13-06-2012, 01:17 PM
The Seven Principles of Supply Chain Management
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Managers increasingly find themselves assigned the role of the rope in a very real tug of war--pulled one way by customers' mounting demands and the opposite way by the company's need for growth and profitability. Many have discovered that they can keep the rope from snapping and, in fact, achieve profitable growth by treating supply chain management as a strategic variable.
These savvy managers recognize two important things. First, they think about the supply chain as a whole--all the links involved in managing the flow of products, services, and information from their suppliers' suppliers to their customers' customers (that is, channel customers, such as distributors and retailers). Second, they pursue tangible outcomes--focused on revenue growth, asset utilization, and cost reduction.
: Principle 1: Segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably.
Segmentation has traditionally grouped customers by industry, product, or trade channel and then taken a one-size-fits-all approach to serving them, averaging costs and profitability within and across segments. The typical result, as one manager admits: "We don't fully understand the relative value customers place on our service offerings."
But segmenting customers by their particular needs equips a company to develop a portfolio of services tailored to various segments. Surveys, interviews, and industry research have been the traditional tools for defining key segmentation criteria. Today, progressive manufacturers are turning to such advanced analytical techniques as cluster and conjoint analysis to measure customer tradeoffs and predict the marginal profitability of each segment. One manufacturer of home improvement and building products bases segmentation on sales and merchandising needs and order fulfillment requirements. Others are finding that criteria such as technical support and account planning activities drive segmentation.
Principle 2: Customize the logistics network to the service requirements and profitability of customer segments.
Companies have traditionally taken a monolithic approach to logistics network design in organizing their inventory, warehouse, and transportation activities to meet a single standard. For some, the logistics network has been designed to meet the average service requirements of all customers; for others, to satisfy the toughest requirements of a single customer segment.
Neither approach can achieve superior asset utilization or accommodate the segment-specific logistics necessary for excellent supply chain management.