According to David et al., (1999), Supply Chain management is the organization, management, and supervision of every procedure, function, and processes that satisfy customers’ needs. The need for a company’s growth and profitability and consumer needs has seen many managers make unethical managerial decisions. Having Supply Chain Management as the main business strategy has proven over time to be very cost-effective and profitable for the company. Supply chain management provides information, proper communication channels, efficient product flow, and link all these into one efficient supply chain. This efficiency has led to aggressive moves by managers to improve their company’s supply chain management. Several themes initiate profitability, growth, and efficiency within a business. These themes comprise a combination of tactical changes, strategic management, and business growth. These themes also replicate a dynamic approach that amalgamates the supply chain management into a profit-making, asset utilization and time-efficient business (Elliott, 2012).
There are seven Supply Chain Management (SCM) principles that increase returns, controls costs (of production and management), advance customer satisfaction, and utilize asset management. Any successful implementation of SCM implementation leads to profit maximization and customer satisfaction. The first principle is the needs-based segmentation. This segmentation requires the business to segment customers by grouping them according to their service/ product need and familiarize them with the supply chain to profit the segments. Conventionally products, industry, group customers or trade across segments, but with this first principle of segmentation groups’ customers by their specific needs, develops a set of services that are tailored for specific segments. Segmentation criteria tools include interviews, surveys, and market research. The second principle is the customized logistics network. This principle customizes logistics with the customers’ service necessities and as a result, leads to a profitable consumer segment. The third principle is market signal alignment. This principle attends to market signals and make an even demand by forecasting across the supply chain, and necessitating consistent forecasts that result in the optimal distribution of resources. The fourth principle involves differentiating between the consumer and the product through the supply chain. This principle locates and differentiates advantage points all through manufacturing and is configured to meet a specific requirement, thus increasing flexibility (David et al., 1999).
The fifth principle is to manage all supply sources strategically, to reduce costs of acquiring services and materials. With this principle, the SCM lets the suppliers fight to supply products/ services other than bargaining for the same. The sixth principle improves the technological strategies within a supply chain to provide information about products and services, and support decision-making within the supply chain. This principle emphasizes the replacement of poor cohesive systems with broad enterprise systems. The seventh principle is to implement performance processes that bridge channels in order to measure business success collectively and efficiently. An exceptional supply chain managers approach, measure, apply, and link every supply chain connection thus increasing financial and service metrics. (David et al., 1999).
The Department of Defence (DOD) in the United States of America supply chain managers manage over five million reparable and disposable items, which over a hundred thousand suppliers sell to them. They then distribute to over thirty thousand consumers. The main challenge of the DOD is to improve customer relations and reduce costs associated to supply chain. To solve these challenges, supply chain managers within the DOD adopt certain enterprise metrics. The first metric is the perfect order fulfillment. This metric requires the delivery of the complete order, accurate and complete documentation, on-time delivery, goods delivered in perfect condition, faultless installation (as applicable). Second is the time response of supply chain. This metric focuses on supply circles, average plans, maintenance and repairs, and delivery cycles. The third is the customer price changes paralleled to inflation in percentage (Klapper et al., 1999). This metric is customer-focused and it measures procurement resourcefulness, maintaining low prices with the global effectiveness of supply chain management.
The fourth metric is the costs of supply chain management as a standard price percentage. These SCM costs comprise of, inventory, planning and finance, acquisition of materials, and management information system. Fifth metrics is the costs of weapon system logistics as a percent of the purchase price (in tune with inflation). This metric characterizes the logistical costs and the purchase price of a functioning weapon system.This metric measures the effective management of assets. The sixth metric is the weapon system, not mission-capable (NMC) charges/ rates. This metric signifies the percentage of time a fleet of weapon systems is not mission-capable (NMC) due to maintenance (poor or lack of maintenance assets), supply (parts lacking), or both. NMC metric rates should be reliant on other metrics like perfect order fulfillment. The seventh metric is the upside production flexibility. This metric is the number of days essential in realizing an unintentional increase in sustainable production that support a major theatre war (MTW) situation. The last metric is the war reserve ratio. This metric is a measure indicator of promptness to sustain a two major theatre war conflict (Klapper et al., 1999).
In conclusion, the seven principles that this paper will discuss are able to renovate a company into a profit-making enterprise, which determines customer needs and addresses them through SCM. These principles thereby lead to cheaper, faster, efficient, and satisfactory financial business performance. These advantages balance profitability and consumer needs into an interdependent profit-making entity. For a proper SCM strategy, the company needs to conglomerate all the seven principles into a fitting strategy that works perfectly for the company. s this article will demonstrate, each company— whether a supplier, manufacturer, distributor, or retailer—must find the way to combine all seven principles into a supply chain strategy that best fits its particular situation. No two companies will reach the same conclusion.
David, J., Frank, E. B., & Donavon, J. F. (1997). The Seven Principles of Supply Chain Management.
Elliott, B. (2012). The seven principles of supply chain management. Journal of Supply Chain Management Research and Practice, 6(1), 15-31.Klapper, L. S., Hamblin, N., Hutchison, L., Novak, L., & Vivar, J. (1999). Supply chain management: A recommended performance measurement scorecard (No. LMI-LG803R1). LOGISTICS MANAGEMENT INST MCLEAN VA.
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