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supply chain management

Page history last edited by Brian D Butler 11 years, 9 months ago


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see also:   supply chain page


Example:  Blue Jeans supply chain:


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Supply Chain management principles


Customer Segmentation: The first principle of any successful supply chain is to fully understand customers and their needs. Customers must be segmented based on service needs rather than the industry. The services must then be tailored according to the respective segments.


Logistics Network Customization: Tailor the logistics network and concentrate intently on the service needs and on the productivity of the identified customer segments.


Planning: Understand the market demand and plan consequently. Planning must cover the entire supply chain to trace signals of varying demand.


Product Differentiation: Differentiate product closer to the customer. Companies cannot hold inventory (safety or buffer stock) to account for poor demand forecasting


Strategic Supply Management: By working closely with key component suppliers the supply sources can be managed strategically, thereby reducing the overall costs of owning materials and services.


Supply chain wide IT strategy: To provide a clear view of the product, service and information flow an IT strategy that spans the entire supply chain and facilitates decision making at various levels must be formed.


Performance Management metrics: Implement performance evaluation metrics that are relevant to every link in the supply chain and measure true profitability at every stage.


By adopting a mixture of these best principles along with information technology, a company can gain integrated forecasting, planning, and execution capabilities with complete supply chain visibility. With such supply chain capabilities, a company can combine its orders and study the material requirements instantly





Supply Chains to Study




Dell Computers:   Dells supply chain.  Dell was struggling as a second tier PC maker until 1994. After it implemented a new business model, “build to order”, Dell eliminated its inventories and adopted a direct selling approach. The just-in-time (JIT) system yielded rich dividends. Dell quickly became a market leader. Dell was able to make computers much faster than it produced earlier. Plant uptime also went up to a record 95 percent.  Click to download full text of this Case Study in PDF format: Dell's Supply Chain Management Strategy


Baxter: Baxter; in the hospital supply business established powerful partnerships with hospital customers in the mid 80’s. Baxter adopted ‘vendor managed inventory’ and managed its customer’s inventories within their hospital facilities. Also, by following ‘stockless system’, a supply chain innovation, Baxter transformed itself from a supplier of increasingly commodity like products to a distinguished provider of value added services.


Procter and Gamble (P&G): The ‘continuous replenishment system’ was pioneered by P&G when it partnered with Wal-Mart. Based on Wal-Mart’s product movement data; P&G replenished the stores. This supply chain innovation brought a striking turnaround in the consumer products and retail industries.


Scholastic, a world's leading publisher and distributor of children's books is another example of a supply chain master as it increased revenues substantially, by adopting a unique supply chain business model.




Innovation & Supply Chains


An innovative supply chain is largely driven through sharp business focus and synergy generated from an integrated functional approach. Some key factors that are essential to build an innovative supply chain are:

  1. Culture and Leadership: Organizations must encourage employees to be creative and innovative. IBM encourages an organizational culture with innovation emphasized in every employee's job description and evaluation. Top management support for an innovative supply chain creates a positive environment for change. An innovative organization should also foster a culture open to ideas. An innovative organization must recognize poor decisions and failures as part of a normal business process.
  2. Reward Innovation: IBM's ISC team in Scotland has developed 200 innovation projects in two years. IBM awards the best innovations.
  3. Motivation to change: A successful implementation of innovation necessitates organizations to constantly motivate for innovation. The approach may be out of sheer necessity or the will to excel constantly. With integrated functions, it is necessary for supply chain managers to become innovators.
  4. Innovative employees: It is essential to have the right employees at the right place for successful innovation. Innovative employees are creative, enterprising, desire change for the better constantly and can visualize differently. Employees may be initiated into innovation through training, benchmarking, professional development, job rotation or even recruitment of fresh talent.
  5. Break traditional barriers to innovation: A supply chain is traditionally considered as an operational function. Hence, innovation takes a backseat. However, operational workforce led by line managers should explore opportunities to innovate, improve existing processes and restructure operations with other functions.

    Innovation is not a new discipline in most organizations. However, the usual strategies in innovation and approaches adopted and succeeded in the '80s and '90s, are no longer sufficient. Organizations must involve in exciting experiments and innovation to reinvent the way they create the future, for "business as usual" does not always produce the desired results.

  6. Evaluate the organization’s present state of innovation: Supply chain managers must benchmark the existing supply chain against the competition and keep track of business trends. It is also important to adopt constantly techniques that enable better performance from service providers so as to adapt the supply chain in accordance with the nature of product.
  7. Prioritize Innovation: Companies acknowledge that innovation is the only sustainable source for growth, competitive advantage, and new profits. However, only about 25 percent of the companies consider innovation as the key strategy to be successful in today’s competitive environment. Organization must consider innovation in the supply chain as top priority and a responsibility of all employees, even the lower level employees. Organizations need to understand and evaluate the impact of innovation. This will allow organizations to put supply chain innovations on the same level as product innovations.

In a dynamic environment, organizations are forced to adopt an innovative supply chain management strategy to ensure success and long term survival. For best results, innovation should be backed by the management and elicit the participation of all the employees. Innovation has always led organisations to stand out


Essential principles for managing innovation:


• Comprehensive approach to innovation.

• Innovation must include an organised, systematic, and continual search for new opportunities

• Involve everyone in the innovation process.

• Work constantly to improve the environment for innovation.






News & Products to consider




Which Service Provider Is Right For Your Supply Chain Project?

IT View and Business View Market Overview, by Patrick M. Connaughton

Supply chain management (SCM) service providers play an important role in helping enterprises more efficiently plan and execute their supply chain strategies. Spending on SCM services will continue to grow due to increasingly complicated global networks, the mashing up of SCM operations with new mergers and acquisitions, and high profile sustainability issues that push SCM up to the C-level agenda. However, choosing a service provider can be a risky decision as many companies report missed expectations and failed projects. To avoid disappointment, buyers must select a consultancy that closely matches their needs by understanding the key characteristics of the four types of SCM service providers: 1) offshore/nearshore technology providers; 2) strategy consultants; 3) global, full-service systems integration firms; and 4) software vendor professional services.




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