What is Supply Chain Design?
Written by: David Sherman, CTL
What is supply chain design? For many in the field of supply chain and logistics, supply chain design is the rudimentary step in understanding how a product or service is altered from raw materials into a finished product in the hands of the final customer. Supply chain design refers to the development of the framework that information and products travel from supplier to customer and back to the supplier again. But what does that mean?
When a firm begins a new product or incorporates a new supplier, a new supply chain has begun. But before a supply chain design begins a firm must first answer one of two highly important questions: should the supply chain be lean? Or should the supply chain be agile? Lean supply chains focus on reducing waste or “muda” across the supply chain through inventory reduction (one piece flow), lead-time reduction, and supplier-base reduction, lean manufacturing, as well as a just-in-time approach or “pull approach”. On the other hand agile supply chains focus on responding rapidly to changes in demand, by increasing flexibility through lead-time reduction, coordinated planning, improved communication, and increased transparency of demand information from each party. The answer is many times, “both.” But how should a firm decide on which supply chain to focus their design?
Design Based on Customer Demand
Supply chain design should be focused around customer demands in order for the supply chains to be most effective. A supply chain is created to add value to a given item/material or group of materials to create a finished good that the customer will eventually purchase. If that supply chain does not focus on the customers demand(s) or need(s) then that supply chain maintains waste. Supply chain designs that meet customer expectations generally maintain lower costs, consist of better coordination and communication channels, and improve customer service. Thus it is imperative that supply chain design revolves around customer demand. Voice of customer/customer demand during the supply chain design process must be continuously known and updated. So how does a firm understand customer demand when creating the supply chain design?
Design Based on Voice of Customer
Oftentimes capturing the voice of customer is the simplest way to obtain an understanding of customer demand. Knowing the customer currently wants a red car rather than a blue car is crucial to future endeavors of a firm’s supply chain performance. It is also important to continuously communicate that voice of customer with other members of the supply chain in order to keep the supply chain design current and accurate. This includes upstream and other members of the supply chain as well. Voice of customer and customer demand may change instantly, and understanding that change immediately can help a firm be more able to meet those needs in a timely, efficient manner. Therefore, supply chain design must embody the voice of the customer in order for it to be successful and efficient in the long run.
Is your supply chain design based on customer demand and voice of customer?Share