Supply Chain Strategies Can Better Serve Diverse Needs of Customers
Supply Chain Strategies Can Better Serve Diverse Needs of Customers
- INTRODUCTION
All ethical businesses seek to provide solution to a social need. These solutions come in the form of products and processes that are manufactured with the aim of meeting or exceeding customer needs.
Most companies take pride in huge returns that accompany their endeavor to fulfill these market demands.
The challenge however, remains the fact that these human needs are not only insatiable but also diverse and dynamic.
It is with this understanding that manufacturers have had to device strategies that would help them meet these diverse needs.
Some of the most applicable strategies as observed by the experts in the industry include but not limited to:
-The use of product-process matrix in strategic planning,
– Integrating the lean and agile manufacturing paradigms in mass customisation.
– Postponement and
– Supply-chain.
This paper explores how these strategies can be harmoniously synchronized, adopted and implemented to better serve the diverse customer needs.
- LITERATURE REVIEW
1. Product-Process Matrix
One of the most fundamental functions of management in any organization is decision making.
Top of the choices often made by managers are the strategic decisions.
In manufacturing companies, supply chain must be treated as a strategic function, if growth, customer satisfaction and better returns on investment are to be realized.
There is therefore, the need to have a clear framework upon which to anchor these strategic decisions regarding supply chain.
According to Hayes and Wheelwright (1979) the concept of product life cycle does not provide a useful and provocative framework for thinking about the growth and development of a new product, a company, or an entire industry.
They observed a major short coming of this concept, namely a concentration on marketing implications of the lifecycles pattern.
They further deduced an implication that other aspects of business and industry environment move in concert with the market lifecycles.
Holding a divergent opinion and in seeking to develop the product lifecycle concept, Hayes and Wheelwright (1979) suggested separating the product life cycle concept from a related but distinct phenomenon and called it “process life cycle.” the purpose was to facilitate understanding of the strategic options available to a company, particularly with regards to manufacturing functions.
Using the product-process matrix, managers can now accurately represent the interaction of both the product and process lifecycle stages.
This representation may end up with certain kind of product structures matched with their natural process structure. This will lead to what is known as a desirable diagonal positioning of the firm.
Some companies may however, with the understanding of its consequences seek off the diagonal position. This may earn some competitive advantage. But companies who drift off the diagonal without understanding the likely implications may fall into problems.
Proper utility of the matrix was aimed at encouraging more creative thinking about organizational competence and competitive advantage, leading to more informed prediction about the changes that are likely to occur in a particular industry and to consideration of the strategies that might be followed in responding to such changes.
However, many supply chains still suffer from an excess of some products and a shortage of others owing to an inability to predict demand.
Fisher (1997) found out that this is because managers lack a framework for deciding which supply chain concepts are best for their firms.
He proceeded to develop a framework that helps the managers understand the nature of the demand for their products and devise the supply chain that best satisfies that demand.
This matrix would require categorization of the products as either primarily functional or primarily innovative since each category requires a distinctly different kind of supply chain.
Functional products have stable
predictable demand and long life cycles but attracts low profit margin due to competition.
Innovative products have unpredictable demand, short lifecycles, great variety and with higher profit margins.
For companies to be sure that they are taking the right approach, they first must determine whether their products are functional or innovative.
Fisher (1997) states that the managers must then determine whether their supply Chain type is physically efficient or responsive to the market.
By using the matrix to plot the nature of the demand, for each of their product families, and it’s supply chain priorities, managers can discover whether the process the company uses to supply products is well matched to the product type; an efficient process for functional products and a responsive process for innovative.
- Mass Customisation
Mass Customisation or what Naylor et al (1999) call ‘make to order’ or ‘build to order’ is the process of delivering wide-market goods and services which are modified to satisfy a specific customer’s needs. Its a manufacturing technique which combines the flexibility and personalization of custom made products with the low unit costs associated with mass production.
This personalized needs and wants usually are diverse considering varying taste and preferences of each customer.
There must therefore, exist a competent supply chain capable of meeting these diverse needs.
Fogliato et al. (2012) made an updated review of the literature related to mass customisation. They were able to give clear distinction between mass production and mass customisation.
Besides, they also came up with four approaches to mass customisation being; collaborative, adaptive, cosmetic and transparent customization.
Proper manufacturing and supply chain management in general should therefore be able to employ the appropriate approach of Mass Customisation to satisfy diverse needs of their clients.
- Integration of Lean And Agile Supply Chain Strategies
A lean supply chain is more cost effective and predictable, while agile supply chain is more flexible and adaptive.
Lean supply chain focuses on cutting costs by producing high volumes of product with low variability.
Lean supply chain management is about reducing costs and lowering wastes as much as possible.
This methodology is important for organizations with high volumes of purchase orders since waste and costs can accumulate quickly.
Demeter and Matyusz (2011) discussed the impact of lean practices on inventory turnover. They also investigated how various contingency factors (production systems, order types, product types) influence the inventory turnover of lean manufacturers.
From the study, they concluded that companies that use lean manufacturing practices to a greater extent have lower levels of inventory than do companies that use lean manufacturing practices less.
Agile supply chain is more appropriate for organizations that want to adapt to unanticipated developments in the economy, including; changes in technology, customer demand as well as economic swings due to major regional or global disasters such as; Hurricanes, Tsunamis or Corona virus outbreaks like the current COVID-19 pandemic.
The above paradigms of lean thinking and agile manufacturing have been viewed in a progression and isolation. Something that Naylor et al (1999) sought to dispel.
They compared the lean and agile manufacturing paradigms and concluded that indeed they are complementary within the correct supply chain strategy.
Their observation was that the use of market knowledge, integrated supply chain/value stream and lead time compression are the foundation for both agile and lean manufacturing.
They found out that integrated supply chain enable the flow of both information and material, in a simplified, streamlined and optimised manner. This reduces waste and lead time.
An approach pursued at any point in the supply chain will depend upon requirements of the customer (therefore a need for customisation.)
- Postponement in Supply Chain
This is a deliberate action to delay final manufacturing or distribution of a product until a customer order is received.
This reduce incidences of wrong manufacturing or incorrect inventory despatch.
Postponement strategy is based on the following principles of demand forecasting:
-The accuracy of forecast demand decreases with an increase in the time horizon.
-The further the time window for which the demand is being forecasted, the more inaccurate it will be.
-Demand projections for a group of products are generally more accurate than projections for individual products.
For manufacturing scenarios like build to stock, the Postponement strategy may delay the packaging of final assembly of the products, allowing
the manufacturer to personalize and configure finished products to customer orders, and change the final product mix to suit any changes in demand.
Postponement strategy effectively reduces inventory obsolescence and takes out the risk and costs associated with keeping excess inventory.
It requires an collaborative supply chain to ensure that the latest demand forecast are frequently created and communicated through out the supply chain so that right products are manufactured and delivered to the right customers at the right time.
In all, a good combination of Mass Customisation, Leagile and Postponement strategies in manufacturing and Supply-chain in general, will leverage the benefit brought about by each strategy.
The culmination here is the correct positioning of the firm in the product-process matrix.
Matching products with the correct supply chain strategy, in pursuit of optimal conformation to diverse needs of customers, is the goal all businesses, manufacturing and supply chain in particular should strive for.