new solution to a customer's problem is created and implemented, it becomes the new dominant paradigm. In other words, if you manufacture scooters, you must figure out how to make them better, faster, and cheaper than your competitors, while also determining what the next dominant paradigm will be, so you know what to create when scooters are phased out. 4

5. 3. Collaboration Supply chain management cannot be done in a vacuum. Individuals must collaborate across organisational silos as well as with external suppliers and customers. A selfish mindset leads to transactional relationships in which people prioritise short-term gains over long-term benefits. This is more expensive in the long run because it fosters distrust and a reluctance to compromise among supply chain participants. A community in which people trust one another and work together for shared success is far more profitable for everyone than a community in which each person is solely concerned with his or her own personal success. If you anticipate doing more business with a specific customer in the future and that the company will be profitable, you are more likely to offer them a discount on the items they are purchasing today. A collaborative environment also makes collaboration more enjoyable.

6. 4. Flexibility Supply chains must be adaptable because unexpected events occur. Flexibility is a metric that measures how quickly your supply chain can adjust to changes in the environment, such as increased or decreased sales or supply disruption. This adaptability is frequently demonstrated by increased capacity, diverse supply sources, and alternative delivery modes. Flexibility is generally expensive, but it also has monetary value. The trick is to know when the cost of flexibility is a good investment. 6

7. 5. Technology The rapid evolution of technology, both in terms of physical product movement and information processing, has changed the way supply chains operate. We used to order from catalogues, mail in checks, and wait for our deliveries. We now place orders on our phones, pay with credit cards, and wait for real-time updates until our deliveries arrive at our door. Understanding how technologies work and how to leverage them to add value at each stage of the supply chain is required for supply chain management.

8. 6. Global Perspective Every business today operates in a global economy due to the ease with which information can be shared and items can be transported cheaply around the world. Your company, regardless of the product or service you offer, is global. As a supply chain manager, you must understand how your company is dependent on global forces for inputs and output demand. You must also consider the competition on a global scale. After all, your company's true competitive threat may come from a company you've never heard of on the other side of the world. 8

9. 7. Risk Control (Management) When high performance expectations are combined with intricate technology and a reliance on global customers and suppliers, the supply chain will become chaotic. There are numerous variables, and numerous things can go wrong. Even minor disruptions, such as a delayed shipment, can set off a chain reaction of problems further down the supply chain, such as stockouts, shutdowns, and penalties. Being aware of potential hazards and developing methods for detecting and mitigating threats are required for supply chain management. While stability is required to keep supply chains running smoothly, risk management is required to avoid or reduce the costs associated with dealing with the unexpected. When risk management is done properly, it can provide opportunities for value capture during times of uncertainty.

10. 8. Visibilit Because you can't manage what you can't see, visibility is critical in SCM. Knowing what is going on in real-time (or near real-time) allows you to make quicker and more informed decisions. Visibility, however, comes at a cost. You must design your supply chain so that you can collect data on critical process steps. Visibility is useful because it allows you to base your decisions on facts rather than intuition or ambiguity. You can optimise the amount of inventory held throughout the supply chain by better understanding supply and demand. 10

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