Supply Management in the Decade Ahead VIII: Designing and Operating Multiple Supply Networks

This post continues our coverage of Succeeding in a Dynamic World: Supply Management in the Decade Ahead (a detailed report based on research jointly undertaken by the ISM, A.T. Kearney and CAPS Research), and our review of the seven critical supply strategies for succeeding in a dynamic world in particular, with the third critical supply strategy identified by the report – the design and operation of multiple supply networks.

In tomorrow’s world, the ability to respond to change will just be the price of admission. Competitive advantage will require agility, while supply chain excellence will be defined by the ability to:

  • Anticipate changes in customer requirements, product offerings, supply conditions, regulations, and competitor actions
  • Adapt to the changes by deftly reconfiguring existing supply chains or creatively assembling new ones
  • Accelerate implementation of change to capture the new opportunities ahead of the competition

The report is dead-on when it notes that make-to-order or assemble-to-order product/service bundles that fill distinct and possibly numerous market niches will quite obviously require the management of several supply chains simultaneously on a global scale as a single supply chain will not afford a company the required flexibility.

The big question will not be whether or not you have one or multiple supply chains, but what form each of your supply chains will take – modular or integral. A modular supply chain is designed to be flexible in operation and structure by way of interchangeable supply relationships governed by the specific needs of various customer and market niches. An integral supply chain, in contrast, features supply relationships that are unique, tightly structure, and distinctly coordinated.

The four most important strategies identified in the design and operation of multiple supply chains were:

  • Standardized processes across companies in the supply chain
  • Management of lead times throughout the supply chain
  • An ongoing process for the management of outsourced activities
  • The creation, leading, and management of global supply networks

The report also outlines a four-step approach to employ when designing multiple supply chains to satisfy the company’s full range of customer and product / service needs. This process is outlined as follows:

  1. Determine customer and market niche requirements and define an appropriate segmentation
  2. Logically construct the necessary distinct supply chains
  3. Match business models and strategies to each of the supply chains
  4. Define a reconfiguration plan that turns these concepts into practical, detailed plans for implementations

The report also noted that complex models will be used to evaluate supply chain risk, continuity, performance and design and that leading-edge companies will use modeling techniques to evaluate strategic supply options, costs, and risks. Among other things, these models will allow firms to more aggressively manage fixed assets while factoring risk into the value proposition.

Companies will also increase their ability to perform “what if” simulations across a range of variables and scenarios, making strategic sourcing decision optimization a key part of every sourcing event, as well as supply chain network optimization (see Part I, Part II, and Part III of the doctor‘s series).

The report also notes that anticipating change may require companies to take a three-phased view where they anticipate temporary blips, directional shifts, and disruptive forces, each of which, if not planned for, could interrupt their supply chain agility. Planning for blips will mitigate unnecessary disruptions when demand spikes, planning for shifts will insure that the company has the right structures, processes, technology and relationships in place when it needs to introduce new products to stay competitive, and anticipating when disruptive forces will be introduced will make sure that the company is always working on potentially disruptive offerings of its own in its innovation group.