Supply Chain Management

The Five Principles of Supply Chain Management

An Innovative Approach to Managing Uncertainty

Authored by John A. Muckstadt, Ph.D.; David H. Murray, Ph.D.; James A. Rappold, Ph.D.; Dwight E. Collins, Ph.D.; Edited and Corporate Summary by Anne M. Radley

INTRODUCTION: THE OPERATIONAL EXCELLENCE CHALLENGE

Identifying and Managing Factors that Contribute to Uncertainty Over the past decade, companies have adopted supply chain management as a critical element of their corporate strategies. Despite these efforts, many companies have not realized the benefits of constructing collaborative relationships with supply chain partners. As manufacturing companies continue to focus on their core competencies, they have made significant strides to integrate their internal business processes and information flows. Companies are leveraging core competencies to compete as part of a larger supply chain. This compels corporate leadership to more completely understand their customers’ needs. What do they want? Where do they want it? When do they want it? How do they want to receive it? What are they willing to pay for the products and services? While constructing and operating a competitive supply chain is the primary objective of supply chain management, several impediments to achieving this goal exist. First, demand uncertainty is so substantial in most supply chain environments that if it is not adequately addressed, it can severely degrade anticipated performance in terms of unit cost, speed, quality, and responsiveness. Second, supply chains with

long and variable response times cannot take full advantage of collaborative relationships due to their inability to respond to environmental changes. Third, companies with poor information infrastructures lack the capabilities necessary to acquire, store, manipulate, and transmit data effectively and quickly. Fourth, business processes are often not designed properly, both intra- and inter-organizationally, to adapt to...