How do I start the supply chain business

Supply Chain Management (SCM)Tasks and examples for supply chain management

In earlier times of mass production and limited customer expectations, the main thing was to use the machines and other resources optimally in order to save costs and minimize unproductive times. The investment capital had to be used profitably. That is why products were often made in stock. Marketing and sales had to make sure that the mass products were sold in the warehouse. The capital tied up in working capital was of secondary importance. The logistics were shaped by the so-called push principle.

In the context of supply chain management, the approach to the so-called pull principle is changing. This means that products are only manufactured when there is a specific customer order for them. On the one hand, this ensures that stocks remain low and the working capital is reduced; on the other hand, the company can respond more flexibly to individual customer requests. This logistics principle is based on the Kanban control of a production.

However, the pull principle carries the risk that delivery times will increase if the manufacturing process only starts with the customer order. For this reason, a mixed form of push and pull principle is often used in practice. It has proven itself:

  • Individual parts or assemblies that are largely standardized are produced in stock according to the push principle.
  • Products are only assembled according to the pull principle - entirely according to customer requirements - when the customer order has been received.

As part of supply chain management, it must be determined which part of the value chain is controlled according to the push principle and which is controlled according to the pull principle. Postponement is the process of moving this point as close as possible to the customer. In some industries, customer-oriented logistics centers are set up in which standard parts are made into individual products or deliveries.