Ten commandments of SCM
Looking at supply chain management from a mathematical
perspective throws up some interesting insights
By Ambuj Khare and Anurag Saxena
In today’s world one has to compete globally and not locally
like yesteryears. The world today has become so nimble that it
is continuously changing and becoming more complex and
competitive. Businesses in the information age must accept these
changes and be ready to be more competitive and
customer-focused. There is a global competition for labour and
trade and operations are now supposed to be performed in
real-time. Customers are demanding detailed information about
products and services. Companies are facing problems in
producing superior products in less resources and information is
becoming critical for management decision-making. Owing to these
pressures many companies are planning to reap the benefits of
alliances with other companies. Supply Chain Management (SCM) is
responsible for looking after such alliances and it seeks to
make every step in the chain as efficient as possible by
ensuring good coordination between the alliances.
The term Supply Chain Management (SCM) came to light in the
1980s. The intent of using this term was to express the need to
integrate the key business processes, from end user through
suppliers. SCM enables companies and corporations to get
involved and work in a cohesive manner for the benefit of
customer as well as themselves. A supply chain entails raw
materials, suppliers, manufacturing, distribution, customers and
consumers. Material from supplier to customer moves on in the
supply chain and it is believed that a smooth flow of these
materials only depicts the health of the supply chain. However
in reality a supply chain entails movement from and to many
warehouses. There are many steps involved, many inventories
maintained and lot of time consumed. SCM is actually so big that
it can be difficult to exemplify each and every component of it.
On a bigger canvas, the function of supply chain is to plan,
organise, coordinate and control almost all the activities of
Let us revisit some of the terms commonly used in the supply
chain scenario. See Table 1 to get a brief description of those
Let us take some key terms commonly used in the supply chain and
do a little bit of mathematics on them. Let us see what these
terms mean for the supply chain from a mathematical perspective.
In Table 2 we have added the digit score (the position at which
it appears in the English alphabets) of each of these terms and
then taken the sum as the percentage of the sum of digit scores
of the term “supply chain”. If we take the sum percentage as the
relative importance for the supply chain, the results are
absolutely attention grabbing. We can see what these terms mean
for the supply chain from the “additive” perspective.
So if one wishes to choose 10 commandants of supply chain
management they would be inventory, effectiveness, cross
docking, information, operations, customers, integration,
strategy, performance and logistics. Let us discuss inventory
(relative importance 99 per cent) first; inventory is a list of
things held in stocks. If a company has high inventory costs and
no synchronisation between stocks and demand, its products are
bound to have higher costs and thus the business will be in a
A company could be very efficient but what matters more at the
end of the day is effectiveness (relative importance 96 per
cent) as effectiveness means doing the right things to create
the most value for the company. Eventual goal of any business is
to satisfy the customer. Next is cross docking (relative
importance 95 per cent), which is often used to maintain low
level of inventory. Retailers like Wal-Mart have shown the
benefits of using cross docking. Information (relative
importance 93 per cent) is the ability to furnish critical data
on product performance, process parameters and cost to internal
groups and to external customers value of information can never
be ignored. It is said that in a supply chain information flow
is as important as the product flow. Effective operations
(relative importance 92 per cent) are again the core of supply
chain as they are the systems that create and deliver the firm’s
primary products and services. If operations are the core then
customers (relative importance 92 per cent) are the essence as
they are the ones that purchase goods and services that are
provided through a supply chain.
Further, a supply chain revolves around efficient integration
(relative importance 92 per cent) of suppliers, manufacturers,
warehouses and stores. Strategy (relative importance 80 per
cent) means deliberately choosing a different set of activities
to deliver a unique mix of value. It is used to define supply
chain objectives. Performance (relative importance 79 per cent)
describes the way in which a company performs and is indicative
of supply chain health. And finally for logistics (relative
importance 78 per cent), we can quote Strahan and Bodegraven
(2004), “supply chain management and logistics are part of the
same solution set, one filling the gaps, and one closing them.
It is possible to have passable logistics without supply chain
It is not possible to have a great supply chain without also
having terrific logistics”.
If one further probes into the multiplicative effect of the
digits of these terms then we find something even more
interesting. In Table 3 we can see what these terms mean for the
supply chain from the “multiplicative” perspective.It is said
that numbers are better tools than words if are making a
business decision. We have thus reinforced the words/ terms
commonly encountered in a retail supply chain with the help of
Ambuj Khare is the Senior General Manager, GENETCO, Oman, and
Anurag Saxena is Professor of Management, Indira Gandhi National
Open University, New Delhi, India.
June - 2013
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