Supply Chain Strategy
In this lesson, you’re expected to learn about:
– the need for strategic supply chain fit
– product-specific supply chain strategies
– the major types of supply chain strategies
The need for strategic supply chain fit
• As we saw previously, the competitive strategy and all functional strategies must form a coordinated overall strategy. That is called strategic fit and also applies to the supply chain strategy.
• Therefore, the design of the overall supply chain and the role of each stage (tier) must be aligned in order to support the supply chain strategy.
• proximity to suppliers
• proximity to clients
• the degree of vertical integration
• the prospective time frame of the relationship with suppliers
• the quantity of suppliers
• the degree of product modularity
• the inventory location
• the intensity of technology used
• the allocation of production capacity based on forecasting or actual orders
“How should supply chains be managed when operations compete in different markets?”
• The classic product probably faces stable, predictable demand throughout the year and commands stable prices (but with relatively low margins). This is what we call a “functional” product.
•The fashion shirt might face unstable, unpredictable demand, command higher margins when sold at full price, but is probably marked-down at the end of its selling season. This is what we call an “innovative” product.
• In order to maintain a stable demand, functional products usually focus on efficient supply chains, which can be attained by achieving high manufacturing utilization, low inventories and by selecting suppliers based on cost.
• On the other hand, innovative products usually require a more responsive supply chain in order to be able to quickly meet unanticipated demands for an ever-changing product.
Enlarged version: http://bit.ly/2pL1vHm
• Since pure functional or pure innovative products are hardly found in practice (e.g. even a grey t-shirt can be customizable and fashionable), in order to find the zone of strategic fit for your supply chain, you might want to think of types of product and strategy as parts of a continuum.
• Thus, as a general idea, products and supply chain strategies must be matched in order to achieve strategic fit.
It is important to note that there is no “closed-form solution” for building a supply chain strategy.
Recommendations when using Product-Strategy Matrix:
• Use these ideas just as a reference or intuition-building tool when designing your supply chain strategy. The right supply chain strategy must be a result of a carefully thought out process, not just a simplistic identify and match approach.
• Many firms are required to achieve strategic fit while serving many customer segments, with a variety of products. In such a scenario, a “one size fits all” strategy cannot provide strategic fit and a tailored supply chain strategy is required.