Burgess COMMENTARY

Peter Burgess

The 7 Principles of Supply Chain Management

'There is scarcely anything that has not been covered in this amazing article, it’s a must-read for anyone associated with Supply Chain Management'.

In 1997, Supply Chain Management Review published one article called “The Seven Principles of Supply Chain Management” written by David Anderson, Frank Britt and Donavon Favre.

At that time, Supply Chain Management (SCM) was a pretty new term so this article did the excellent job to explain important supply chain management principles in one shot.

More than 10 years pass and this article is considered the “classic” article and got republished in 2010, and again in 2013.

As of now, it got more than 160 citations from both scholarly articles and trade publications.

To help managers decide how to proceed, we revisited the supply chain initiatives undertaken by the most successful manufacturers and distilled from their experience seven fundamental principles of supply chain management.

Principle 1: Segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably.

Principle 2: Customize the logistics network to the service requirements and profitability of customer segments.

Principle 3: Listen to market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation

Principle 4: Differentiate product closer to the customer and speed conversion across the supply chain

Principle 5: Manage sources of supply strategically to reduce the total cost of owning materials and services

Principle 6: Develop a supply chain-wide technology strategy that supports multiple levels of decision making and gives a clear view of the flow of products, services, and information

Principle 7: Adopt channel-spanning performance measures to gauge collective success in reaching the end-user effectively and efficiently

Reaping the Rewards

The companies mentioned in this article are just a few of the many that have enhanced both customer satisfaction and profitability by strengthening management of the supply chain.

While these companies have pursued various initiatives, all have realized the need to integrate activities across the supply chain. Doing so has improved asset utilization, reduced cost, and created price advantages that help attract and retain customers—and thus enhance revenue.