Differentiated Supply Chain Strategy - Response to fragmented and complex market.

Licentiatavhandling, 2008

Supply Chain Management (SCM) aims to synchronize the requirements of customers with the flow of materials from suppliers, in order to satisfy the needs of the customers as cost-efficiently as possible. This has become a difficult task due to several developments in the market, such as increased competition, increased demand variability, increased product variety, increased amounts of customer-specific products, and shortening product life cycles. These developments, due in part to globalization, provide additional management challenges and new practices in which supply chains are designed and managed, and can eventually make the difference between companies staying competitive or not. The overall purpose of this thesis is to investigate how complexity and globalization affect supply chain design and operations. The main emphasis has been on producing descriptive results of the studied phenomenon. This research involves five case studies covering international transportation structures used in SCM, the selection of supply chain strategies in different business environments, and the role of information systems and technology in achieving the objective of SCM. In this thesis it has been concluded that in order to cope with increasingly complex and fragmented markets companies need more differentiated transportation structures, modes, and supply chains. Furthermore, to effectively manage this, information systems and advanced decision support tools are required. In addition, this thesis has shown that current taxonomies for supply chain strategy selection are too simplistic due to three major problems: they mediate that it is a question of choosing one supply chain strategy for the entire company, they regard markets as rather homogeneous, and they link each supply chain strategy to a specific business context. Instead, it has been concluded that in order to better satisfy differing customer needs in various markets it is increasingly necessary to develop a differentiated supply chain strategy by utilizing different manufacturing and delivery strategies concurrently. Thus, a need exists for new taxonomies for supply chain strategy selection which recognize that the markets are becoming more fragmented and complex, that customer preferences differ across customer/market segments, and that there is a need to differentiate the supply chain strategy. This thesis also highlights several requirements of a differentiated supply chain strategy. Firstly, extended supply chain collaboration is required, since a differentiated supply chain strategy will involve more supply chain partners than a traditional supply chain strategy. Secondly, there is a need for more transportation mode alternatives, particularly intermodal, both in supply and distribution operations, due to the fact that differentiation requires diversity. In this thesis, intermodal landbridge freight services are highlighted as one interesting avenue, which could potentially facilitate a more differentiated supply chain strategy. Thirdly, more integrated information systems are needed along with decision support tools. This study illustrates that agent based modeling appears to be an interesting method for developing realistic decision support tools in the context of complex supply chains. An interesting aspect for further research is to investigate how different manufacturing and delivery strategies can be used concurrently in international supply chains. Moreover, there are several requirements and opportunities of a differentiated supply chain strategy, and these have to be investigated further.