The Seven Principles of Supply Chain Management

The Seven Principles of Supply Chain Management

To balance customers' demands with the need for profitable growth, many companies have moved aggressively to improve supply chain management. Their efforts reflect seven principles of supply chain management that, working together, can enhance revenue, cost control, and asset utilization as well as customer satisfaction. Implemented successfully, these principles prove convincingly that you can please customers and enjoy profitable growth from doing so.

By David L. Anderson, Frank E. Britt, and Donavon J. Favre[1]

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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.

Rejecting the traditional view of a company and its component parts as distinct functional entities, these managers realize that the real measure of success is how well activities coordinate across the supply chain to create value for customers, while increasing the profitability of every link in the chain. In the process, some even redefine the competitive game; consider the success of Procter & Gamble (see "The Power of Partnership").

Our analysis of initiatives to improve supply chain management by more than 100 manufacturers, distributors, and retailers shows many making great progress, while others...