According to Cooke matching demand characteristics to supply chain capabilities in order to capture sales opportunities and to satisfy customer needs in terms of speed, location and product variability is the purpose of supply chain planning.
In the year 1997, Fisher presented a framework for selecting the appropriate supply chain for a product. This framework was further developed and refined by Li an O’Brien in 2001, and De Treville et al in 2004. Fisher recommends that the features of product demand define whether the product is functional or innovative. The assets of demand to be considered are:
1) demand predictability
2) life cycle
3) product variety and lead time and
4) service requirements
The author states that the above mentioned factors determine the availability and inventory needs, which in turn determine demand. On the basis of the above mentioned factors, products can be categorized as either primarily functional such as those bought in supermarkets or primarily innovative like many products in the fashion or technology sector.
The type of supply chain expertise required would be dependent on the type of product. For functional products, an efficient supply chain that focuses on delivering products at the lowest possible cost to customers should be developed. Selection of, suppliers, capacity usage and product design all need to aim gaining effective low cost solutions.
The second type is a market responsive process, where speed and flexibility are required from suppliers, manufacturers and from product design solutions. For innovative products, the demand for which is difficult to predict, market responsive processes ought to be developed.
A useful framework for analyzing the issues involved in developing a supply can be represented as a pyramid. At the strategic level the retailer can focus on service levels required to support the unique value proposition that the retailer has developed. The retailer can then evolve appropriate channels and networks to achieve the uniqueness desired.
The framework is depicted below:
A framework for analyzing issues in SCM
1) Channel Design
2) Network Strategy
1) Warehouse design and operations
2) Transportation Management
3) Materials management
1) Information systems
2) Policies and Procedures
3) Facilities and Equipment
4) Organizational and Change Management
The next level the structural level, allows the retailer to identify suppliers, stock points and to develop an appropriate transportation model. The extent of outsourcing is also determined at this level.
At the functional level, the operational details are worked out. This includes developing policies and procedures around the facilities and equipment to be deployed implementing information systems to support the operations and ensuring that the right organizational and training inputs are provided.
The consumers developed using any framework must be successfully implemented. Successful implementation usually requires a programming approach to ensure that the implementation is effective and helps the retailer achieve its goals.
Fast emerging concept is that of an Agile supply chain, which according to Christopher and Von Hoek, is driven by being responsive to the market. Market sensitivity and responsiveness to the market conditions and requirements of the consumers is a key driver of developing an agile supply chain. The agile supply chain is network based, which can also be of a virtual nature. This will require a great deal of integration between all the elements of the supply chain. Complete process integration is also a prerequisite for developing such an agile chain. The various components are illustrated below:
1) Market Sensitive
3) Process integration
4) Network Based.