• September 5, 2022

Designing a Supply Archipelago for Demand and supply Side Uncertainty

Supply archipelago management is a powerful management tool to make an impression on competition. Well designed supply archipelago for different products will appear different. Supply archipelago for supplying pasta changes from supply archipelago for selling fashion jewelry or flowing airline spare parts. Supply archipelago for producing and delivering pasta will be designed for productivity and efficiency. Supply archipelago for airline spare parts or ocean going drilling equipment will give greatest importance to timely delivery and availability whatever it takes. Nature of the product, customer requirement 亞馬遜產品識別碼, production method and parts used are some of the factors to be considered when designing a fitting supply archipelago. Demand and supply side uncertainty are the key determining factor when designing a supply archipelago for a product. Well designed supply archipelago that suits a product or category is a competitive advantage.

Product nature can be broadly classified as either functional or aesthetic. Functional products like pasta have stable demand whereas demand for aesthetic products like fashion goods is erratic. Innovative aesthetic products enjoy high profit margins but at the same time have in season demand and short product life cycle. It is difficult to stock enough of each items from bigger product collection but a stock out of a popular item can tarnish brand reputation. On the other hand functional products like pasta or bread have predictable demand. Product nature determines demand uncertainty which experts claim determines the character of the supply archipelago. While product nature lends demand uncertainty, supply side uncertainty can emanate from multiple factors. Uncertainty at the production stage can develop form capricious yield or change in production technology or change in process. Uncertain lead time, small supply base and weather are also some of the non-production factors that contribute to supply side uncertainty.

When the supply side and demand side variations are low, in business efficiency is the key to successful supply archipelago. Production intensive industries can improve in business efficiency by optimizing the production process and eliminating not for value adding activities. An important issue to bear in mind during supply archipelago design is visibility to actual demand from end customer. Stable demand from end consumers could become lumpy and capricious to second and third level suppliers due to bulk ordering practice of distributor and retailer. Supply archipelago planning becomes difficult when the demand is capricious. Trust based collaboration between the supplier and buyer for sharing real demand information is the solution for avoiding demand lumping in the supply archipelago. Stable and even demand facilitates better demand predict, effective planning, optimum numbers of safety stock, better customer service levels, less waste and improved profit margins. Logistics is core to operation of distribution intensive firms. Firms in distribution intensive industries like retail and 3PL must focus on improving logistic efficiency. Careful review of transportation, storage and distribution network and practice will through some light into not for value adding logistic tasks. Overhaul of end to end supply archipelago can improve logistic efficiency. WalMart, a leading in retail supply archipelago, boats stable demand products right to the store from its supplier thereby eliminating expenses due to intermediate handling, inventory management and transportation.

When the supply side uncertainty is high, risk pooling input materials can help Inventory can be stacked up for low value input materials. Usually there is a risk associated with creative or high-value parts. Inventory can be pooled, shared and managed along with other users if the inputs items are tight high value things that are difficult to obtain in bulk. Maintaining substitute materials and alternative suppliers is a time tested tactic used to manage supply side risk. Procedure of allowing substitute parts or materials earlier during the design time is also a supply side risk management strategy notoriously called as “Design for Supply Chain”. Firms in the down stream of supply archipelago use more custom parts to distinguish their products from their competitors. Special attention is required to maintain uninterrupted method of getting such customized parts critical to product differentiation. Various supplier relationship strategies such as controlling pole, partnership, future contracts and other supply hedges to secure steady method of getting critical parts.

Demand is capricious for items like fashion apparel and hi-tech gadgets. These products rarely face any supply side uncertainty. Demand for items such as fashion apparel, movie and books are known only when the product reaches the store ledge. If the market reception for new items is not good, excess inventory is sold at a discount. Strategies such as postponement, store level setup, parallel features and Internet orders can help tackle excess stock due to capricious demand. HP, a respected electronic devices manufacturer, undertaken the problem of uncertain demand for its high end printers by post poning the minor but important assembly tasks to regional distribution centers. Universal products are customized just before delivery time to meet demand for different types of same product. Supplier or dealer level setup can be used to customize products which are easy to configure.

For low value items like self service instructions and warranty cards, printing and packaging in multiple dialects is an effective strategy for numerous national and numerous cultural supply chains. Opening online channels may are very effective for items like music, video games etc. Apple iTunes site for ipod device is a notable example. Dell’s popular assemble to order process for PC manufacturing is a revolutionary example of supply archipelago design for demand volatility. Products with variable demand and supply can use a combination of above techniques. Collaborative demand projecting with buyers and collaborative planning with suppliers can maximize the value of overall supply archipelago.

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