The 7 principles of Supply

Chain Management
Introduction
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?
Segments?
Vendor Managed Inventory
Activity Based Costing
Principle 2
Customize logistics network
To service requirements & profitability of
customer segments

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 conversion

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
Cross-Docking
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
warehouse
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