Tuesday, October 8, 2013

Best Value Supply Chains

21st century Supply Chains are very challenging but possess opportunities that can help reap millions. A study by David J Ketchen et al. “Best Value Supply Chains: A key competitive weapon for the 21st century”, explains the creation of Best Value supply chains. 
The core of such a supply chain is ( Figure 1) :
· Agility: How fast the supply chain can respond to changes in supply and demand. This can be achieved through the use of buffers (more inventory, capacity and management) – which is not recommended, as “Inventory is BAD”. Agility could be achieved by co-locating with the customer. This increases information flow that cannot be duplicated. But this might increase costs.
·      Adaptability: The willingness and capacity to reshape the supply chains. This is achieved when the same supply chain is used for multiple products/services. It is beneficial to design a single supply chain for a customer if they add significantly to your revenue.
·      Alignment: Creating consistency in the interests of all participants in the supply chain. Collaborative forecasting with customers and suppliers helps in alignment.

Figure 1: An illustration of best value supply chains
Another aspect that differentiates Best Value Supply chains from other supply chains is:
1.     Strategic Sourcing: From Purchasing and supply chain management by Monczka, Supply chains involve suppliers early on achieve “on average a 20% reduction in material cost, a 20% improvement in material quality, and a 20% reduction of development time”
2.     Logistics Management: From the article, best value supply chains integrate logistics as a strategic mechanism at the level of corporate strategy. They also emphasize the value of positioning inventory and a flexible supply chain structure.
3.     Supply chain Information Systems: Effective supply chain information systems provide cost benefits, productivity improvements and alignment to a product strategy.
4.     Relationship Management: Effective integration of participants in the supply chain is crucial to the success of a Best Value supply chain. “Collaboration” is the key.
      As the size of large retailers such as Amazon and Walmart keep increasing, a small revolution seems to be brewing. The race to deliver outsourced products fast is also facing competition from local markets. In the light of such competition, are leaner supply chains the answer? Will ongoing efforts to make supply chains leaner make them so lean that all that remains in the supply chain is logistics? Will inventory be a thing of the past?


“Best value supply chains: A key competitive weapon for the 21st century”

David J. Ketchen, Jr. , William Rebarick , G. Tomas M. Hult c David Meyer  

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