8 Essential Supply Chain Management Principles

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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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