Strategic Supply Chain Management - Supply Chain Online

CHAPTER 1 Core Discipline 1: View Your Supply Chain as a Strategic Asset 13
We worked with these companies to combine make-to-stock and
configure-to-order strategies. “Vanilla” products were produced and stored
in a central distribution center. When orders came in from each market,
products were customized and shipped accordingly. Availability shot up
and inventory went down in part due to the central inventory but also
because the new approach simplified supply chain planning since procurement
and manufacturing could focus on generic products instead of hundreds
of language variants.
It may be to your advantage to choose different operations strategies
for different products or market segments. Automobile makers have long
pursued a make-to-stock strategy, but some—especially European manufacturers
of high-end vehicles—have aggressively pursued make-to-order
and configure-to-order strategies, an approach we call “Dell on Wheels.” 1
However, make to order has its limits, as automobile makers are finding.
Offering passenger cars on a make-to-order basis while maintaining a competitive
lead time is a tremendous challenge given the millions of potential
end configurations. Unless suppliers can be fully integrated into the maketo-order
supply chain, the inventory risk is very high. In addition, changing
the manufacturing process to allow each car to match a unique set of
characteristics is a very costly undertaking that few OEMs have been willing
to embrace. In 2002, only about 20 percent of passenger cars sold in
North America were made to order. The rest were made to stock and sold
from dealer lots. In Europe, the percentage of made-to-order vehicles was
greater. In the German domestic market, for instance, about 60 percent of
the high-end cars made by BMW, Audi, Porsche, and Mercedes were made
to order.
Like the other supply chain configuration components, operations
strategy is dynamic. A key driver is the product life cycle. As demand for
products peaks and then decreases, companies can move from make to
stock to make to order to reduce inventory risk while still ensuring availability
at a competitive price. Another driver is the number of product variants.
It is not unusual to find that 80 percent of volume shipments comes
from just 20 percent (yes, Pareto at work again) of your sales item numbers
(or possible configurations). In this circumstance, a hybrid make-to-stock
and make-to-order strategy may be more appropriate.
Channel Strategy
Your channel strategy has to do with how you’ll get your products and services
to buyers or end users. These decisions address such issues as whether