A robust supply chain management is possible when you and your logistics partner(s) are able to efficiently plan, coordinate, schedule and control a wide range of activities such as procurement, production and delivery of goods to customers. Planning is crucial for supply chain management, and a well-managed supply chain is the backbone of ecommerce’s growth and success.
While there are many supply chain management theories and methods in vogue, each business has its own unique needs and what works well for one may not work at all for another. Listed here are five popular supply chain management methods and theories.
Everything in the supply chain must be adapted to your customer. Hence, customer relationship management comes first in the supply chain. In front of your supply chain, there are the store staff who interact with customers and they need to nurture ongoing relationships. A CRM tool allows them to capture customer information useful for marketing research and to reach out to customers effectively. By capturing customer preferences, you can design the products and services to offer in the future. In addition to providing ongoing customer services, CRM tools also support in automating and recording many of the customer interactions.
Generally, supply chain and logistics companies deal with supply chain management for multiple businesses. This is where channel coordination or supply chain coordination can be applied to improve the supply chain performance by aligning individual enterprise goals with the common goals (in everyone’s best interest). Channel coordination reduces overall costs and saves time. In distributed inter-company settings, channel coordination primarily focuses on inventory management and ordering decisions.
Traditionally used by institutional investors, Transaction Cost Analysis (TCA) is a method based on financial models that helps investment managers to lower their trading costs. In supply chain management, TCA offers insights into whether the trades are executed at favorable prices- for example, purchasing at a lower price and selling at a higher price. Transaction cost analysis can be used by producers, distributors, retailers and delivery partners to determine whether their trade is generating the required results. It allows supply chain managers to estimate the direct and indirect costs involved in a transaction, and implement the most effective trading methods for your vital transactions.
Total quality management (TQM) is a continuous, structured approach to detect and reduce errors and streamline supply chain management. It takes into account overall organizational management by improving the quality of an organization’s output, such as its goods or services. As per the TQM principle, everyone involved in the production process is responsible for the final delivery of quality product or service. Total quality management ensures that all employees in an organization are up to speed with the result that customer experience is improved considerably.
Theory of Constraints (TOC) can be related to the axiom “a chain is no stronger than its weakest link.” Even the smallest constraint can prevent the supply chain system from achieving its goal. In this methodology, an organization will try to identify the most important restraining factor that stands in the way of achieving a goal and take the necessary measures to reduce its vulnerability. The weakest link can lie anywhere – in processes, organizations, individual team members or any other form of risk that challenges the successful execution of the project. By applying this risk-elimination theory, you can improve the efficiency of the entire supply chain.
Global trade boundaries keep blurring, making supply chain management more complex. As business requirements change and new requirements evolve, custom theories and methods are being propounded widely. The ultimate purpose of any supply chain management method or theory is to improve the supply chain’s efficiency by adopting a customer-friendly approach. When you manage your supply chain functions in-house as well as with your 3PL partners, you should be able to arrive at a consensus on what works best for your business, and solves your existing challenges. You must also revisit the combination of SCM methods and theories used in your business from time to time. A careful evaluation of these methods will also help you bank on the right logistics and supply chain partners who can scale to your business needs.
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