Tuesday, February 25, 2014

The modern business model, and its impact on supply chain complexity

In the New York Times article "Putting Customers in Charge of Design" (http://www.nytimes.com/2010/05/16/business/16proto.html?_r=0), we see the emergence of a new, small, customized, higher priced and less supply-chain heavy business model.

This model relies on relatively well-to-do urban, trendy customers who are interested in personalized, small brand purchasing experiences. In the case of Blank Label, we see a clothes manufacturer that deals with their end, individual customers directly rather than selling to retail stores. As a result of short-cutting the supply chain, the manufacturer in this business model is able to make much more profit per item than the manufacturer who sells to retail locations. The downside, implicitly, is that scale is perhaps more difficult to achieve -- at least in the case of the start-up, Blank Label.

Although I am unaware of large-scale customized shopping/manufacturing business models, it is possible that the internet will enable the extension of this model to a wide audience. Blank Label's customer reach is built around the use of the web, and the customer's individual style choices are actualized through an savvy online clothing design interface. Potentially, this business model can accomodate as many transactions as the traditional retail-only business model. In the event of expansion, however, we would presume that the supply chain at Blank Label would grow more complex, with a more apparent bifurcation between the customer sales and service end, and the manufacturing end, of the business. The main advantage in Blank Label's case, however, is the lack of inventory: each clothing item is made on the spot, upon order.

Question: How can a large, product-sales based company maintain a minimal supply chain (with regards to supply chain components, complexity of relationships and price)?

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