| Supply chain management is a powerful management | | | | can be pooled, shared and managed along with other |
| tool to win over competition. Well designed supply | | | | users if the inputs items are scarce high value items |
| chain for different products will look different. Supply | | | | which are difficult to obtain in bulk. Maintaining substitute |
| chain for supplying pasta will be different from supply | | | | materials and alternative suppliers is a time tested |
| chain for selling fashion jewelry or rushing airline spare | | | | tactic used to manage supply side risk. Practise of |
| parts. Supply chain for producing and delivering pasta | | | | allowing substitute parts or materials earlier during the |
| will be designed for productivity and efficiency. Supply | | | | design time is also a supply side risk management |
| chain for airline spare parts or offshore drilling | | | | strategy famously called as "Design for Supply Chain". |
| equipment will give utmost importance to timely | | | | Firms in the down stream of supply chain use more |
| delivery and availability at any cost. Nature of the | | | | custom parts to differentiate their products from their |
| product, customer expectation, production method and | | | | competitors. Special attention is required to maintain |
| parts used are some of the factors to be considered | | | | uninterrupted supply of such custom made parts critical |
| when designing a fitting supply chain. Demand and | | | | to product differentiation. Various supplier relationship |
| supply side uncertainty are the key determining factor | | | | strategies such as controlling stake, partnership, future |
| when designing a supply chain for a product. Well | | | | contracts and other supply hedges to secure steady |
| designed supply chain that suits a product or category | | | | supply of critical parts. |
| is a competitive advantage. Product nature can be | | | | Demand is unpredictable for items like fashion apparel |
| broadly classified as either functional or aesthetic. | | | | and hi-tech gadgets. These products rarely face any |
| Functional products like pasta have stable demand | | | | supply side uncertainty. Demand for items such as |
| whereas demand for aesthetic products like fashion | | | | fashion apparel, movie and books are known only |
| goods is erratic. Innovative aesthetic products enjoy | | | | when the product reaches the store shelf. If the |
| high profit margins but at the same time have seasonal | | | | market reception for new items is not good, excess |
| demand and short product life cycle. It is difficult to | | | | inventory is sold at a discount. Strategies such as |
| stock enough of each items from broader product | | | | postponement, store level configuration, parallel |
| portfolio but a stock out of a popular item can tarnish | | | | features and Internet orders can help tackle excess |
| brand reputation. On the other hand functional products | | | | stock due to unpredictable demand. HP, a leading |
| like pasta or bread have predictable demand. Product | | | | consumer electronics manufacturer, tackled the |
| nature determines demand uncertainty which in turn | | | | problem of uncertain demand for its high end printers |
| determines the nature of the supply chain. While | | | | by postponing the minor but important assembly tasks |
| product nature lends demand uncertainty, supply side | | | | to regional distribution centers. Generic products are |
| uncertainty can emanate from multiple factors. | | | | customized just before delivery time to meet demand |
| Uncertainty at the production stage can originate form | | | | for different types of same product. Reseller or dealer |
| unpredictable yield or change in production technology | | | | level configuration can be used to customize products |
| or change in process. Uncertain lead time, small supply | | | | which are easy to configure. For low value items like |
| base and weather are also some of the | | | | self service manuals and warranty cards, printing and |
| non-production factors that contribute to supply side | | | | packaging in multiple languages is an effective strategy |
| uncertainty. When the supply side and demand side | | | | for multi national and multi cultural supply chains. |
| variations are low, operational efficiency is the key to | | | | Opening online channels may work well for items like |
| successful supply chain. Production intensive industries | | | | music, video games etc. Apple iTunes site for iPod is a |
| can improve operational efficiency by optimizing the | | | | notable example. Dell's popular assemble to order |
| production process and eliminating non value adding | | | | process for PC manufacturing is a revolutionary |
| activities. An important issue to keep in mind during | | | | example of supply chain design for demand volatility. |
| supply chain design is visibility to actual demand from | | | | Products with variable demand and supply can use a |
| end customer. Stable demand from end consumers | | | | combination of above techniques. Collaborative |
| may become lumpy and unpredictable to second and | | | | demand forecasting with buyers and collaborative |
| third level suppliers due to bulk ordering practice of | | | | planning with suppliers can maximize the value of |
| distributor and retailer. Supply chain planning becomes | | | | overall supply chain. |
| difficult when the demand is unpredictable. Trust based | | | | Copyright. SupplyChainStar. This article can be |
| collaboration between the supplier and buyer for | | | | reproduced without modification as long as it includes |
| sharing real demand information is the solution for | | | | the author bio and preserves the URL links included in |
| avoiding demand lumping in the supply chain. Stable | | | | the article. |
| and even demand facilitates better demand forecast, | | | | Authored by Senthil |
| effective planning, optimum levels of safety stock, | | | | Author is an independent supply chain, logistics and |
| better customer service levels, less waste and | | | | technology consultant focusing on strategy and |
| improved profit margins. Logistics is core to operation | | | | technology used by enterprise for better supply chain, |
| of distribution intensive firms. Firms in distribution | | | | logistics and general operations management. He |
| intensive industries like retail and 3PL must focus on | | | | regularly tracks and analyses industry news and |
| improving logistic efficiency. Careful review of | | | | supply chain trends and writes articles for |
| transportation, storage and distribution network and | | | | SupplyChainStar and other business magazines. He |
| practice will through some light into non value adding | | | | also exchanges ideas with leading executives through |
| logistic tasks. Redesign of end to end supply chain can | | | | interviews and conference participation. |
| improve logistic efficiency. WalMart, a pioneer in retail | | | | When requested, he is also available for reviewing and |
| supply chain, ships stable demand products directly to | | | | recommending process and technology changes for |
| the store from its supplier thereby eliminating expenses | | | | better operations management. Insights gathered from |
| due to intermediate handling, inventory management | | | | executive interviews, discussion and other means are |
| and transportation. | | | | usually published in SupplyChainStar for the benefit of |
| When the supply side uncertainty is high, risk pooling | | | | supply chain professionals. Others interested in supply |
| input materials can help Inventory can be piled up for | | | | chain can also contribute to SupplyChainStar by |
| low value input materials. Usually there is a risk | | | | publishing articles in their area of expertise and |
| associated with creative or high-value parts. Inventory | | | | participating in discussions. |