7 Vital principles of Supply Chain Management

supply chain management

Supply chain management refers to the process of efficaciously managing the operations, production and the flow of goods and services from their point of origin to their point of consumption. It involves inventory management, procurement, ensuring effective distribution system, maintenance of resources, finance management, and marketing. In several companies, there is a dire need for those candidates that can manage the production cycle efficiently in such a way that operations are optimized to maximize the speed as well as accuracy.  To achieve this, there are 7 vital principles of supply chain management that needs to be followed.

These are described as follows:

1.     To adjust the Supply Chain catering to the needs of the customers

The major goal of any supply chain manager should be to focus on the needs of the customers.  In order to understand the needs of the customers, different customers can be divided into different groups and this process is termed as ‘segmentation’. The people can be divided on the basis of trade, sales volume, profitability, and supply channel. A supply chain manager should have the skills to even predict customer’s need.

2.     Customize the network of logistics

When the customers are divided into groups or segments on the basis of the service needs, the network of logistics should also be customized accordingly. The design of the entire network of logistics totally depends on the customers.

3.     Align demand planning with market trends

The supply chain practitioners are trained to share their demand data with the partners whom they are trading with so that no unnecessary stocking of products is found. The demand forecast can be made by gathering data from different retailers and analyzing previous sale data. To ensure optimal resource allocation, the demand planning should align with the market signals.

4.     Differentiate products that are closer to the customers

Assembling goods and making them available at the places where their demand is more is germane.  It is also essential to offer variety to the customers. It can be brought by packaging the goods in attractive coverings or changing some features of the products. Standardization is also vital. It helps to reduce the cost of the product as it is interrelated with the economy of scale. Hence, standardization should also be considered along with differentiating products.

5.     Outsourcing strategically

Outsourcing is a principle that saves time. However, outsourcing should be done properly to witness the desired results. The best strategy of outsourcing is that always outsource those jobs for which you or your team members have less competency. Never outsource the job related to your niche.

6.     Develop a supply chain-wide technology strategy

Automation is the need of the hour, and software like ERP can streamline the supply chain processes. Technology can be used in supply chain management to achieve optimal efficiency and ensure top-notch quality. It is essential to understand the deficiencies in the processes in order to determine the right kind of technology needed for the organization.

7.     Adopting Financial Metrics and Service

The collective success in reaching end-users should be measured with respect to some financial metrics.  Usually, ABC concept or aka activity-based costing is imposed to detect customer’s profitability. These measures can be used to drive appropriate improvements.

These 7 vital principles of supply chain management ensure that every process is managed effectively. A PGDBA in Supply Chain Management is equivalent to an MBA degree. The course is offered in online mode by one of India’s top distance education institute, MIT School of Distance Education. The course accentuates all these vital principles so that the candidates can have a blooming career in the sector.