Aligning The Supply Chain Strategies With Product Uncertainties

Topics: Management, Supply chain management, Production and manufacturing Pages: 12 (383 words) Published: March 19, 2015
Aligning The Supply chain
Strategies With Product
Uncertainties

Introduction
• Why Should We Align Supply Chain Strategy?
• Supply Chain Strategies in the Information Era
• Setting Up a Right Supply Chain Strategy to Match Product Uncertainty
• Categorized products into two: Functional Product and Innovative Product.

Two Types Of Risk
• Demand Uncertainty
• Based on Product attributes: Functional and Innovative.

• Supply Uncertainty.
• Based on Supply Processes: Stable and Evolving.

Demand Uncertainty
• Functional Products





Have stable Demand.
Long product life-cycle.
Low on product variety.
Volume per SKU is High so less stock-out cost.

• Innovative Products





Have short life-cycles with high innovations and fashion contents. Highly Unpredictable demand.
Many different variety of products.
Volume per SKU is low due to uncertain demand and stock-out cost is high.

Demand Uncertainty Framework

How to Reduce Demand Uncertainty
1.Demand uncertainty reduction strategies
Sharing demand information and synchronized planning across the supply chain with the internet

2.Supply uncertainty reduction strategies
1. Free exchanges of information along with product life cycle 2. Early design collaboration
3. Supplier hubs

Supply Uncertainty
• Stable Supply Process:
• It is the process where manufacturing process
and underlying technology are mature
and the supply base is well established.

• Evolving Supply Process:
• It is the process where manufacturing process
and underlying technology are under
developing stage and changes rapidly.

Supply Chain Strategies
• Efficient Supply Chain
• Strategies aimed at Cost efficiency by eliminating non value adding activities and by pursuing economies of scale.
• Internet plays important role in Supply Chain integration.

• Risk-Hedging Supply Chain
• Strategies aimed at pooling and sharing resources in supply chain so that risk in supply could be shared.
• Single supply source is more venerable to disruptions but multiple supply source reduce risk of disruptions.

• Responsive Supply Chain
• Aimed at being responsive and flexible to changing and diverse needs of consumers.
• Company uses mass customization and build to order techniques.

• Agile Supply Chain
• Aimed at being responsive and flexible to changing and diverse needs of consumers while the risk of supply shortages and disruptions are held by pooling inventory and capacity resources.
• Use combination of Hedge and Responsive Supply Chains.

Matched Strategies Matrix
Demand Uncertainty

Stable
Process
LOW
Evolving
Process
HIGH

Supply Uncertainty

Functional
Product
LOW

Innovative Product
HIGH

Efficient Supply Chain

Responsive Supply Chain

Risk-Hedging Supply Chain

Agile Supply Chain

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