Do you know the eight principles of supply chain management?

#SupplyChain #Cooperate #Management

Supply chain is a system, which is an organic whole with specific functions, which is composed of several components that interact and depend on each other. The supply chain is a functional network chain structure model that connects suppliers, manufacturers, sellers, logistics service providers, and end users into a whole through the control of information flow, logistics, and capital flow around the core enterprise.

In supply chain management, there are eight basic principles:

1. Principle of horizontal integration of resources

The principle of horizontal integration of resources reveals a new thinking under the new economic situation. This principle holds that in today's rapid development of economic globalization, enterprises can no longer meet the requirements of the rapidly changing market by relying only on the original management model and their own limited resources. Enterprises must abandon the traditional management mode based on vertical thinking and shift to a new management mode based on lateral thinking. Enterprises must horizontally integrate the resources of external related enterprises, form a strategic alliance of "combination of strong and strong, complementary advantages", and form a community of interests to participate in market competition, so as to improve service quality while reducing costs, and respond quickly to customer needs. The purpose of more options.

Different ways of thinking correspond to different management modes and enterprise development strategies. Vertical thinking corresponds to the management mode of "vertical integration", and the development strategy of the enterprise is vertical expansion; horizontal thinking corresponds to the management mode of "horizontal integration", and the development strategy of the enterprise is horizontal alliance. This principle emphasizes the horizontal integration of advantageous resources, that is, each node of the supply chain participates in the resource integration of the supply chain with its resources that can generate competitive advantages, and participates in the overall supply chain with the completion of its advantageous business in the supply chain. operate.

This principle is one of the most fundamental principles of supply chain management and represents a major shift in the way people think.

2. System principle

The system principle holds that the supply chain is a system, which is an organic whole with specific functions that is composed of several components that interact and depend on each other. The supply chain is a functional network chain structure model that connects suppliers, manufacturers, sellers, logistics service providers, and end users into a whole through the control of information flow, logistics, and capital flow around the core enterprise.

The supply chain is a complex large system, and its system characteristics are mainly reflected in its overall function. This overall function is a specific function that no member enterprise of the supply chain has, and is the function integration between supply chain partners. rather than simply stacking. The overall function of the supply chain system is concentrated in the comprehensive competitiveness of the supply chain, which is not possessed by any single supply chain member enterprise.

3. The principle of win-win and reciprocity

The principle of win-win and reciprocity believes that the supply chain is a community of interests formed by related enterprises to adapt to the new competitive environment, and its close cooperation is based on common interests. to seek a win-win and reciprocal goal. Supply chain management changes the competition mode of enterprises, transforming the competition between enterprises into competition between supply chains, emphasizing that core enterprises establish strategic partnerships with upstream and downstream enterprises in the supply chain, in the form of strong alliances , so that each enterprise can play its own advantages and achieve the effect of win-win and mutual benefit in the value-added chain.

4. the principle of cooperation and sharing

The principle of cooperation and sharing has two meanings, one is cooperation and the other is sharing.

The principle of cooperation holds that because any enterprise has limited resources, it is impossible to obtain competitive advantages in all business fields, so if an enterprise wants to win the competition, it must concentrate its limited resources on its core business.

At the same time, enterprises must establish close strategic cooperative relations with related enterprises that have a competitive advantage in a certain aspect around the world, and hand over non-core businesses in the enterprise to cooperative enterprises to give full play to their unique competitive advantages. , so as to improve the overall competitiveness of the supply chain system.

The sharing principle holds that the implementation of supply chain cooperation means the sharing of management ideas and methods, the sharing of resources, the sharing of market opportunities, the sharing of information, the sharing of advanced technology and the sharing of risks. Among them, information sharing is the basis for realizing supply chain management, and accurate and reliable information can help enterprises make correct decisions. The coordinated operation of the supply chain system is based on the high-quality information transmission and sharing of each node enterprise. The application of information technology effectively promotes the development of supply chain management and improves the operation efficiency of the supply chain.

5. Demand-driven principle

The demand-driven principle holds that the formation, existence and reconstruction of the supply chain are all based on certain market demands. In the operation process of the supply chain, the needs of users are the driving source of the information flow, product, service flow and capital flow in the supply chain. In the supply chain management mode, the operation of the supply chain is carried out in an order-driven manner. The commodity purchase order is generated under the drive of the user demand order, and then the commodity purchase order drives the product manufacturing order, and the product manufacturing order drives the raw materials (zero components) purchase orders, and raw material (components) purchase orders drive suppliers. This step-by-step order-driven model enables the supply chain system to respond to user needs on time, thereby reducing inventory costs and improving logistics speed and inventory turnover.

6. The principle of quick response

The principle of rapid response believes that in the context of global economic integration, with the continuous intensification of market competition, the rhythm of economic activities is getting faster and faster, and users' requirements in terms of time are getting higher and higher. Users not only require enterprises to deliver on time, but also require shorter and shorter delivery times. Therefore, enterprises must be able to respond quickly to the ever-changing market, must have strong product development capabilities and the ability to quickly organize product production, and continuously develop customized "personalized products that meet the diverse needs of users." "To dominate the market to win the competition.

In the current market environment, everything is required to be able to quickly respond to user needs, and to achieve this goal, it is not enough to rely on the efforts of one enterprise. Supply chain management emphasizes punctuality, that is, punctual procurement, punctual production, punctual distribution, and emphasizes that the selection of suppliers should be less and more precise, etc., all of which reflect the idea of ​​quickly responding to user needs.

7. the principle of synchronization

The principle of synchronous operation believes that the supply chain is a functional network composed of different enterprises, and there are various types of cooperative relations among its member enterprises. The operation performance of the supply chain system depends on whether the supply chain partnership is harmonious or not. A coordinated system is at its best. The key to supply chain management lies in the close cooperation among the nodes in the supply chain and the good coordination between them in all aspects.

The synchronized operation of the supply chain requires that the member enterprises of the supply chain solve the problem of synchronization of production through synchronized production plans. The synchronized operation of the chain can be achieved. The just-in-time production system formed by the supply chain requires upstream enterprises to provide necessary raw materials (parts and components) to downstream enterprises on time. If any enterprise in the supply chain fails to deliver on time, it will lead to instability of the supply chain system or interruption of operations, resulting in The responsiveness of the supply chain system to users decreases, so it is very important to maintain the consistency of the production rhythm among the members of the supply chain.

8. dynamic reconstruction principle

The principle of dynamic reconfiguration holds that the supply chain is dynamic and reconfigurable. A supply chain is formed within a certain period of time, aiming at a certain market opportunity and in order to meet a certain market demand, and has a certain life cycle. When the market environment and user needs undergo major changes, the supply chain around the core enterprise must be able to respond quickly and be able to perform dynamic and rapid reconstruction.

Market opportunities, partner selection, core resource integration, business process reengineering, and agility are the main factors for dynamic restructuring of supply chains. From the perspective of development trend, the establishment of virtual enterprise based on supply chain will be a manifestation of dynamic and rapid reconstruction of supply chain.