Digital model-driven retail supply chain management

Licentiate thesis, 2019

The purpose of this thesis is to increase the understanding of how matching of digital models of products and customers can be used to shift the performance frontier in retail supply chains. This thesis puts forward the matching of digital models as an operational practice used by retail supply chains. Digital product models are digital descriptions of available products on the market and they contain information about the products' characteristics. Digital customer models are digital descriptions of customers and contain customer characteristics and preferences. This thesis concerns product recommendations based on matching of digital product and customer models.

This thesis conceptualizes the operational practice of matching digital models of products and customers (Paper I), identifies potential supply chain outcomes by introducing the operational practice in retail supply chains (Paper II), and evaluates mechanisms driving the outcomes in two retail supply chains (Paper III). Exploratory design science research is used to conceptualize the operational practice, and case studies and a case survey are used to empirically evaluate supply chain outcomes and mechanisms that drive them.

Findings show how the operational practice moves the performance frontier by improving market mediation performance in retail supply chains, particularly through improved delivery performance and production cost performance. The findings imply that delivery performance and cost performance can be achieved without a trade-off between the two.

The practical contribution of this thesis is that the findings help companies understand how their profiles match the operational practice and gear them to achieve the outcomes. The thesis demonstrates how the operational practice would function in real-life and studies how existing similar practices produce the outcomes, which yields insight into hands-on knowledge that can be used by the companies. The thesis develops a maturity model, describing three maturity levels of the operational practice. Companies can map their current status and desirable to-be status in the model and advance in level.

The thesis contributes to theory by increasing the solution space for combining efficiency and responsiveness in retail supply chains by bypassing the trade-off between production efficiency and delivery performance through the use of new matching technology. Matching technology enables the operational practice to more fully utilize the existing product variety in already manufactured product supply to move the performance frontier in retail supply chains.