WORKING BOOK

Working Paper Number (16-02)

April 08, 2016

Rethinking your supply chain strategy:

a brief guide

Roberto Perez-Franco1

1 MIT Center for Transportation and Logistics

MIT Global Scale Network

MIT Global Scale Network
Working Paper Series

Rethinking your supply chain strategy: a brief guide

Roberto Perez-Franco, MIT Center for Transportation and Logistics

Abstract

Rethinking a supply chain strategy is not a trivial problem. Supply chains tend to be rather complex
entities, and the act of thinking strategically about them, what we call supply chain 'strategizing', reflects
this complexity. The absence of an established answer in the supply chain management literature
regarding how to rethink the supply chain strategy of an organization further compounds what is already
a daunting problem. Between 2006 and 2016, a team of researchers at MIT’s Center for Transportation
and Logistics (CTL) explored the problem of supply chain strategizing, as part the Supply Chain 2020
Project. After a decade of research in collaboration with world-class organizations, significant progress
was made. Many questions remain open, and will continue to be explored by an offshoot of the SC2020
Project, called the MIT Supply Chain Strategy Lab. But we feel it is time to share with the community of
supply chain managers the insights we have derived so far on how to re-think the supply chain strategy of
an organization. That is the purpose of this text.

Keywords: supply chain strategy, strategizing, capture, evaluation, reformulation

Acknowledgements:
The authors thank our students Javier Martin, Leonardo Laranjeira, Daniel Mota and Manuel Rippel for
the feedback they provided to early versions of this manuscript.

Corresponding Author:
Roberto Perez-Franco
MIT Center for Transportation and Logistics
77 Massachusetts Ave, E40-293, Cambridge, MA 02139
Email: roberto@mit.edu

MIT Global Scale Network

 rethinking your
supply chain strategy
A BRIEF GUIDE

roberto perez-franco
contents
 introduction

7
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Acknowledgements
 CHAPTER 1

the nature of the beast

B
The basic challenges

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It’s complicated!
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Complexity: Objective vs. Subjective

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Prescriptions to tame complexity

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 CHAPTER 2

our approach to the problem

H
Type-based vs Specific

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Best practices vs Tailored practices

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External and Internal Wisdom

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Fundamental tasks

Task #1: Scoping

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Task #2: Visioning

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Task #3: Specification

Task #4: Articulation

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Task #5: Evaluation

Task #6: Generation

Task #7: Selection

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 CHAPTER 3

a framework for rethinking SCS

B
A definition of supply chain strategy

Strategizing in multiple dimensions

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Bridging the gap

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Adding granularity
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The conceptual elements

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The enabling elements

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The internal elements

The external elements

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The complete picture

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 CHAPTER 4

capturing your SCS

Categorization vs Articulation

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Mapping concepts 101

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Negotiate directly with

tier-2 suppliers on behalf
of tier-1 suppliers.

Aggregate volume of Leverage Dell’s

procurement orders buying power
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Aggregate volume of Leverage Dell’s

procurement orders buying power

Negotiate directly with

tier-2 suppliers on behalf
of tier-1 suppliers.
 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 37

This Ensure continuity Reduce procurement

way to of supply costs further
“Why?”

Aggregate volume of Leverage Dell’s

procurement orders buying power

This
way to Negotiate directly with
“How?” tier-2 suppliers on behalf
of tier-1 suppliers.
38 | MIT SCS LAB

Vertical axis: the strategy-operations continuum

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Horizontal axis: the thematic range

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When mapping, hold judgment

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Nominal and Executed

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 CHAPTER 5

a protocol for capture

Step 1 - Scope

46
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Example

Step 2 - Conduct qualitative interviews

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Level 1 (7 individuals)

Executive VP of Strategic Sourcing

Senior VP of Marketing and Retail Sales
Senior VP of Operational Excellence
Senior VP of Customer Service
Senior VP of Strategy and Business Development
Executive VP of Operations and Supply Chain
Senior VP of National Chain Accounts

Level 2 (7 individuals)

VP of Operations - West Region

VP of Operations - East Region
VP of Operations - Central Region
VP of Specialty Sales
VP of Information Technology
VP of Strategic Planning and Execution
VP of Operational Excellence

Level 3 (8 individuals)

Director of Inventory Optimization

Director of Operations (x2)
Director of Retail Sales (x2)
Director of Consumer Products
Manager of Performance Cons.
Director of Marketing & Product Development
RETHINKING YOUR SUPPLY CHAIN STRATEGY | 49
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Open Questions
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Semi-open questions
 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 53

Example

Step 3 – Identify areas, policies and choices

Task 1: Identify tentative areas

Task 2: Identify policies and choices in each area

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Task 3: Confirm validity of policies and choices

Example
 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 55

o
o
o

o
o
o

o
o

o
56 | MIT SCS LAB

o
o

Step 4 – Identify objectives & build hierarchy

Task 1: Look for the objectives

Task 2: Prepare a hierarchical summary per area

 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 57

Example

Step 5 – Build partial maps

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Example

Step 6 - Validate partial maps

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Example

Step 7 - Combine related partial maps

Example
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Step 8 – Map nominal strategy

Example
 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 61

Step 9 - Assemble the FSM

Example

Step 10 - Validate FSM

First round: Individual feedback

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Second round: Collective feedback

Example
 CHAPTER 6

evaluation criteria

Rumelt’s Challenge

63
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Our Approach

Evaluation Criteria

Coverage
RETHINKING YOUR SUPPLY CHAIN STRATEGY | 65

Clarity

Feasibility

Internal Consistency
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RETHINKING YOUR SUPPLY CHAIN STRATEGY | 67

External Consistency

Support
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Sufficiency

Parsimony
RETHINKING YOUR SUPPLY CHAIN STRATEGY | 69

Riskiness

Advantageousness

Actionability
 CHAPTER 7

applying the criteria

Coverage

70
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Examples
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RETHINKING YOUR SUPPLY CHAIN STRATEGY | 73

Clarity

Examples
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Feasibility

Examples
RETHINKING YOUR SUPPLY CHAIN STRATEGY | 75
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Internal Consistency

Compatibility
RETHINKING YOUR SUPPLY CHAIN STRATEGY | 77
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Example
 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 79

B2 0%
B3 0% 27%
B4 0% 0% 0%
B5 27% 18% 18% 9%
B6 0% 0% 0% 0% 9%
B7 9% 0% 9% 0% 15% 38%
B8 0% 0% 0% 0% 9% 73% 38%
B9 0% 0% 0% 0% 23% 9% 0% 18%
B10 0% 0% 0% 0% 10% 18% 0% 0% 18%
B11 0% 0% 0% 0% 0% 0% 0% 18% 0% 8%
B12 8% 0% 0% 0% 9% 0% 0% 15% 0% 9% 0%
B1 B2 B3 B4 B5 B6 B7 B8 B9 B10 B11
80 | MIT SCS LAB

Coherence and Synergy

RETHINKING YOUR SUPPLY CHAIN STRATEGY | 81

Examples
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Support
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Example
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B1 B2 B3 B4 B5 B6 B7 B8
A1 50% 10% 70% 70% 60% 10% 50% 60%
A2 60% 50% 60% 20% 90% 20% 40% 50%
A3 90% 70% 80% 10% 89% 40% 70% 0%
A4 10% 0% 50% 10% 20% 0% 10% 30%
A5 40% 20% 60% 50% 50% 20% 30% 40%

B1 B2 B3 B4 B5 B6 B7 B8
A1 50% 60% 20% 30% 40% 80% 50% 40%
A2 40% 40% 30% 70% 10% 70% 60% 50%
A3 10% 10% 20% 30% 0% 60% 30% 70%
A4 70% 60% 50% 80% 60% 80% 90% 70%
A5 60% 50% 30% 50% 40% 50% 60% 50%
RETHINKING YOUR SUPPLY CHAIN STRATEGY | 89

Sufficiency

Example
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About the remaining criteria

RETHINKING YOUR SUPPLY CHAIN STRATEGY | 91
 CHAPTER 8

reformulating your SCS

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 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 95

Progressive Formulation

Who is involved
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Required Inputs
RETHINKING YOUR SUPPLY CHAIN STRATEGY | 97

Steps
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From Specification to Elaboration

RETHINKING YOUR SUPPLY CHAIN STRATEGY | 105

A word on implementation
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 CHAPTER 9

reformulation examples

Example #1: Libica

107
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Example #2: Convenience Stop

 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 113

-
-

-
-
114 | MIT SCS LAB

o
o

o
o

o
o
o

o
o

o
 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 115

o
o

o
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o
o

o
 RETHINKING YOUR SUPPLY CHAIN STRATEGY | 117

o
 CHAPTER 10

connecting the dots

118
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-
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references

123
index
RETHINKING YOUR SUPPLY CHAIN STRATEGY | 125