Strategic Supply Chain Management - Supply Chain Online

60 Strategic Supply Chain Management
Supply Chain Configuration
The first source of complexity is your supply chain configuration—how
you’ve structured your network of physical assets and distributed activities
within that network. The decisions you make to support your channel
strategy, operations strategy, and other components of your supply chain
strategy can lead to complex supply chain configurations. And complex
configurations drive process complexity. Do you have a large number of
order-entry desks, warehouses, factories, engineering centers, and other
physical locations Are you trying to manage too many customer and supplier
relationships directly Each location and relationship is another node
in the supply chain that must be designed and managed.
Consider how Alcatel Enterprise, Europe’s largest provider of business
voice and data Internet Protocol (IP) servers, simplified its supply
chain configuration for business advantage. In the late 1990s, Alcatel
management realized that the market for its products—business handsets
and PBXs—was maturing. The company had to find a way to improve
customer service without increasing costs. Alcatel wanted to provide
faster transactions with better traceability while reducing inventory levels
and eliminating the need for multiple suppliers across different geographic
regions. 4
For Alcatel, the answer was to adopt a cost-based supply chain
strategy with a much simpler supply chain configuration; in its case,
this meant outsourcing supply chain operations not considered core
competencies.
Many of these activities were part of the deliver process—getting
equipment to customers, having it installed, and then initiating service.
The company decided to move most sales, installation, and service activities
to its channel partners, resulting in the percentage of indirect sales
growing from 25 percent in 2001 to 95 percent in 2002. In addition,
Alcatel worked on simplifying the interactions with channel partners, creating
an extranet, the Alcatel Business Partner Web site, that sharply
reduced order-management costs by replacing electronic data interchange
(EDI), fax, and mail orders with self-service processes.
Alcatel used the move to indirect sales as an opportunity to streamline
physical distribution of its products around the world. The company
managed a huge number of logistics service providers—more than 30 in
Europe alone. This complexity made it difficult to measure and improve
supply chain performance, so it decided to move all final packaging and
distribution from internal operations to a fourth-party logistics provider
(4PL). Alcatel chose UPS Logistics, and UPS now manages relationships