Developing Market Specific Supply Chain Strategies
Gian Andrea Manzoni
Business Operations: Systems Perspectives in Global Organizations Walden University
14th June 2015
Developing Market Specific Supply Chain Strategies
In today’s business environment, companies have to deal with demand volatility and cost reduction. Firms want to grow efficiently and flexible, but many of them have failed: the main reason was that they were not able to develop a specific supply chain (SC) strategy. Scholars defined that the root cause of these failures was due to the limited knowledge of SC and the costs involved, and the impact of SC in their operations (Mentzer, Myers, & Stank, 2007). These firms were not able to produce with competitive cost and/or respond efficiently to the market demand. Companies have to understand the circumstances of the market and their operational capacity before undertake any SC strategy (Ambe, 2012). In fact, the concept of one size fits all does not work with the SC design, implementation, and control (Christopher, Peck, & Towill, 2006; Christopher & Towill, 2002). Consequently, organizations have to develop SC strategies upon concurrent market characteristics if they want to achieve higher responsiveness to customer demand while reducing the overall SC costs. An effective SC management requires setting challenging objectives, and it is a critical success factor for today’s businesses. Organizations need therefore to make strategic decisions and implement competitive strategies that add value to the enterprise (Lee, 2002). These procedures entail the enhancement of SC capabilities such as flexibility, cost reduction, process efficiency and increased service level (Ismail & Sharifi, 2006). Therefore, it is essential that the management understand the customers’ needs and the market competition, and consequently chooses and the right strategy in order to satisfy their demand. One objective the SC strategies have all in common: to provide the right product, at the right quality and quantity, with the right cost and at the right place and time to the customer (Hugos, 2006).
Competitive Advantages of a SC Strategy
There are many aspects of the business to evaluate before conceiving an effective supply-chain strategy. The first, and most important, is to assess the products’ demand (Fisher, 1997; Konecka, 2010). Other aspects can refer to the product life cycle, product assortment, market predictability, and market standards for lead times and quality (Fisher, 1997). Studies demonstrated that if products are classified on the basis of their demand pattern, they are included in one of the following two categories: (a) functional, or (b) innovative (Fisher, 1997). Functional products are stable, long life cycles, have predictable demand, and low profit margins, while innovative products have unique concept, shorter life cycles, higher profit margins and greater variety, which increases unpredictability (Ambe, 2012). Many companies failed because they did not recognize the products’ category and consequently creating a mismatch between the product and the type of SC (Ambe & Badenhorst-Weiss, 2011; Fisher, 1997). Determining an optimal supply chain strategy requires a trade-off between key variables before implementing the selected strategy. Mainly the trade-off is between the quality and costs, two factors that affect the competitiveness and performance (Konecka, 2010). This action is imposed by the complexity of today’s SC requirements, partially due to the outsourcing strategy and the globalization of the market (Ambe, 2012). Thanking this aspect in consideration, scholars and managers have identified two main SC strategies (Christopher, Lowson, & Peck, 2004; Srinivasan, 2007; see also “Difference between,” n.d.): (a) the lean SC strategy, and (b) the agile SC strategy. With this taxonomy, lean is intended to focus to minimize the waste, including delivery time while...
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