Page 248 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 11: Supply Chain Logistics Design

The result is that multinationals are increasingly focusing on manufacturing and marketing and Notes
are outsourcing warehousing, distribution and other logistics services to expert third-party
logistics providers (3PLs) that can develop logistics networks to keep down the cost of entry into
global markets.
As companies expand their supply chains worldwide, logistics complications grow and solutions
become more problematic.
11.1 Supply Chain Design

Customer requirements are diverse for different types of products and range enormously from
one market sector to another. It is therefore not possible to service everybody with everything
via a single all embracing supply chain strategy. Most companies require some level of mix of
the two approaches in designing the supply chain.

This is especially true of multi-product companies and consumer-oriented companies. In general,
they have to live with the problem that they do not have the freedom to settle for one competitive
strategy. The competition forces them to pursue cost leadership for one product line and a focus
strategy for another within the same business unit. This requires separate supply chain processes
within the same business unit.
This is likely to be a major constraint in the design of a supply chain that has the best strategic fit
and all the benefits of good strategic fit that include cost reduction, improved efficiencies, better
responsiveness, and the transfer of knowledge and skills may not be achieved. One way to
handle this issue is that the process and model for designing supply chain should be cross-
functional.
In general too, the design process and supply chain model requires inputs (estimates, real values
and empirical values based on experience) from marketing, engineering, finance, manufacturing
and supply chain teams so that reasonable estimates of the supply chain performance can be
obtained. By handling supply chain design as a cross-functional problem, a solution to both the
issues can be found.
It is difficult to conceptualize the principles of ‘strategic fit’ and how it is applicable in the design
of supply chains without a practical example. Therefore, let us try out the concepts with a simple
example.

Example: You are asked to design a supply chain for Style and Grace at Connaught
Place. Style and Grace is a retail outlet for menswear. It sells cloth and readymade menswear of
some of the well-known brands. In addition, it has a tailoring department that manufactures
custom made menswear, basically suits for customers. The store caters to the high and high-
middle income groups. You have to determine its competitive strategy. You also have to where
you would place the demand on the implied uncertainty spectrum and why. Based on these you
have to outline your considerations in designing the supply chain.

The customer profile of Style and Grace is high end and high middle income group clientele. For
the readymade menswear, the customers would generally be ladies, whereas for the tailor-
made suits, the customers would generally be men, as the measurement and fitment of suits
requires their presence.
Customers, with this socio-economic profile, would be less price sensitive and more brand and
quality conscious. They would also be highly conscious of the time utility, especially men, as
they would be working people. They will appreciate good service especially if it is personalized.

Style and Grace is located at Connaught Place. This is a major shopping area and in addition, it
is also the commercial centre in Delhi. The locational attributes are a distinct competitive

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