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 https://www.uscoatings.com/wp-content/uploads/2018/03/AdobeStock_78154231.jpeg
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: https://corporate.walmart.com/newsroom/sustainability/20140107/the-next-phase-of-walmart-canadas-supercube-truck

Fox Business: https://a57.foxnews.com/static.foxbusiness.com/foxbusiness.com/content/uploads/2020/11/0/0/Whole-Foods-Car-iStock.jpg?ve=1&tl=1
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 https://uploads-

ssl.webflow.com/5bc7540db0cfa61a770960b8/5ee9d5efb15f545e4f87c158_Takeoff_How_to_Win_in_Online_Grocery.pdf
 Amazon Supply Chain

Source: Larester, T. How to Win in Online Grocery // URL https://uploads-

ssl.webflow.com/5bc7540db0cfa61a770960b8/5ee9d5efb15f545e4f87c158_Takeoff_How_to_Win_in_Online_Grocery.pdf
Key Takeaways

Innovative
Functional
Responsive
Efficient

Match products and

supply chain strategies