Seven Principles of Supply Chain Management and Bull Whip Effect

Topics: Forecasting, Supply chain management, Logistics Pages: 3 (628 words) Published: November 21, 2011
Explain the seven principles of supply chain management . Take an example of any product in the market and explain Bullwhip effect. Answer:
Seven Principles of SCM are:

1. Group customer by needs
Effective SCM groups customer by distinct service
needs, regardless of industry and then tailors services to those particular segments.
2. Customize the logistics network

In designing their logistics networ k,
companies need to focus on the service require ment and pr ofit potential of the

customer segments identified.

3. Listen to signals of market demand and plan accordingly Sales and
operations planners must monitor the entire supply chain to detect early warning signals of changing customer demand and needs. This demand driven approach leads ot more consistent forecast and optimal r esource allocation. –

4. Differentiate the product closer to the customer
Companies today no longer
can afford to stock pile inventory to compensate for possible forecasting errors. Instead , they need to postpone product differentiation in the manufacturing process closer to actual consumer demand. This strategy allows the supply chain to r espond quickly and cost effectively to changes in customer needs. 5. Strategically manage the sources of supply by working closely with their key suppliers to reduce the overall costs of owning mater ials and services, SCM maximizes profit mar gins both for themselves and their suppliers. 6. Develop a supply chain wide technology strategy

as one of the cornerstones
of successful SCM information technology must be able to suppor t multiple levels of decision making. It also should afford a clear view and ability to measure the flow of products, services and information.

7. Adopt channel spanning performance measur es
Excellent supply chain
per formance measurement systems do more than just monitor internal functions. They apply...
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