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

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ve

Su

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ly C

hai

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Eff

icie

nt

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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

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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.

Thanks for your attention. Questions? Or suggestion?

B.Behdani@tudelft.nl