Supply Chain Strategy
Objective of a Supply Chain
Objective of a Supply Chain
3
Strategic Fit between the SC
and Competitive Strategy
Strategic Fit between the SC
and Competitive Strategy
Customer Requirements
Supply Chain Uncertainty
Supply Chain Capabilities
Achieving Strategic Fit
Customer Requirements
Quantity of the product needed in
each lot
Response time that customers are
willing to tolerate
Variety of products needed
Service level required
Price of the product
Desired rate of innovation in the
product
Image Sources: US Coatings [Link]
Supply Chain Uncertainty
Supply Chain Uncertainty
Frequency of breakdowns
Predictability of yields
Quality level
Supply capacity constraints
Flexibility of supply capacity
Maturity of the production process
Supply Chain Capabilities
Respond to wide ranges of quantities of demand
Meet short lead times
Handle a large variety of products
Build highly innovative products
Meet a high service level
Handle supply uncertainty
Achieving Strategic Fit
Choosing the level of responsiveness
Degree of responsiveness must be consistent with
the implied uncertainty
Responsiveness
Cost
Efficient SC Strategy
Efficient SC Strategy
Supplier Inbound Inbound Manufacturing Outbound Outbound Retailer
Logistics Distribution Distribution Logistics
• Focus on • Full • Full • Long runs • Move • Full
cost shipments pallets or large shipments
only cases • Focus on volumes only
• Volume low
discounts • Focus on changeover • Cross-
cost per cost docking
• Long-term km
contracts • Reduce
production
cost
• Planned
schedules
Responsive SC Strategy
Supplier Inbound Inbound Manufacturing Outbound Outbound Retailer
Logistics Distribution Distribution Logistics
• Focus on • Partial loads • Just-in- • Short runs • Pick orders • Small
fast lead time as they arrive shipments
• Fast receipts • Frequent
times transportatio changeovers • Shipments
Smaller n modes direct to
• • Build-to-order customers
quantities • Premium
• Supply as services
needed
Walmart vs Whole Foods
Image Sources: Walmart Canada: [Link]
Fox Business: [Link]
Fisher’s Framework
Fisher’s Framework
Functional products Innovative products
Low demand uncertainty High demand uncertainty
Efficient
MATCH MISMATCH
Supply Strategy
Responsive
MISMATCH MATCH
SC Strategic Decisions
SC Strategic Decisions
Facilities: capability, location, capacity, demand allocation
Inventory: cycle inventory, safety stock, seasonal inventory,
service level
Transportation: design of transportation network,
transportation mode
Information: demand planning, coordination and information
sharing, sales and operations planning
Sourcing: in-house or outsource, supplier selection,
procurement
Pricing: pricing and economies of scale, everyday low pricing
or high-low pricing, fixed price or menu pricing
Amazon Supply Chain
Source: Larester, T. How to Win in Online Grocery // URL [Link]
[Link]/5bc7540db0cfa61a770960b8/5ee9d5efb15f545e4f87c158_Takeoff_How_to_Win_in_Online_Grocery.pdf
Amazon Supply Chain
Source: Larester, T. How to Win in Online Grocery // URL [Link]
[Link]/5bc7540db0cfa61a770960b8/5ee9d5efb15f545e4f87c158_Takeoff_How_to_Win_in_Online_Grocery.pdf
Key Takeaways
Innovative
Functional
Responsive
Efficient
Match products and
supply chain strategies
