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Dr. Behzad Behdani Lecturer, Consultant, Principal Researcher
Supply Chain Management/ Logistics
Module 1: How to define Supply Chain Strategy?
• Supply Chain Managers:
• To decide about an appropriate strategy for their Supply Chains
• Logistics Service Providers:
• To understand the expectation of companies based on the type of Supply Chain
• MBA Students/Researchers:
• To get an overview of existing literature on “Supply Chain Strategy”
This lecture is useful for:
What is the role of “Supply Chain Strategy”
Business Strategy
Supply Chain Strategy
Supply Chain Capabilities
Supply Chain Performance
Source: Morash, E.A. (2001). Supply Chain Strategies, Capabilities, and Performance. Transportation Journal, 41(1), p. 37-54.
Business Strategy: the organization’s positioning in terms of following dimensions of competence:
• Quality (performance, consistent quality, reliability)
• Time (delivery speed, development speed)
• Flexibility (mix of products, mix of volume/packaging)
• Cost (labor, material, engineering, quality-related)
Defining Business Strategy
Source: Bozarth C. and R. Handfield (2008). Introduction to Operations and Supply Chain Management, 2/e . Prentice Hall.
Defining Business Strategy Conflicting dimensions
High Quality
High Flexibility
Low Cost Short Delivery Time
Form Business to Supply Chain Strategy
High Quality
High Flexibility
Low Cost Short Delivery Time
From Supply Chain Strategy to Supply Chain Capabilities
Facilities Inventory Transportation
Information
Logistical
Sourcing Pricing Cross- Functional
Business Strategy
Supply Chain Strategy
Efficiency Responsiveness
Source: Chopra S. and Meindl P. (2012). Supply Chain Management: Strategy, Planning, and Operation, 5/e, Pearson Education.
• Fisher (1997, p.106):
“The root cause of the problems plaguing many supply chains is a mismatch between the type of product and the type of supply chain”
Other views on defining Supply Chain Strategy Supply Chain Strategy and Product Characteristics
Source: Fisher, M. L. (1997). What is the Right Supply Chain for Your Product? Harvard Business Review 75(2), p. 105–116.
match
match mismatch
mismatch
Res
po
nsi
ve
Su
pp
ly C
hai
n
Eff
icie
nt
Su
pp
ly C
hai
n
Functional Products
Innovative Products
• Multiple products:
• Separate supply chains or Tailored supply chains?
• Product life cycle:
• Supply Chain Strategy moves toward efficiency as innovative products (if successful) will eventually evolve to become functional products.
• Product Customization/Standardization:
• As companies move away from customization toward standardization, there is a shift from flexibility and a high-performance design quality to a consistent quality and cost.
Some relevant issues
Other views on defining Supply Chain Strategy Supply Chain Strategy and S/D Uncertainty
Source: Chase, R.B., Aquilano, N.J. and Jacobs, R.F. (2000). Operations Management for Competitive Advantage, 9/e., McGraw Hill.
Demand Uncertainty
Low (Functional products)
High (Innovative products)
Efficient
Supply Chain
Responsive
Supply Chain
Risk-Hedging
Supply Chain
Agile
Supply Chain
Low (Stable Process)
High (Evolving Process)
Su
pp
ly U
nce
rtai
nty
Other views on defining Supply Chain Strategy Looking at Market Characteristics: Lean vs. Agile
Agile: Speedy reaction to a dynamic/ unpredictable
Market
Lean: Efficient
reaction to a stable Market
• Christopher (2000, p. 39):
“Agility is needed in less predictable environments where demand is volatile and the requirement for variety is high” and “Lean works best in high volume, low variety and predictable environments.”
Other views on defining Supply Chain Strategy Looking at Market Characteristics: Lean vs. Agile
Source: Christopher, M. (2000). The agile supply chain: competing in volatile markets. Industrial Marketing Management 29(1), p. 37–44.
Agile
Lean
Lo
w
Hig
h
Low High Variability
Var
iety
Other views on defining Supply Chain Strategy Looking at Market Characteristics: Lean vs. Agile
Source: Christopher, M., Peck, H., and Towill, D. (2006). A taxonomy for selecting global supply chain strategies. International Journal of Logistics Management 17(2), p. 277–287.
Lean
Plan and Execute
Agile
Quick Response
Lean Continuous Replenishment
Leagile Postponement
Predictable Unpredictable
Demand Characteristics
Su
pp
ly C
har
acte
rist
ics Long
Lead
Time
Short
Lead
Time
• Two views on “Leanagile” Supply Chain:
• Dividing the total demand for a product can be to “base” and “surge” demand; considering lean for “base” demand which is more predictable and using agile strategy to cope with “surge” demand (Christopher et al., 2006).
• Operating cost-effectively (i.e. lean) in the “upstream” of supply chain and responsively (i.e., agile) in the market “downstream” (Bruce et al., 2004).
Other views on defining Supply Chain Strategy Looking at Market Characteristics: Lean vs. Agile
Source: • Christopher, M., Peck, H., and Towill, D. (2006). A taxonomy for selecting global supply chain strategies. International Journal of Logistics Management
17(2), p. 277–287. • Bruce, M., Daly L., and Towers, N. (2004). Lean or agile. A solution for supply chain management in the textiles and clothing industry?
International Journal of Operations and Production Management 24(2), p. 151-170.
