Principles of Supply Chain Management

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Principles of Supply Chain Management
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Basic principles of Supply Chain Management can be grouped in accordance with their main scopes of application. Speed of the entire supply chain and reduction of difference of the execution times of the tasks. They are in fact particularly important from the point of view of supply chain design, and the basic objectives are to provide competitive infrastructure and logistics organization to enable the implementation of global flow of goods, information and funds.

Role of supply chain management in economy

Supply chain management involves coordinating of relationships with suppliers, companies and final customers to deliver the highest value at a lowest cost for the entire chain. Most important feature in supply chain management is proper cooperation between enterprises in the chain, to integrate the activities while maintaining independence in the legal sense.

The concept of the extended supply chain has been in practice from the second half of the twentieth century. This was a consequence of the severity of the need for cooperation of enterprises in pursuit of the objectives in an environment where the pace and scale of change have increased substantially. In the supply chain decisions about design and development of individual units should take into account relationships with others.

The concept of the supply chain was established as an alternative to the traditional perception of the relationship between suppliers and customers, which are characterized by antagonism and use of bargaining power.

Suppliers strive to ensure rapid inventory turnover and low operating costs. To achieve sufficient flexibility to changing customer expectations it is important to ensure close cooperation of suppliers and flexible information flows between these units. Fast and undistorted customer service is not possible without the exchange of information between producers and distributors, allowing quick delivery of information about changes in preferences and demand.

Suppliers strive to maintain fuller control of their own business, but planning and coordinating the flow of raw materials, semi-finished products, finished products, recycled waste, information and funds are implemented in the whole chain.

Principles of supply chain management

  • Speed ​​of tasks performed from receipt of order to collecting of money for goods supplied to customers, which is primarily associated with the provision of adequate infrastructure,
  • Harmonizing the actions of subsequent links in the chain - diversification of time required to perform tasks by individual units in the chain, allowing the reduction of inventory levels and thus cost reduction.
  • Ensuring the flow of information between cooperating units - in particular on the demand for finished products reported by customers, to ensure an adequate level of stocks of raw materials or semi-finished products and to determine the required duration of the contract, to provide the cash flow needed to protect stock levels.
  • Knowledge and understanding of the expected results of cooperation - primarily related to the arrangements between partners regarding expected results for the entire chain and the use of appropriate performance indicators.
  • Value creation - associated with the need to recognize and take into account the expectations of all stakeholders in the supply chain operations.

Role of information flow in Supply Chain Management

Ensuring the flow of information in an appropriate form, place and time and knowledge of assumptions concerning cooperation efforts primarily affect the activity of individual links in the chain and the implementation of these principles should facilitate the adjustment of supply to demand, as well as an assessment of performance in the whole chain. Creating value for stakeholders stems from the assumption that this form of cooperation between enterprises is intended to enable stakeholders to achieve higher benefits.

Electronic product code in Supply Chain Management

Electronic Product Code is a kind of serial number, unique on a global scale, which can be called the successor to the standard bar code. It is often used in combination with the RFID (Radio Frequency Identification) system. With the labeling of product with that EPC number (which most often occurs in the form of a sticker labels, so-called tag) it is possible to identify the position of each product in the supply chain.

Currently, the most common type of code is 96-bit EPC, which contains identification number, called SGTIN (Serialized Global Trade Identification Number), information about the manufacturer, type of facility and its serial number

Basic elements of EPC tag in Supply Chain Information flow

Names and application of fields stored in 96-bit EPC tag

  • Header - specifies the length of the entire EPC identification number,
  • Filter - used for fast filtering and pre-selection of basic logistics types,
  • Split - indicates the length of a company prefix and unit designation,
  • 'Company Prefix - identifies the manufacturer of the product,
  • Identification Unit - defining the type of product,
  • Identification number - a unique number for each item.