7 Key Principles of Supply Chain Management

7 Key Principles of Supply Chain Management
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The processes involved in moving products from the supplier to the consumer are referred to as the supply chain. It is a network of upstream and downstream organizations, people, resources, activities, and information. SCM encompasses the activities that occur from the acquisition of raw materials to the final delivery of the product to consumers. Supply chain management reduces waste, costs, and time spent in the manufacturing process.

Others are generalists, while some supply chain management experts are specialists. Specialists focus on a single supply chain step, whereas generalist professionals take a more comprehensive approach. Think of the guidelines below as a place to start learning about supply chain management.

It is reflected in 7 concepts, and it is now essential to the success of organizations in the modern world. Applying these guidelines will guarantee customers’ happiness and boost profit growth.

Top Principles of Supply Chain Management

Adapt the Supply Chain to the Needs of the Customer

Businesses and supply chain professionals understand the needs of their customers. To better understand customers, they are divided into groups called “segments.” ABC (Activity Based Costing) analysis is the most basic way to segment customers based on sales volume or profitability. the AMC method is possible to implement by product, trade channel, and industry.

Personalize the Logistics Network

SCM managers must tailor coordination networks to serve different segments to cater to customization based on different customer requirements, The SCM manager must prioritize deliveries and make appropriate provisions to quickly distribute goods labeled as urgent.

Coordinate Demand Planning Throughout the Supply Chain

To avoid unnecessary stock, supply chain professionals get training to share data with trading partners as well. SCM managers must use demand data with caution.

Product Differentiation Proximity to Customers

Standardization and differentiation are different concepts. Some cosmetic companies produce only one SKU that they are selling throughout Asia, rather than one SKU per country. Standardization will reduce costs due to the economy of sales.

Strategic Outsourcing

Whether outsourcing is popular, managers must outsource strategically. You need to gain core expertise. This principle has withstood the test of time.

Create IT (Information Technology) that Facilitates Multi-Level Decision-Making

Business process reengineering should take precedence over IT projects. This provides a thorough understanding of process flaws and aids in determining the type of innovation required.

Modify Service and Financial Metrics

The profitability of the customer is analyzed by using the activity-based costing (ABC) method. Even better, use Time Driven Activity Based Costing to understand changes in activities, processes, products, and customers.

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