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 / Fall 2004 / Issue 36(originally published by Booz & Company)


Supply Chain Strategy: Back to Basics

6. Be smart about customization. Customers are demanding ever more customized products and services, but customization adds expensive and wasteful complexity to the supply chain if it is not carefully planned for and managed. More part and product configurations mean more suppliers, more inventory, and shorter production run times. Before burdening the supply chain with these costs, assess the value of the additional products or services to the customer and the company. Complexity can be reined in through effective product architecture and by fully understanding all associated costs.

7. Understand the value and risks of technology. Information technology should not be used to replace broken links in the supply chain. Processes complementing the company’s SCM strategy must be designed first — then the right technology infrastructure can support the strategy. Managers may be tempted to eliminate the critical human element and rely only on software to manage the supply chain. But software can’t possibly understand a company’s strategic plan, or intelligently adjust the supply chain when it fails to match customers’ needs. In SCM, there is no substitute for knowledgeable, hands-on managers; technology can help provide data to make good decisions.

8. Adapt to changing business realities. Many SCM initiatives fail because they’re constrained by the existing supply chain structure. In those cases, the supply chain is tweaked, based on a limited short-term perspective, when it needs to be optimized by radically altering practices and processes. Frequent reexamination of the supply chain, with no limits placed on the assessment, is necessary if companies are to ensure that the supply chain strategy remains effective. Economies evolve, markets evolve, and channels evolve, and so must the supply chain. What works in one business environment may be unsuccessful in another. Continual adaptation of the supply chain to support frequently changing business realities — particularly new product introductions and new business launches — is a critical step to enduring market leadership.

Author Profiles:

Keith Oliver ([email protected]) is a senior vice president with Booz Allen Hamilton in London. During more than 35 years in consulting, he has helped senior executives address strategic issues involving the management of the extended enterprise, from suppliers to end customers.

Dermot Shorten ([email protected]) is a vice president with Booz Allen Hamilton in Boston. Mr. Shorten focuses on value stream restructuring, with specific expertise in supply chain management, supply base configuration, and manufacturing strategy.

Harriet Engel ([email protected]) is a senior associate with Booz Allen Hamilton in New York. Ms. Engel has advised businesses in multiple industries, and organizations in the nonprofit and public sectors, on supply chain management strategy and implementation.
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