More and more, managers recognize that their business needs multiple supply chains.
As an example, Supply Chain Management Review (Nov 2006) reports on a example that highlights a classic trade-off:
Victoria’s Secret has created two different supply chains for the two sorts of products it sells. Its supply chain for high-fashion items like lingerie has been designed to get products into it stores as quickly as possible to maximize sales of short-lived, high-margin goods; its supply chain for basic items like socks has been designed to products on its shelves at the lowest cost.
In this case, you can air freight one set of products and ship the other set by ocean. The high-margin, high fashion items easily absorb the extra transportation costs while the low-margin, low cost items can easily absorb the extra inventory carrying cost. These products might also flow through different distribution points within the network.
Optimization-based supply chain planning tools can help create the best design and plan for each of these supply chains.
What is interesting, though, is that managers no longer have to figure out how many supply chains they have and then come up with the right design for each one.
The advances in the planning tools now allow the managers to use optimization-based tool to help figure out how many supply chains they should have and what they should look like. This process can lead to interesting new insights into the business.
For example, you benefit from unique supply chains based on product, on different seasons, on different brands, on where the product comes from, on different regions, on different customer segments, on different channels, and so on.
Creating different supply chains can lead to significant increase in overall profit margin, increase in customer service, decrease in cost, and an overall improvement of the supply chain’s ability to meet the firm’s strategic goals.
To monitor and manage this additional complexity, more firms are relying on a tighter integration with operational data. This allows you to make adjustments in real-time. Gone are the days of looking at the design of your supply chains once every couple of years.
All of this taken together means that firms gain a competitive advantage by carefully determining their supply chains and staying on top of them.