The article released by the Supply Chain Management Review in 1997 entitled, “7 Principles of Supply Chain Management,” was hailed as a classic in the subject of supply chain management (SCM). This article has excellently uncovers the main issues that supply chains normally encounter and provided strategic solutions that will ultimately transform how conventional supply chains work. The article began by identifying the common dilemma of supply chain managers which is trying to strike a balance between satisfying customer demands and increasing company profitability (Anderson, et al., 2007). The author claim that both can be achieved without compromising one over the other. It has described that the failure of supply chain is not correlated on the management’s inability to detect deficiencies in the chain of procedures; the troubles are actually entrenched on an inappropriate perspective about the supply chain and the failure of developing and executing transformation on every level of the sequence. Furthermore, the authors explained that successful SCM can be attributed to the holistic perspective of managers, which means viewing the overall series of physical process as a whole and not separately, and the ability to implement and ride with change (Anderson, et al., 2007). The article was simple and straightforward, with the purpose of helping companies able to formulate a tailored SCM strategy by providing key theoretical principles based on experiences from successful supply chain businesses. Nevertheless, theories significantly differ in practice and what looks simple in paper becomes complex in application. Overall, the article’s seven guiding principles in supply chain do not actually propose steps in managing the different areas and linkages of supply chain to deliver optimal products to customers. Instead, the article actually advises a complete paradigm shift of supply chain management, which if adapted, will totally transform the internal and external operations of the supply chain. The transformation will be due to a change in organisational culture that will spread throughout the entire from start to end process. Hence, applying only one or two of the principles might not result to distinguishable changes as maximum optimisation needs to happen on every level of the chain.
2.0 Review and Summary of the 7 PrinciplesThe seven principles proposed by the authors are as follows: 2.1 Segmentation of customers based on their service needsAuthors propose that careful analysis must be done to identify which of the customer segmentation will bring in maximised profit. This means capitalising company resources by prioritising what the customer really needs and what they are willing to pay for. 2.2 Customisation of logistics network to suit the segmented customer requirementsPrioritising customer needs leads to the second step of creating an efficient order fulfilment process. Configuring a logistics network involves various aspects in manufacturing, inventory, warehousing, delivery, and monitoring. For some companies, multi-level networks are required to quickly supply customer requirements. They key idea is to develop a logistical design that is flexible and responsive to immediate decision-making needs. 2.3 Understand market signals and align demand planning accordingly to optimise allocation of resourcesAuthors believe that demand forecasts are unsuitable and unreliable in identifying what the market needs. Instead, demand forecasting has to be integrated in every step of the supply chain to assess which supply operation will generate the highest profit. 2.4 Differentiate product closer to customer and expedite conversion across the supply chainJust-in-time differentiation can be easily and less costly achieved by mass production and postponing customization to keep stock units low and packaging up to date. 2.5 Reduce cost of materials and services by managing suppliers strategicallyWhile the traditional supply chain approach has an adversarial relationship with the suppliers, the author advise to considering suppliers as partners in reducing expenditures while gaining profitability. This “gain-sharing arrangement” increases market margin while ensures that the company benefits from high-quality products and services due to a strategic collaboration with suppliers. 2.6 Develop a supply chain wide technology to support multi-tiered decision making while providing a clear flow of products Without appropriate infrastructure, the changes introduced in the company will be futile. The information technology system needed in a progressive supply chain should be able to function in multi-tiered operations. First, it should be able to support daily business operations needed to keep supply and demand up to date. Next, it must be capable of improve planning and production for a more economical resource allocation. And lastly, it must be able to translate data in meaningful information that will assist managers in evaluation and assessment. 2.7 Utilise supply chain spanning performance measures to gauge collective successThe final principle entails setting specific goals for a specific metric and proper review of the company’s overall and differentiated performances. Among the suggested ways of doing this are measuring perfect order and determining cost and revenue. 3.0 Key Aspects of the ArticleAll the 7 principles seems generally essential, I personally think that the 6th principle is worth reiterating as the most important and equally most interesting facet. The emergence of technology is disrupting traditional supply chain management as it streamlines complex structures and eliminates or adds new flow in the chain. Conventionally, inaccurate predictions of supply and demand will affect the operations of supply chain. However, organisation coupling with technology will eliminates errors and inaccuracies and allows its supply chains to be flexible by providing sufficient data that reveals potential obstructions in the chain (Mehrjerdi , 2010). For instance, technological innovations such as the Internet of Things (IoT) and Blockchain create countless possibilities for supply chain improvement. IoT allows smart factories to fully automate workflow in warehouse organization and track real-time work progress, inventory supply, transportation developments, and even production conditions that can impact product quality such as temperature and moisture (Kshetri, 2017). IoT can also analyse machine conditions and predict possible breakdowns that can cause delay in product delivery, hence allowing supply chains to take necessary action to prevent such incident. In addition, Blockchain technology leverages big data which provides a clear flow of products, services, and transactions that happen across the supply chain. Since Blockchains supply an accurate, transparent, and incorruptible registry of supply chain data, third party services that manage monetary and non-monetary interactions can be eliminated which diminishes supply chain operational cost ( IIE Annual Conference. Proceedings, 2017). Companies such as IBM, Walmart, Siemens, and Amazon capitalise on these technologies (Bo & Li, 2017). On the other hand, the principle that appears relatively contentious is the last principle of channel-spanning performance measures to gauge collective success. Although the authors’ stance to measure success according to customer satisfaction and revenue is quite agreeable, disregarding functionally oriented assessments would provide an incomplete picture of the supply chain’s performance as well as overlook potential gaps that need to be identified and eradicated. To balance this, a holistic evaluation is required taking into consideration both customer feedback and network wide operations and coordination strategy assessments (Gang, et al., 2016). 4.0 Methodological CritiqueIn the global market competition, supply chains need to have a thorough and robust understanding of how supply chains should operate. Particularly since disruption in one flow of the network would certainly affect all the processes and overall outcome in the supply chain and total quality management (Sharma & Sachin, 2015). Hence, companies should strive to not only manage internal transactions but to forge strategical relationships with suppliers and external organisations involved in the supply chain (Stock & Boyer, 2009). According to the seven principles of SCM, facilitating a smooth flow of products and services across the network translates to increased revenue, reduced redundancies and errors, lower levels of inventory, and enhanced customer satisfaction. Simply, improving internal and external relationships creates a “seamless” operational performance (Burgess, et al., 2006). However, empirical studies still have to be conducted and collected to support the claims regarding the effectiveness of the seven principles (Stock & Boyer, 2009). Most studies also lack empirical evidences due to the intricacies of supply chains and the lack of a universally accepted definition of what constitutes it. Hence, there seems to be a lacking in theoretical foundation of SCM since every framework varies with every business and industry. With the lack of a widely accepted framework, the seven principles appear to be just another trial-and-error approach that could prove convoluted to operationalise. 5.0 Personal OpinionOn the other hand, the notable feature of the article is its seeming timelessness and relevance despite being written some 20 years back. Learning from the article’s perspective, supply chain should not be seen as a fragmented method of balancing customer satisfaction and revenue creation. This idea is in total contrast to traditional perspective of supply chain management. In fact, the principles present ideas that are directly opposite to the conventional way of running a supply chain. That is somewhat surprising taking into consideration the massive changes that need to occur if a business adopts the framework proposed. Furthermore, the idea that SCM will be reliant to technological innovation seems to be a far-off notion from the time that the article was written, nevertheless, it holds true today and more increasingly applicable in the future. However, the article missed defining what constitutes a supply chain management which remains to be a debatable topic up to the present. Giving a clear characterization of supply chain will help readers get a clearer picture of the enormous impact of perspective change and the challenges it entails if the principles are employed. Nevertheless, the article does not only present theoretical ideas but also provide examples from experiences of successful supply chain business. In addition, it also reveals the difficulties of effecting change in such a complex industry structure which assists in translating theory into practice. Overall, the article can definitely help students and researchers to gain proper outlook regarding supply chain management, and create a foundational knowledge of the ideal operations of a high performing supply chain. Furthermore, the article promotes a progressive and holistic approach towards SCM that will benefit students as they advance to their career paths. 6.0 Conclusion
Successful supply chain management begins with understanding that the whole organisation along with its internal and external environment to work to serve as a single entity. In the past, the traditional approach was defined by uncoordinated functional differentiation and narrowly-focused management which created slow movement of products and operations across the supply chain. However, regarding different supply chain requirements individually would cause conflicting needs and levels of prioritisation. To balance these factors, a perspective shift is required that considers each stage of the supply chain as a part of the whole. Only then can supply chains achieve optimised product outcomes and increased profitability. Nevertheless, effecting supply chain wide changes will neither be undemanding nor inexpensive. In theory, gaining a holistic perspective alone can be a difficult challenge due to the complexities and differences of operations across the supply chain. In the practical sense, facilitating a comprehensive shift in the accustomed company procedure requires a thorough examination of the every part of the network of supply chain to identify gaps that cause errors and blockages to information sharing. Furthermore, the shift would take time, effort, and money putting forward the need to balance immediate company needs to long-term rewards. In essence, the principles presented by the authors would only work through enduring commitment and adaptability to change. Nevertheless, the tenets provide timeless knowledge that will seem to continue being relevant to the future development of SCM. For instance, the 5th principle of gain-sharing across between supply chain managers and suppliers is worth upholding. Supply chains are beginning to realise that collaboration brings in various benefits not just in revenue but in their long-term subsistence. Finally, the 6th principle of utilising network-wide technology that will support decision-making processes by translating data into information is increasing in importance nowadays. More companies are discovering the power of technology to streamline complex tasks that often impact order fulfilment and product quality. Technology and innovation are transforming the landscape and businesses would do best to ride with change or risk falling behind.