Module 1:

How to define
Supply Chain
Strategy?

Dr. Behzad Behdani

Lecturer, Consultant, Principal Researcher
Supply Chain Management/ Logistics
This lecture is useful for:
• Supply Chain Managers:
• To decide about an appropriate strategy for their Supply
Chains

• Logistics Service Providers:

• To understand the expectation of companies based on
the type of Supply Chain

• MBA Students/Researchers:
• To get an overview of existing literature on “Supply
Chain Strategy”
 What is the role of “Supply
Chain Strategy”

Business Strategy

Supply Chain Strategy

Supply Chain
Capabilities

Supply Chain
Performance

Source: Morash, E.A. (2001). Supply Chain Strategies, Capabilities, and Performance. Transportation Journal, 41(1), p. 37-54.
 Defining Business Strategy
Business Strategy: the organization’s positioning in
terms of following dimensions of competence:

• Quality (performance, consistent quality,

reliability)

• Time (delivery speed, development speed)

• Flexibility (mix of products, mix of

volume/packaging)

• Cost (labor, material, engineering, quality-

related)

Source: Bozarth C. and R. Handfield (2008). Introduction to Operations and Supply Chain Management, 2/e . Prentice Hall.
 Defining Business Strategy
Conflicting dimensions
High Quality

Short Delivery
Low Cost
Time

High Flexibility
 Form Business to Supply Chain
Strategy
High Quality

Short Delivery
Low Cost
Time

High Flexibility
 From Supply Chain Strategy to
Supply Chain Capabilities
Business Strategy

Supply Chain Strategy

Efficiency Responsiveness

Logistical Facilities Inventory Transportation

Cross-
Functional Information Sourcing Pricing

Source: Chopra S. and Meindl P. (2012). Supply Chain Management: Strategy, Planning, and Operation, 5/e, Pearson Education.
 Other views on defining Supply
Chain Strategy
Supply Chain Strategy and Product Characteristics

• Fisher (1997, p.106):

“The root cause of the problems plaguing many supply
chains is a mismatch between the type of product and the
type of supply chain”
Functional Innovative
Products Products
Supply Chain
Efficient

match mismatch
Supply Chain
Responsive

mismatch match

Source: Fisher, M. L. (1997). What is the Right Supply Chain for Your Product? Harvard Business Review 75(2), p. 105–116.
Some relevant issues
• Multiple products:
• Separate supply chains or Tailored supply chains?

• Product life cycle:

• Supply Chain Strategy moves toward efficiency as
innovative products (if successful) will eventually
evolve to become functional products.

• Product Customization/Standardization:
• As companies move away from customization
toward standardization, there is a shift from
flexibility and a high-performance design quality to a
consistent quality and cost.
 Other views on defining Supply
Chain Strategy
Supply Chain Strategy and S/D Uncertainty

Demand Uncertainty

Low (Functional High (Innovative

products) products)
Supply Uncertainty

Low
(Stable Efficient Responsive
Process) Supply Chain Supply Chain

High Risk-Hedging Agile

(Evolving
Process) Supply Chain Supply Chain

Source: Chase, R.B., Aquilano, N.J. and Jacobs, R.F. (2000). Operations Management for Competitive Advantage, 9/e., McGraw Hill.
Other views on defining
Supply Chain Strategy
Looking at Market Characteristics: Lean vs. Agile

Agile:
Lean:
Speedy reaction
Efficient
to a dynamic/
reaction to a
unpredictable
stable Market
Market
 Other views on defining
Supply Chain Strategy
Looking at Market Characteristics: Lean vs. Agile

• Christopher (2000, p. 39):

“Agility is needed in less predictable environments where
demand is volatile and the requirement for variety is high”
and “Lean works best in high volume, low variety and
predictable environments.”
Low Variability High
High

Agile
Variety

Lean
Low

Source: Christopher, M. (2000). The agile supply chain: competing in volatile markets. Industrial Marketing Management 29(1), p. 37–44.
 Other views on defining
Supply Chain Strategy
Looking at Market Characteristics: Lean vs. Agile

Long
Supply Characteristics

Lean Leagile
Lead
Plan and Execute Postponement
Time

Short
Lean Agile
Lead
Continuous Replenishment Quick Response
Time

Predictable Unpredictable
Demand Characteristics

Source: Christopher, M., Peck, H., and Towill, D. (2006). A taxonomy for selecting global supply chain strategies. International Journal of Logistics
Management 17(2), p. 277–287.
 Other views on defining
Supply Chain Strategy
Looking at Market Characteristics: Lean vs. Agile

• Two views on “Leanagile” Supply Chain:

• Dividing the total demand for a product
can be to “base” and “surge” demand;
considering lean for “base” demand
which is more predictable and using agile
strategy to cope with “surge” demand
(Christopher et al., 2006).
• Operating cost-effectively (i.e. lean) in the
“upstream” of supply chain and
responsively (i.e., agile) in the market
“downstream” (Bruce et al., 2004).
Source:
• Christopher, M., Peck, H., and Towill, D. (2006). A taxonomy for selecting global supply chain strategies. International Journal of Logistics Management
17(2), p. 277–287.
• Bruce, M., Daly L., and Towers, N. (2004). Lean or agile. A solution for supply chain management in the textiles and clothing industry?
International Journal of Operations and Production Management 24(2), p. 151-170.
Thanks for your attention.
Questions?
Or suggestion?

B.Behdani@tudelft.nl