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The 7 principles of Supply Chain Management

Successful managers
Think of supply chain as a whole Pursue tangible outcomes focused on Revenue growth Asset utilization Cost

Principle 1
Segment customers
Based on service needs Adapt supply chain to serve them

Types of needs?

Vendor Managed Inventory Activity Based Costing

Principle 2
Customize logistics network
To service requirements & profitability of customer

Multi level networks

Cross docking
3rd party logistics

Principle 3
Listen to market signals & plan accordingly
Across SC Consistent forecasts Optimal resource allocation

Fill rate
Asset turns

Principle 4
Differentiate products closer to customer & speed

Cellular manufacturing Just-in-time

Mass customization
Postponement Modular design

Principle 5
Source strategically
To reduce total cost of owning materials & services Long term contracts Keiretsu SCORE: Chrysler

Principle 6
Develop SC technology strategy
Enterprise wide information systems Integrate Short term transaction & operation management Mid-term planning & decision support Long term strategic analysis

Bar coding vs. RFID

SCM software

Principle 7
Adopt channel spanning measures
Gauge collective success, not functional

Perfect order Activity based costing

Identify actual costs & revenues required to serve an

account Data warehouse

Translating principles into practice

Orchestrate improvement efforts
Blueprint to map linkages among initiatives &

implementation sequence Rigorous assessment of entire supply chain Set explicit outcome targets for revenue growth, asset utilization & cost

Translating principles into practice

Rome wasnt built in a day
Massive task
Balance long term & immediate business needs

Recognize difficulty of change

Extensive visible participation by top managers

Popularized by Wal-Mart Warehouses function as inventory coordination

points rather than as inventory storage points. Goods arriving at warehouses from the manufacturer:
are transferred to vehicles serving the retailers are delivered to the retailers as rapidly as possible.

Goods spend very little time in storage at the

Often less than 12 hours Limits inventory costs and decreases lead times

Issues with Cross-Docking

Require a significant start-up investment and are

very difficult to manage Supply chain partners must be linked with advanced information systems for coordination A fast and responsive transportation system is necessary Forecasts are critical, necessitating the sharing of information. Effective only for large distribution systems
Sufficient volume every day to allow shipments of fully

loaded trucks from the suppliers to the warehouses. Sufficient demand at retail outlets to receive full truckload quantities