Right Supply Chain Strategy?

Suresh K Jakhar, PhD

Faculty, IIM Lucknow
How is Strategic Fit Achieved?

1. Understand your customers, product and competition.

2. Understand the required supply chain capabilities.

3. Achieve strategic fit through roles and allocations.

7 Vs to Understand Customer Product Characteristics

1. Visibility
2. Variability (Demand, Supply, Supply Chain Processes)
3. Validity (Shelf Life)
4. Value (High and Low)
5. Variety
6. Velocity (Fast & Slow Moving, Lead Time)
7. Volume
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 Variability (In Demand)
Low High
Grocery, Basic Airlines, Hotels,
Low
Apparel, Movies, Fashion
Variability Food, Oil, and Gas. Apparel.
(In Supply)
Agro Products, High-Tech
High Solar, Hydro, and Electronics
Wind Power.

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Smartphones Manufacturers
Value
Low High
Low

Volume

High

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 Revenue Market
Share Share
Apple 43.75% 17
Samsung 16.07% 19
OPPO 8.25% 10.25

Xiaomi 8.03% 13.75

Vivo 7.58% 9.5
Others 16.29% 29.75

Revenue Market
Share Share
Apple 43.75% 17%
Samsung 16.07% 19%
Others 40.15% 63.25%

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 Value
Low High
Low Apple
Volume Prestige Oriented
Customers
OPPO, Xiaomi,
High Vivo
Bargain Seekers

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 Value (Margin)
Low High

Avoid if volume and

Short Innovative Products
velocity (selling speed)
Validity are not very high.
(Shelf Life)
Functional Products. Lean production
Long methods can be
used.

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Variability in Demand and Supply Spectrum
 Lemon Coriander, Red Paprika,
Onion Garlic, Black pepper powder

19/KG 38/KG 64/KG 750/KG

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How is Strategic Fit Achieved?

1. Understand your customers, product and competition.

2. Understand the required supply chain capabilities.

3. Achieve strategic fit through roles and allocations.

How is Strategic Fit Achieved?

 Understand the required supply chain capabilities.

2. Supply Chain Capabilities

Network of Suppliers.

Facilities Location, Capacities.

Distribution Channels: online sales, retail stores, or modern trade.

Transportation and Logistics Partners.

Use of Technology to Optimize Operations.

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 Supply Chain Cross Docking Points keep
unloading/loading/sorting
and warehouse costs down

Manufacturers
e.g.

White Labelled Consolidation Centre

Manufacturers

S1

Consolidation Centre
S2
Suppliers help achieve Economies
Physical Flow
of Scale in transportation
Information Flow
HORIZONTAL COLLABORATION
 Problem Statement
Low load factor, 95% of the max weight
capacity but only 50% of the volume
capacity.
Traditional Approach
Convert LTL(less than truckload) to
FTL(full truck load) by merging different
weight volumes based on geographical
and temporal overlapping.
Downside?
Logistic Providers are not able to take
advantage of all potential order bundling
as they can’t change client orders, weight
and volume.
Moreover, at different points of time,
P&G products would be clubbed with
different shipments. Therefore, max
optimization tough to achieve, given the
high degree of fragmentation in logistics.
 Project TINA
Trains Intermodality, a New Approach

P&G P&G P&G Partner 1 Partner 2 Partner 3

Belgium-Greece
Corridor
 Chose
P&G Tupper
Origin Mechelen, Belgium Aalst, Belgium
Destination Athens, Greece Thiva, Greece (100km from
Athens)
Product Type Heavy weight, Low Volume Light Weight, High Volume
Mode Intermodal (Road + Train) Road
Equipment type 45ft containers 120m3 combi-trailers
Volume Utilization ~50% ~85%
Weight Utilization ~95% ~30
 Inter- Inter-
Modal hub Modal hub
 &

Inter- Inter-
Modal hub Modal hub
 Benefits

Load Factor increased from 50% to 85%

Collaborative Cost Savings of ~17% on total lane costs

1,50,000 truck kms saved in the first year of its implementation

CO2 emissions have been reduced by 200 tons

P&G and Tupperware awarded with “Prize of the Audience”

in Supply Chain Award
 Apple Supply Chain

Direct Delivery
Suppliers holding 2 weeks parts
inventory close proximity to
assembly plants Apple.com Customers

Warehouse,
California Retail Store
DC-to-Store

Click & Collect

DC-to-E-tail DC

E-Tail Options
E.g.
Parts Assembly, China
UPES/Fedex E commerce Channel

Outsourced Delivery
Physical Flow
Information Flow
Intermediate Warehouse
 Innovative Vs Functional Products

High
Supply Chain frontier shows

Responsiveness
trade-off between responsive
and efficient supply chains.

Low

Low High

Cost Efficiency
Roles and Allocations
Step: Achieving Strategic Fit

Low High
Variability
Strategic Fit

Slow and steady wins the

race?

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Strategic Fit

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Strategic Fit

Post, the 3rd race the tortoise and the hare joined forces and
decided to reach the finish line in less time.
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 Cost Speed
(Efficiency) (Responsiveness/Velocity)

Product- Market characteristics and Competitive Strategy

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Responsiveness Spectrum
Match
 Changes Over Product Life Cycle

Beginning stages
1. Demand is very uncertain, and supply may be
unpredictable
2. Margins are often high, and time is crucial to gaining
sales
3. Product availability is crucial to capturing the market
4. Cost is often a secondary consideration
 Changes Over Product Life Cycle

Later stages
1. Demand has become more certain, and supply is
predictable
2. Margins are lower as a result of an increase in
competitive pressure
3. Price becomes a significant factor in customer choice
 Variability (In Demand)
• Push
Low High • Pull
A B
Long • Continuous
Velocity
(Lead Time)
C D Replenishment
Short
(Lean)
• Strategic Inventory

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 Variability (In Demand)

Low High

Long Push Strategic

Inventory
Velocity
(Lead Time) Continuous Pull
Replenishment
Short
(Lean)

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 Fast Fulfillment Supply Chain Design
• Many years back, the product was the differentiator.
• Then branding became a differentiation.
• In the internet era ratings and reviews became a
differentiation.
• Then pricing became a differentiation. But private labels killed
the pricing differentiation.
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 Fast Fulfillment Supply Chain Design

• Today, the true differentiation is fast fulfillment.

• What started as good to have has become an important

differentiation.

• Today, the supply chain has become a revenue enabler. Your

distribution is your differentiation.

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10 Minutes Delivery?

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Value Velocity Variety
(Cost) (Convenience) (Catalogue)

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 Value

Variety

Velocity

Convenience

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 Zepto
• Zepto promises grocery delivery in 10 minutes (up to 90 percent
of orders).
• Operates on a hub-and-spoke model through a network of dark
stores.
• Zepto claims its network is better optimised with the use of location
intelligence and geospatial data, including geography, demography,
road patterns, traffic dynamics, weather, last-mile supply
availability, real estate prices, etc.

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Gross
# of
Margin

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Total contribution from
one
Dark store in a month:
18000*40 =
7.2 Lakh INR

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• Facing the pressure to “grow big fast”.

• This desire for massive, immediate growth is so intense that they

are launching in new cities on the thesis that the unit economics

of home grocery delivery would be profitable.

• MVP (Minimum Viable Product) Vs. GBF(Get Big Fast).

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The same applies to the marketing cost (CAC).
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Basically this is game of scale (Volume).

If we order grocery more frequently, it makes more

profitable for dark store.

Economics of scale for resources and more predictable fast

moving inventory makes it more profitable.

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7Vs
o Value
o Velocity
o Volume
o Variety
o Variability
o Visibility
o Validity

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