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Revisiting the Classic
In the March 1997 issue of HBR, Dr. Marshall Fischer published his article – “What is the right Supply Chain for your product”. The rest is history in the world of Supply Chain thought leadership.
The article argued that your products can be differentiated in certain categories (like functional, innovative) and hence defined the characteristics of Supply Chains required to support a specific type of product. No student of Supply Chain can be termed “Supply Chain educated” in the domain without having read that article ( in my opinion) along with few others (Like the Triple A Supply Chain). It is a Supply Chain classic that laid the foundation of one important aspect:
Your Supply Chain design needs to be structured around your product
Note that the aspect definition above says “around the product”. Customer was important but not as paramount in the late 90s as they are now. Then…..
The World of business started changing exponentially- and became extremely customer centric
We know how fast the world of business has evolved since the mid 90s. As the world of business evolved with new platforms, technologies, E commerce and the type of product offerings exploded, thought leaders helped us define multiple types of Supply Chains that were needed to get these products to the customers at the right place, at the right time and in the right quantity- Agile, Responsive, Flexible, efficient among many others.
Still, each product was supported by one type of Supply Chain only.
Then, the likes of Amazon introduced an aspect that would change the world of Supply Chain forever by putting the customer at the top of their strategy. The rest of the world of business had to follow- sooner or later. Those who could not or did not, became extinct.
Customer needs became the central point of every Supply Chain strategy
And that broke the entire notion of one product-one Supply Chain to pieces. Customer segmentation developed a whole new meaning and even functional products needed to be delivered in multiple ways, not only in terms of channels but other aspects like delivery speed. The question- “What is the right Supply Chain for your product” did not remain grammatically correct anymore.
The new question became – What are the right Supply Chains for your product ?
Digital opens a whole new floodgate
In the world of Digital Supply Chains powered by Industry 4.0 , organizations plan to deliver “extreme customization” like batch size one. But let us stay focussed on functional product – say Soda.
Are there opportunities to customize an erstwhile functional product like Soda ? Definitely. What if you want a vending machine to vend a can with your name or your partners’ name on it ? What is, rather than having standard variants of a specific brand, you can customize your drink using the vending machine interface (for example, something between zero calories and regular with more caramel flavor and a hint of vanilla).
So now you can imagine that such vending machines will have a different Supply Chain, vs cases of this soda being sold via a retail store, even though the end product is the same. The functional model, in this new channel transforms into kind of a functional product.
Below are two real life examples of how for the same product, two companies in two different industries ended up creating multiple Supply Chains:
Example 1: A leading Pharma retail chain
A leading Pharma retail chain determined through segmentation that it can leverage both efficient and responsive Supply Chains within the same Supply Chain for mail order prescription fulfillment. There were other nuances involved as well in the segmentation like the storage and logistics temperature requirements of the medicines etc. but the gist is that based on the segmentation exercise, the company created multiple Supply Chains. Then, for the segments and Supply Chains where rapid fulfillment and visibility was critical, it leveraged best in class Digital technologies to provide the visibility, interface and planning. It even created separate warehousing processes for these different Supply Chains, where the pick, pack and dispatch process for the responsive Supply Chain were highly automated.
Example 2: A leading Fashion retailer
A leading fashion retailer segmented its different brands and developed separate Supply Chains for each of these brands. For the brand where the end customer was seeking more personalization, and new varieties and was more tech savvy, a complete digital experience was provided. On the marketing side, it allowed them to personalize certain aspects of the apparel, whereas on the Supply Chain side, digital enablement allowed for rapid customization and fulfillment.