M.COM SEMESTER – IV (CBCS)

BUSINESS STUDIES (MANAGEMENT)

SUPPLY CHAIN MANAGEMENT LOGISTICS

Q.2 Explain the principles of SCM in
detail.

ANS:

The concept of the chain is important because
each link is connected in a specific direction and order, and the next link
cannot be reached without going through the previous one. Each link adds time
and costs, and may involve labour, parts, and transportation. Every product a
business carries may have its own supply chain, though they may use certain
suppliers for multiple products.

1. Adapt Supply Chain to Customer’s
Needs:

The businesses and supply chain professionals
understand customer‘s needs. Customers are divided into different groups called
‗segments‘ in order to understand them better. On the basis of sales volume or profitability,
the primitive way to segment customer is ABC analysis. It can also be done by
product, trade channel and industry. Anticipating the customer‘s needs is also
very important. Once the needs of the customers are anticipated, the supply
chain should be aligned to cater to the needs.

2. Customize Logistics Network:

After the segmentation of the customers based
on different requirements, SCM managers have to tailor logistics networks to
serve different segments. The SCM manager has to prioritize the deliveries and
make suitable provisions to quickly distribute those goods that are marked as urgent.

3. Align Demand Planning Across Supply
Chain:

Supply chain professionals are trained to
share data with trading partners in order to avoid the unnecessary stock. The
demand data must be used wisely by the SCM managers.

4. Differentiate Products Close to
Customers:

Standardization and differentiation are two
completely opposite things. Some cosmetic companies manufacture only 1 SKU that
can be sold throughout Asia instead of 1 SKU per country. Due to the economy of
the sales, standardization can drastically bring down the cost.

5. Outsources Strategically:

Though outsourcing is all the rage, the
managers must outsource strategically. The core expertise should not be
outsourced ever. This principle stands the test of time.

6. Develop IT that Support Multi-Level
Decision Making:

The IT projects should not be done in
isolation and before IT projects, the business process reengineering should be
done. This provides a proper understanding of process insufficiencies and helps
to determine the kind of innovation needed.

7. Adapt Both Services and Financial
Metrics:

The activity-based costing (ABC) is applied
to determine the customer‘s profitability. It is even better to exploit Time
Driven Activity Based Costing in order to understand changes in activities,
process, product and customers.

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