Modeling and implementing strategies for supply chain alignment

Optimal supply chain design depends on the business context the chain caters for. In this dissertation, we are concerned with attaining and maintaining this alignment between a firm's supply chain portfolio and its business context. Following an introduction in Chapter 1, in Chapter 2 of this dissertation, we analyze the influence of a firm's product types on optimal supply chain design: Academics and practitioners agree that functional products are best delivered via physically efficient supply chains, while innovative products are best delivered via market responsive chains. However, to date, only a few firms have systematically adjusted their supply chain strategies according to this argument. Instead of carrying only one product type, firms deliver a number of both functional and innovative products in parallel complicating the alignment of supply chain portfolios with product portfolios. We address this issue and analyze in detail a firm's optimal supply chain portfolio as a function of its product portfolio. We target the tactical level of decision-making and develop a generic mathematical model to analyze how product portfolios affect the optimal setup of supply chain portfolios. We identify generic problem properties and perform extensive sensitivity analysis to illustrate our findings with numerical examples. Our results indicate that effective supply chain and product portfolio alignment holds the potential for significant cost savings. Because of the large number of factors influencing the optimal set-up, however, profound quantitative analysis is required to exploit the full potential of aligning the supply chain with the product portfolio and to guide implementation. In Chapter 3, we extend our modeling framework and take into account the fact that a firm's products and global business parameters, such as labor rates and transportation costs, evolve over time. Hence, firms need to adapt their supply chain portfolios frequently to stay aligned in the long term. Adapting a well-established supply chain portfolio, however, may involve high costs and expose a firm to unforeseeable risks. We address this issue, differentiating business dynamics into product portfolio dynamics and global business dynamics, and classifying supply chain adaptation into high, medium and low. Building on these classifications, we extend our mathematical model to analyze how much supply chain adaptation a firm actually requires to respond to the business dynamics it faces. Our results indicate that supply chain adaptation may indeed be crucial for a firm to retain its competitiveness. The need for adaptation, however, varies widely across firms: For example, a firm faced with product portfolio commoditization may be required to adapt its entire manufacturing footprint, while a firm with a high product turnover rate may not need to adapt its supply chain portfolio at all. Furthermore, the need for supply chain adaptation is not only determined by the business context in which a firm operates, but can also be manipulated by the firm's product portfolio decisions. Finally, a firm should carefully align its supply chain portfolio with the employed supply chain adaptation strategy to exhaust attainable benefits. In Chapter 4, we widen our scope and develop a step-by-step process to guide sustained alignment between a firm's business context and its supply chain portfolio in practice. Drawing on academic literature, insights from our quantitative models, and extensive interviews with executives from leading firms, we propose and detail four process steps. In the first step we suggest challenging the performance of a firm's current supply chain setup and identifying pressure points to evaluate how acute supply chain realignment is. As a second step we propose and detail a business context analysis to identify what a supply chain lacks and potential areas for realignment. To complement the previous analysis, in a third step, we frame and discuss generic options for long-term supply chain strategy. As a fourth step, we lay out opportunities and pitfalls during the project implementation. We conclude with recommendations on how to stay aligned in the long term. We end the dissertation with a conclusion in Chapter 5.