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Devising Seamless Market-Orientated Supply Chains
(Focused Demand Chains)

 
  • A seamless market-oriented supply chain is an ideal supply chain state where all members work together in a coordinated and synchronized manner via the most appropriate supply chain strategies so as to maximize competitiveness in the marketplace

  • This requires to redesign your supply chain into multiple Customer focus (differentiated) Supply Chains strategies so as to maximize competitiveness for different distinct clusters of product.

  • This would overcome the averaging effects which mask both exemplars and poor practice and would stop compromising each element of the supply chain in the typical general-purpose which satisfies no strategy, no market, and no task.

  • The focused methodology tailors demand chain competencies so as to best service varied marketplace environments. i.e. It matches supply chain strategy with cluster of products according to Customer requirements

  • The major steps in the integrated framework for the development of focused demand chain strategies are:

  • Study the company core competencies, resources, target markets and the overall corporate strategy.

  • This leads from highlighting of core competencies and resources, and its primary purpose is the identification of specific markets to be targeted plus the overall corporate strategy.

  • Hence, inputs from the marketplace in the form of key order winner and order qualifier characteristics are used, together with information about the competitive situation in the form of knowledge of the strategies and tactics of competitors.

  • Specific products and their related service levels are identified. These are tailored to the target markets with emphasis placed on prioritization of service, quality, cost or lead times, thereby emphasizing the all important trade-offs to be made in each focused demand chain.

  • Any supply chain can not optimize all four business drivers simultaneously and independently. Therefore a trade-off has to be made based on market and customer requirements

  • Products are segmented into clusters based on market demands which are influenced of both lean and agile thinking in selection of the five key variables (DWV3 acronym)

    • Duration of life cycle

    • time Window for delivery

    • Volume

    • Variety

    • Variability

  • The sequence of the five variables is to be shifted and sorted until we reach to clusters that are differentiated predominantly on market demand volumes and responsiveness requirements.

DWV3

Classification

Variables

Some key reasons for use to classify demand chain types

Duration of life

cycle

 

         Short life cycles require rapid time to market.

         Short life cycles require short end-to-end pipelines to enable demand to be continuously replenished during the life cycle.

         Short life cycles require a demand chain to be able to ‘fast track’ product development, manufacturing and logistics to exploit ever decreasing windows of opportunity.

         Replenishment lead times need to be matched to stage of the product life cycle, so to reduce lost sales and obsolescence risks.

time Window for delivery

 

         Rapid response is required to replenish fashion goods that are selling well at a particular point in time.

         Competitive pressures are continually reducing acceptable response times, with many demand chains competing on the basis of very short windows for delivery of customized products.

Volume

 

         Products aimed at high volume mass markets allow for the lean-type production and make-to-forecast strategies to take advantage of economies of scale.

         Lower volume markets benefit from flexibility both in production and the entire demand chain.

Variety

 

         Greater variety results in a larger number of stock keeping units because the volume is split between alternatives.

         Continuous appraisal of the proportional breakdown between variants must be conducted during the product life cycle because those variants popular at the introductory stage may be less popular in the decline stage

Variability

         Variability relates to both spikiness of demand and unpredictability, the former drastically affects capacity utilization and resultant production techniques. The latter increases the risk of obsolescence and lost sales and can be addressed via information enrichment, consultative forecasting and lead time reduction.

 

  • This analysis lead to the engineering of multiple distinct and focused demand chains based on MRP, Kanban or Leagile principles

Figure 1 Achieving Strategic Fit

 

Figure 2 Sample of Matching Supply Chain Strategies with Products Clusters

 

Figure 3 Sample MRP Supply Chain Strategy

Figure 5 Sample Leagile Supply Chain Strategy

Figure 6 Sample Design-To-Order Supply Chain Strategy

 

  • The optimum value stream may vary also with the position of a product within its life cycle. Furthermore, the marketplace OWs and OQs are dynamic for any specific product as it proceeds through its product life cycle. Therefore, the production and manufacturing processes must also dynamically adapt to best service these changing marketplace conditions see Figure 6

  • The basic elements of a supply chain are then re-configured to better match the marketplace

Figure 7 Product Life Cycle and Corresponding Supply Chain

 

  • Based on the degree of market orientation define the Level of Integration of each supply chain (TO BE).

  • Compare this Ideal situation with the actual one (AS IS) to define the GAP

Figure 8 Integration-Orientation Matrix


 

Level of Integration

Stevens Integration Model and the Seamless Supply Chain

Stage of Integration

Supply Chain

Operating Characteristics

Impact on

Seamless Supply Chain

Baseline

Reactive short-term planning

Fire fighting leads to “quick fix” mentality

Many pools of inventory

Vulnerability to market changes

Work processes and “Islands”

Entrenched organisation

Controls concentrate on cost not value

Stop-go material flows cause waste

Functional Integration

Focus now on goods inward

Emphasis still on cost, not performance

Work processes still buffered by inventory

Customer service still reactive

Move towards internal trade-offs

Still poor visibility to marketplace

Work processes now efficient

Some integration of product/ information flows

Technology concentrated on discrete work processes

Organisation based around function, not process

Internal Integration

All company work processes integrated

Customer back-to-supplier planning

Integrated company controls

Full visibility from distribution to supplier

Extensive use of EDI to support customer

But still reacting to the customer

Effective work processes form integrated business process

Appropriate technology investment

Good controls in place

Organisation actively supports integration

Flows much more stable

External Integration

Integration of all suppliers

Suppliers and customers extended enterprise

Focus on customer, not product

Open-book operation at all interfaces

Synchronised material flows

Total trust and visibility

Linked business processes form “seamless” supply chain

Emphasis on shared values

Accelerated cash flows

Capacities balanced throughout chain

 

  • Devise an effective management system of multiple supply chains (each designed to satisfy particular demands) by a single organisation. Effective Resources Allocation will overcome conflicting objectives and decouple Supply Chains.

  • Analysis and design of focused demand chains, Paul Childerhouse, James Aitken, Denis R. Towill, Journal of Operations Management 20 (2002) 675–689

  • The impact of product life cycle on supply chain strategy, James Aitkena, Paul Childerhouseb, Denis Towillc, Int. J. Production Economics 85 (2003) 127–140

  • A Theoretical Framework to Enable Seamless Market-Orientated Supply Chains, Dr Paul Childerhouse The University of Waikato, New Zealand

  • R. Sundarraj, Production and Operations Management