Universidad de La Sabana

Escuela Internacional de Ciencias Econmicas y Administrativas

Instituto de Postgrados - Forum
Proyecto de grado
Maestra en Gerencia de Operaciones


Aligning the supply chain to business strategy
Alineando la cadena de abastecimiento con el entorno de negocio

Hernn David Prez-Arroyave*,

Thesis directors:
Luis Alejandro Rodrguez-Ramrez

J airo Montoya-Torres

* [email protected]
Escuela Internacional de Ciencias Econmicas and Administrativas, Universidad de La Sabana, autopista norte de Bogot, D.C., Cha
(Cundinamarca), Colombia.

Resumen: Para enfrentar el desafiante ambiente
competitivo actual es primordial la correcta
alineacin de la estrategia funcional de la cadena de
abastecimiento con el entorno de negocio. En la
literatura se presentan diversos modelos genricos
de estrategias de cadena de abastecimiento, sin
embargo, para las organizaciones se dificulta
asegurar la correcta seleccin y alineacin de estos
modelos genricos a su propia realidad de negocio.
Este proyecto pretende responder a la pregunta,
Cmo validar el alineamiento y pertinencia de la
estrategia funcional de la cadena de abastecimiento
con respecto al entorno de negocio de una
organizacin industrial? mediante el desarrollo de:
(1) un mtodo para caracterizar la estrategia de la
cadena de abastecimiento de una organizacin
industrial y (2) un mtodo que identifique la
pertinencia de la estrategia de la cadena de
abastecimiento con el entorno de negocio de la
organizacin. La metodologa de investigacin es
soportada en tcnicas como el anlisis cruzado de
casos y el meta anlisis, basada en el anlisis de:
casos existentes en la literatura, teoras de otros
autores, anlisis con expertos y la experiencia del
autor. Se pretende desarrollar un mtodo que sea
aplicable por las organizaciones industriales.

Palabras clave: Estrategia de cadena de
abastecimiento, Supply Chain Roadmap.
Abstract: Proper alignment of functional supply
chain strategy with business framework is essential to
address the current challenging competitive
environment. In the literature there are various
generic models of supply chain strategies, however, it
is difficult for organizations to assure the proper
selection and alignment of these generic models with
their own business situation.
This project aims to answer the question, "How to
evaluate the alignment and relevance of the supply
chain functional strategy with respect to the business
strategy of an industrial organization? By developing:
(1) a method to characterize supply chain strategies of
an industrial organization and (2) a method to identify
the relevance of supply chain strategy with business
framework of an organization. Research
methodology is supported in techniques as Cross-
case synthesis and Meta Analysis based on the
analysis of: cases in the literature, theories of other
authors, expert analysis and experience of the own
author. It hopes to develop a method that will be
understandable and applicable by supply chain
professionals for their own organizations.
Keywords: Supply Chain Strategy, Supply Chain
design, Supply Chain configuration, Supply Chain
Roadmap.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
1

Table of contents:
Foreword ..................................................................................................................................... 10
Section 1: Introduction, literature review and methodology ............................................. 12
1. Problem Statement .................................................................................................. 13
2. Justification .............................................................................................................. 15
3. Literature Review .................................................................................................... 15
4. Methodology ............................................................................................................ 18
Section 2: Development of Supply Chain Roadmap
TM
...................................................... 25
5. Defining Strategy ..................................................................................................... 26
6. General vision of the model for characterizing a supply chain ........................... 28
Section 3: Reference Generic Supply Chain models ........................................................... 43
7. Characterization of the supply chain generic models .......................................... 44
8. Applicability of the supply chain generic models (SCGM) ................................. 57
Section 4: Supply Chain Roadmap
TM
method application ................................................ 68
9. Case Analysis ........................................................................................................... 69
10. Own Case Analysis .................................................................................................. 90
Section 5: Model validation ..................................................................................................... 109
11. Model validation .................................................................................................... 110
12. Conclusions ............................................................................................................ 125
Section 6: Model & Tools ........................................................................................................ 126
13. Introduction to Supply Chain Roadmap guide .............................................. 127
14. Three-step method ................................................................................................ 130
Acknowledgements ................................................................................................................... 144
Appendix ................................................................................................................................... 145
A1. Definition of the terms of reference ............................................................................. 145
A2. References ...................................................................................................................... 146


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
2

Table of contents (detailed view):
Foreword ..................................................................................................................................... 10
Section 1: Introduction, literature review and methodology ............................................. 12
1. Problem Statement .................................................................................................. 13
1.1 Context ........................................................................................................................... 13
1.2 Research Statement ........................................................................................................ 14
1.3 General Objective .......................................................................................................... 14
1.4 Specific Objectives ........................................................................................................ 14
2. Justification .............................................................................................................. 15
3. Literature Review .................................................................................................... 15
4. Methodology ............................................................................................................ 18
4.1 Selection of the research methodology .......................................................................... 18
4.2 Analytical technique ...................................................................................................... 20
4.3 Applicability of the selected technique .......................................................................... 20
4.4 Verification of design quality......................................................................................... 21
4.5 Stages and methodology ................................................................................................ 22
Section 2: Development of Supply Chain Roadmap
TM
...................................................... 25
5. Defining Strategy ..................................................................................................... 26
5.1 What is strategy? ............................................................................................................ 26
5.2 What is an operations strategy? ...................................................................................... 27
5.3 From the operations strategy to the supply chain strategy ............................................. 27
6. General vision of the model for characterizing a supply chain ........................... 28
6.1 The structure of a supply chain adapts to the businesss environment .......................... 28
6.2 Business Environment =Business Framework .............................................................. 28
6.3 Supply Chain Profile ...................................................................................................... 30
6.4 Supply chain strategy ..................................................................................................... 31
6.5 Supply Chain framework factors ................................................................................... 32
6.6 Supply chain profile ....................................................................................................... 34
6.7 Unique value proposal.................................................................................................... 38
6.8 Winners and Qualifiers: essence of the unique value proposal ...................................... 38
6.9 Supply Chain Roadmap
TM
model .............................................................................. 42
Section 3: Reference Generic Supply Chain models ........................................................... 43
7. Characterization of the supply chain generic models .......................................... 44
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
3

7.1 Fishers approach ........................................................................................................... 44
7.2 Lees Uncertainty Framework .................................................................................... 46
7.3 Lees Triple A Supply Chain ...................................................................................... 49
7.4 Best Value Supply Chain ............................................................................................... 51
7.5 Gattorna Dynamics Supply Chain ............................................................................. 51
7.6 Christophers Global Supply Chain Strategies .......................................................... 54
7.7 Stavrulaki and Davis ...................................................................................................... 56
8. Applicability of the supply chain generic models (SCGM) ................................. 57
8.1 A unique set of Supply Chain Generic Models .......................................................... 57
8.2 Efficient SCGM ............................................................................................................. 57
8.3 Continuous replenishment SCGM ................................................................................. 59
8.4 Agile SCGM .................................................................................................................. 60
8.5 LeAgile SCGM .............................................................................................................. 62
8.6 Flexible SCGM .............................................................................................................. 62
8.7 Other SCGM .................................................................................................................. 64
8.8 Reference SCGM ........................................................................................................... 64
8.9 Criterias for the Gap Analysis ........................................................................................ 65
Section 4: Supply Chain Roadmap
TM
method application ................................................ 68
9. Case Analysis ........................................................................................................... 69
9.1 Crocs
TM
: Revolutionizing an industrys supply chain model ......................................... 69
9.2 Tamago-Ya of J apan: Delivering lunch boxes to your work ......................................... 75
9.3 Toyota: Demand Chain Management, Scion experience ............................................... 80
9.4 Wills Lifestyle in India................................................................................................... 85
10. Own Case Analysis .................................................................................................. 90
10.1 Applying Supply Chain Roadmap
TM
in your own case ........................................... 90
10.2 First case: FMCG Company........................................................................................ 96
10.3 Second case: Manufacturer of raw materials for textile industry .............................. 102
10.4 Adjusting Supply Chain Roadmap
TM
method........................................................ 107
Section 5: Model validation ..................................................................................................... 109
11. Model validation .................................................................................................... 110
11.1 Quality of research design .......................................................................................... 110
11.2 Meta-analysis or iterative triangulation...................................................................... 111
11.3 Own Case results ........................................................................................................ 124
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
4

11.4 Brand and Patent Pending .......................................................................................... 124
11.5 Future work ................................................................................................................ 124
12. Conclusions ............................................................................................................ 125
Section 6: Model & Tools ........................................................................................................ 126
13. Introduction to Supply Chain Roadmap guide .............................................. 127
13.1 Several approaches to business strategy .................................................................... 127
13.2 Supply Chain Roadmap approach .............................................................................. 127
13.3 Supply Chain Roadmap model ................................................................................... 128
13.4 When/Where to apply Supply Chain Roadmap?........................................................ 129
14. Three-step method ................................................................................................ 130
14.1 First step: Supply Chain Assessment ......................................................................... 130
14.2 Second step: Mapping ................................................................................................ 135
14.3 Third step: Gap analysis ............................................................................................. 137
14.4 Key question for the Gap Analysis ............................................................................ 142
14.5 Update and deployment.............................................................................................. 142
Acknowledgements ................................................................................................................... 144
Appendix ................................................................................................................................... 145
A1. Definition of the terms of reference ............................................................................. 145
A2. References ...................................................................................................................... 146


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
5

List of Figures:
Figure 1, Chronological development of Generic Supply Chain ........................................... 15
Figure 2, Cross case synthesis + Meta analysis ........................................................................ 20
Figure 3, Conceptual model. ..................................................................................................... 22
Figure 4, Stages and methodology ............................................................................................ 23
Figure 5, Business Framework and Supply Chain Profile ..................................................... 28
Figure 6, Forces governing competition in an industry .......................................................... 29
Figure 7, Business framework forces governing supply chain profile................................... 30
Figure 8, Elements of supply Chain profile ............................................................................. 31
Figure 9, Supply Chain Roadmap model ................................................................................. 31
Figure 10, components of three framework forces .................................................................. 33
Figure 11, Relationship among order cycle, production cycle and order penetration point36
Figure 12, Relationship among framework factors, profile key elements and buffering .... 37
Figure 13, Supply Chain Roadmap profile and framework ................................................... 37
Figure 14, Unique Value Proposal ............................................................................................ 38
Figure 15, Winners & Qualifiers = Unique Value Proposal ................................................... 38
Figure 16, Unique value proposal levels ................................................................................... 39
Figure 17, Supply Chain Roadmap
TM
Graphic view .................................................... 40
Figure 18, Supply Chain Roadmap
TM
model ...................................................................... 42
Figure 19, Lees Generic Supply Chain Models .................................................................. 46
Figure 20, Christophers Generic Supply Chain Models ................................................... 54
Figure 21, Comparison of supply chain characteristics, ......................................................... 56
Figure 22, Crocs 2007: Supply Chain Roadmap ..................................................................... 71
Figure 23, Tamago-ya 2007: Supply Chain Roadmap ............................................................ 77
Figure 24, Toyota Scion: Supply Chain Roadmap .................................................................. 82
Figure 25, Wills: Supply Chain Roadmap ............................................................................... 87
Figure 26, Steps to apply Supply Chain Roadmap
TM
method in a real case ................... 90
Figure 27, Supply Chain Roadmap
TM
tool .......................................................................... 94
Figure 28, Category B, Omega Company under Supply Chain Roadmap
TM
. ................. 98
Figure 29, Alpha Company under Supply Chain Roadmap
TM
. ...................................... 104
Figure 30, Three-step method for applying Supply Chain Roadmap
TM
. ................... 108
Figure 31, Supply Chain Roadmap, prototype 1. .................................................................. 111
Figure 32, Supply Chain Roadmap, prototype 2. .................................................................. 111
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
6

Figure 33, Supply Chain Roadmap, prototype 3 Matrix-. ................................................. 112
Figure 34, Supply Chain Roadmap, prototype 4 Cross-. ................................................... 112
Figure 35, Supply Chain Roadmap, first version .................................................................. 113
Figure 36, Supply Chain Roadmap, second version ............................................................. 114
Figure 37, Supply Chain Roadmap, third version ................................................................ 115
Figure 38, Supply Chain Roadmap, intermediate version ................................................... 116
Figure 39, Supply Chain Roadmap, final version before Omegas case ............................. 117
Figure 40, Supply Chain Roadmap, final version after cases feedback .............................. 118
Figure 41, Supply Chain Roadmap, final version after cases feedback .............................. 123
Figure 42, Several approaches about strategy ....................................................................... 127
Figure 43, Supply Chain Roadmap model ............................................................................. 128
Figure 44, Scenarios where is applicable Supply Chain Roadmap ..................................... 129
Figure 45, Supply Chain Roadmap three step method. .................................................. 130
Figure 46, Supply Chain Roadmap Assessment scope...................................................... 131
Figure 47, First step. ................................................................................................................ 131
Figure 48, Assessment, questionnaire 1: Supply Chain Framework ................................... 132
Figure 49, Assessment, questionnaire 2: Supply Chain Profile ........................................... 133
Figure 50, Assessment, questionnaire 3: Unique Value Proposal. ....................................... 134
Figure 51, Assessment, questionnaire 4: Management focus. .............................................. 135
Figure 52, Second step ............................................................................................................. 135
Figure 53, Mapping tool. ......................................................................................................... 136
Figure 54, Third step. .............................................................................................................. 137
Figure 55, Gap analysis tool or SCGM parallel view. ........................................................... 138
Figure 56, Gap analysis tool, Dominant Behaviors. .............................................................. 139
Figure 57, Gap analysis tool, Dominant Supply Chain models. ........................................... 140
Figure 58, Gap analysis tool, Gaps definition. ....................................................................... 141
Figure 59, Three-step methods cycle ..................................................................................... 142


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
7

List of Tables:
Table 1, Evolution of supply chain design criteria .................................................................. 16
Table 2, Main generic supply chain models ............................................................................. 17
Table 3, Supply chain strategy cases ........................................................................................ 18
Table 4, Methodological framework ........................................................................................ 19
Table 5, Validation of requirements of selected technique ..................................................... 21
Table 6, tactical actions to assure research quality ................................................................. 22
Table 7, Business framework factors affecting supply chain strategy .................................. 32
Table 8, Framework forces evaluation ..................................................................................... 34
Table 9, Supply chain profile elements. ................................................................................... 35
Table 10, Supply Chain profile elements focus, according to unique value proposal .......... 39
Table 11, Supply Chain Roadmap
TM
Parallel-Table View ........................................... 41
Table 12, Fishers Efficient and Responsive Supply Chains. ................................................ 44
Table 13, Fishers Efficient and Responsive Supply Chains .................................................. 45
Table 14, Stable vs. evolving supply ......................................................................................... 46
Table 15, Lees proposal characterized under Supply Chain Roadmap
TM
model. ......... 48
Table 16, Lees Triple A Supply Chain. ............................................................................... 49
Table 17, Lees Triple A Supply Chain, Ketchens Best Value Supply Chain ............. 50
Table 18, A comparison of best value and traditional supply chains .................................... 51
Table 19, Buying behaviors ....................................................................................................... 52
Table 20, Gattornas Dynamic Supply Chains .................................................................... 53
Table 21, Christophers Generic Supply Chains ................................................................. 55
Table 22, Efficient Reference SCGM ....................................................................................... 58
Table 23, Continuous Replenishment Reference SCGM ........................................................ 59
Table 24, Agile Reference SCGM ............................................................................................. 61
Table 25, LeAgile Reference SCGM and Flexible Reference SCGM ................................... 63
Table 26, Full view of Reference SCGM ............................................................................. 64
Table 27, Crocs 2007: Financial ratios compared with peers ................................................ 72
Table 28, Crocs 2007: gap analysis based on Reference SCGM ........................................ 73
Table 29,Tamago-ya 2007: gap analysis based on Reference SCGM ................................ 78
Table 30, Toyota Scion: gap analysis based on Reference SCGM ..................................... 83
Table 31, Wills: gap analysis based on Reference SCGM .................................................. 88
Table 32, Framework assessment tool ...................................................................................... 91
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
8

Table 33, Profile assessment tool .............................................................................................. 92
Table 34, Focus assessment tool ................................................................................................ 93
Table 35, Reference SCGM tool (Gap Analysis) ..................................................................... 95
Table 36, Supply Chain Profile Assessment, Omega Company, Category B ....................... 96
Table 37, Framework Assessment, Omega Company, Category B ....................................... 97
Table 38, Framework Assessment, Omega Company, Category B ....................................... 97
Table 39, Category B, Omega Company gap analysis under reference SCGM. .............. 99
Table 40, Supply Chain Profile Assessment, Alpha Company ............................................ 102
Table 41, Supply Chain Framework Assessment, Alpha Company .................................... 103
Table 42, Supply Chain Focus Assessment, Alpha Company .............................................. 103
Table 43, Alpha Company, gap analysis under reference SCGM. .................................. 105
Table 44, Adjustments of the model. ...................................................................................... 108
Table 45, Method Validity and Reliability ............................................................................. 110
Table 46, Reference SCGM, first version .............................................................................. 119
Table 47, Reference SCGM, second version .......................................................................... 120
Table 48, Reference SCGM, version before own cases application ..................................... 121
Table 49, Reference SCGM, version before omega case application .................................. 122


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
9








The formulation of great strategies is an art, and it will always remain so. But the
description of strategy should not be an art. If people can describe strategy in a more
disciplined way, they will increase the likelihood of its successful implementation

Kaplan & Norton

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
10

Foreword

In a challenging competitive environment, where industrial companies are faced against
worldwide and global-scale competitors, proper alignment of functional supply chain strategy with
business framework is essential to maintain competitiveness. But a big question appears:

How to validate the alignment and relevance of the supply chain functional strategy with
respect to the business environment of an industrial organization?

This is precisely the value proposition of "Supply Chain Roadmap", a three-step method for
understanding, mapping and redesign of your supply chain strategy, assuring linkage with business
strategy by understanding market forces and companys competitive positioning.

As is explained by Kaplan & Norton, The formulation of great strategies is an art, and it will
always remain so. But the description of strategy should not be an art. If people can describe
strategy in a more disciplined way, they will increase the likelihood of its successful
implementation, this is just the positioning of Supply Chain Roadmap, Supply Chain
Roadmap is not a new type of supply chain strategy, Supply Chain Roadmap is a method
supported in the most important and recognized theories and practices about supply chain strategy,
its contribution resides in the development of a simple and easy method to characterize and identify
the relevance of the supply chain strategy with business framework of an organization by a three-
step method: Assessment, Map and Rethink.
Supply Chain Roadmap method is supported in two main pillars, the characterization method
and the gap analysis, which compares any supply chain strategy with five reference supply chain
models.
Supply Chain Roadmap is not a quantitative method with a unique or predefined solution,
Supply Chain Roadmap is a method where supply chain strategy could be gathered and reviewed
in a systematic and organized approach supported by several team discussions where is analyzed
current supply chain strategy compared against reference supply chain models, in order to define
gaps and/or inadequate alignment between supply chain strategy and business strategy.

Research was developed by a Qualitative method, due that, it was necessary to do extensive
reviews (crossed analysis) and iterative refining of the method, which are developed in six sections:
Section 1 presents an understanding about difficulties experienced by companies when they are
outlining supply chain strategy; a literature review about supply chain strategy, understanding
approaches defined by several authors and case studies, finding a gap between current state of the
art and industry needs. Finally is proposed a research methodology for defining a new model that
allows companies to characterize their supply chain strategy and verify the relevance of supply
chain strategy with business framework.
Section 2 presents understanding and crossed analysis of current theories about supply chain
strategy, based on that, is developed the first pillar of Supply Chain Roadmap model, the method
to characterize supply chain strategies of an industrial organization.
Section 3 develops the second pillar of Supply Chain Roadmap model, the Reference
Generic Supply Chain models, which are obtained after the characterization and crossed
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
11

analysis of generic supply chain models, proposed by several authors as Fisher, Lee, Gattorna,
Christopher.
Section 4 applies the Supply Chain Roadmap method in four cases developed by other
authors, in order to adjust method based on an iterative refining. After that, method is applied in
two own developed cases, in order to verify method relevance and adjust method deployment.
Section 5 verifies method deduction based on the research methodology defined in Section 2,
and presents conclusions.
Section 6 presents a How to apply methods guide.

Welcome to Supply Chain Roadmap!!!




Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
12

Section 1: Introduction, literature review and methodology

Chapters 1 and 2 present an understanding about difficulties experienced by companies when
they are outlining supply chain strategy, and based on this opportunity are defined objectives of this
project. Chapter 3 presents a literature review about supply chain strategy, understanding
approaches defined by several authors and case studies, finding a gap between current state of the
art and industry needs. Finally Chapter 4 shows a proposed methodology for defining a new model
that allows companies to define their supply chain strategy aligned to business framework.







Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
13

1. Problem Statement
1.1 Context
Competition in diverse industrial and service sectors has increased to unimaginable levels in the
past years. Factors such as product technological maturity, a greater number of suppliers in the
market, free trade agreements and the advantage of scale that competitors with global reach have,
are approximating diverse industrial sectors to product commoditization (loss of differentiation).
In order to face this challenging competitive environment, organizations are developing several
approaches for the business strategy, such as innovation, advantages in costs, the development of
value-added services or a mix thereof, among others. At the same time, in the last ten years, the
Supply Chain function has become a key element for competing and differentiating itself in the
markets given that within its functional role it is in charge of coordinating the flow of information,
products and money from the suppliers, passing through the manufacturing and transformation
processes to then reaching the Customers, thus strongly affecting the organizations competitiveness
factors such as product cost, working capital, the speed with which it reaches the market and service
perception, among others. The importance of these competitiveness factors has garnered the
attention of many authors in respect of how one can approach organizations supply chain strategy
so as to adequately support the business strategy and propose generic supply chain models, in
accordance with several criteria.
The first approach to these supply chain strategy design models was developed by Hill (1995),
who focuses on the manufacturing field and introduces concepts such as order qualifiers and order
winners and on which the proposal to define an organizations manufacturing strategy is based, a
work which he later perfected and evolved, but maintaining his approach towards manufacturing
(Hill & Hill 2009). The first widely recognized proposal of a segmented model for a supply chain
strategy arises from Fisher (1997), who in his classic article What is the right supply chain for
your product? suggests that the design of the supply chain must be being defined with respect to
the product type: for functional products he recommends efficient chains and for innovative
products he recommends agile chains. Martin Christopher (2000, 2002), adds the lead-time
criteria to Fishers product type criteria for the selection of the supply chain model by developing a
2x2 matrix and introduces agile, lean and lean agile supply chain concepts. Alongside, Lee (2002)
develops the uncertainty framework concept, in which starting from the interaction between the
uncertainty of demand and the uncertainty of sourcing, he introduces four types of supply chains as
follows: Efficient, Agile, Rapid Response and Risk Coverage. Later, Christopher and Gattorna(p
119 2005) define the concept of alignment of supply chains with the Customers needs and
introduce four generic supply chains: Collaborative, Efficient, Rapid Response and Innovative.
Gattorna (2006) subsequently evolved this concept to dynamic supply chains, where he presents
four types of supply chains: Agile, Efficient, Continuous Replenishment and Flexible. In the
interim, the Best Value Supply Chain (Ketchen & Hult 2007) arises, which is a hybrid approach
combining elements of the generic chains proposed previously by other authors. It is important to
highlight that the authors use similar terminology for naming the generic supply chains, but develop
different concepts in the modus operandi and in these generic chains applicability criteria,
constituting a first element of confusion, thus making it difficult for supply chain professionals to
understand concepts so they can correctly select and align the adequate supply chain model to their
own business reality.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
14

In addition, discussions with people responsible for the supply chain function in several
industrial sectors and those in professional and teaching practices in areas related to Supply Chain
management, have allowed observing other factors contributing to the misalignment of the supply
chain strategy with the business environment, in which the following stand out:
Non-existence of a supply chain strategy.
Organizations where the strategy has been defined informally without due technical
discipline.
Lack of knowledge in how to formulate the functional strategy and its alignment with
the business environment.
Gaps between the theoretical concepts of existing methodologies and the real world.
From these factors arises the opportunity to develop a method for validating the supply chain
functional strategy geared towards implementation, in which the needs of the productive sector
are satisfied in regards to aligning the theoretical concepts to business realities, concepts that are
understandable by people in different levels and with different training, and ensuring ease in
implementation and deployment. This project intends to: (1) develop a method for characterizing
supply chain framework factors affecting the supply chain strategy of an industrial organization, (2)
develop a method for characterizing the supply chain strategy of an industrial organization (3)
characterize and define the applicability of supply chain generic models reported in literature and
(4) develop a method that identifies the coherence of the supply chain strategy with an
organizations business environment, based on the applicability of supply chain generic models. In
this manner, a correct definition and execution of the supply chain strategy is sought in such a
manner that will allow ensuring the organizations key competitive factors such as product cost,
working capital, the speed with which it reaches the market and service perception.
1.2 Research Statement
How to validate the alignment and relevance of the supply chain functional strategy with respect
to the business environment of an industrial organization?
1.3 General Objective
Develop a methodology for characterizing and validating the applicability of an industrial
organizations supply chain functional strategy, verifying its alignment to the business environment
and identifying the gaps that must be adjusted in order to increase the performance of the key
competitive factors.
1.4 Specific Objectives
Develop a method for characterizing an organizations supply chain functional strategy.
o Define the variables that characterize an industrial organizations supply chain
functional strategy.
o Define the supply chain framework factors that affect an industrial organizations
supply chain functional strategy.
Develop a method that identifies the coherence of the supply chain functional strategy with
the business environment of an organization, based on the applicability of supply chain
generic models.
o Define the relationship between the supply chain framework factors and the supply
chain profile for the supply chain generic models, identifying applicability ranges
and events of inconsistency for each generic model.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
15

Validate the proposed methodology through the application in at least one real case, with
the purpose of analyzing its relevance in industrial organizations.
2. Justification
Despite how new this topic is, literature and the evidence of cases is extensive, with a diversity
in criteria and methods, thus generating a lack of consensus among supply chain professionals
regarding which method is the most appropriate, reducing the dissemination of existing evaluation
models in academia to the productive sector. This project is suitable for industrial organizations,
regardless of their size, industrial sector and geographic coverage, given that it will analyze the
theory and evidence of existing cases and after some fine-tuning will seek a convergence towards a
method geared towards implementation for evaluation regarding the relevance of the supply
chain strategy with the businesss strategic approach.
3. Literature Review
There are many proposals of supply chain generic models, which are developed starting from
Fishers concepts (1997), and then evolve in the last fifteen years, as detailed in the timetable
presented in Figure 1.


Figure 1, Chronological development of Generic Supply Chain
Source: own elaboration

The analysis of contributions made in supply chain strategy allow classifying the principal works
in four main currents: (1) Proposals of supply chain generic models, (2) Methodologies for supply
chain design, (3) Report of quantitative case studies, (4) Report of qualitative case studies, the latter
two being geared towards evaluating success or failure factors in the implementation of supply
chain models.
In order to select the principal proposals of supply chain generic models, it is necessary to dig
deeper in the design criteria of the supply chain strategy, such criteria being grouped in five sets of
factors in accordance with their nature, as follows: (1) Product Flow, whereby in accordance with
the flow of materials and information on the plant floor, criteria for designing the manufacturing
model is designed. (2) Product, business differentiation: models in which the supply chain is
designed in accordance with several factors regarding the products behavior in the market and the
1995 2002 2006
Fisher
1997
Duclos
Flexible
Supply Chain
Christopher
Lean & Agile
Supply Chain
2000
Hill
Order Winners
/ Qualifiers
What is the
right Supply
Chain for your
product?
Efficient,
Responsive,
Risk Hedging
& Agile
Lee
Efficient, Quick
Response &
Innovative
ATKearney
2003 2004
Adaptable
Supply Chain
Christopher
Lean, Agile,
Fully flexible,
Continuous
replenishment
Christopher
& Gattorna
Triple A
Supply Chain
2011 2005
Lee
Ketchen &
Hult
Best value
supply chain
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
16

business environment. (3) Supply/demand uncertainty: where internal and external factors involving
the stability of supply and demand in the supply chain define the most appropriate generic model.
(4) Organizational competencies: models in which the development of functional competencies in
the supply chain is promoted in order to create a competitive advantage. (5) Customer
Segmentation: where the relative importance and the opening towards Customer collaboration
define the generic model to be applied to each group of Customers. (6) Hybrid Models: combine
several of the previous dimensions. Table 1 presents a summary of the main contributions in the
development of supply chain strategy concepts and the corresponding supply chain generic models.

Table 1, Evolution of supply chain design criteria
Source: own elaboration


From the previous table it is evident that some models have progressively evolved, reason why
we have selected the proposals that are currently valid, having decide do six proposals. These
proposals for supply chain generic models can be classified according to the number of proposed
supply chain generic models, with the following two classifications: (1) Sole model proposals,
where the respective author proposes a sole generic model, supported by multiple functional
competencies, which level of development is defined with respect to the organizations competitive
environment as well as its business strategy, and (2) Multiple chain model proposals, in which there
are several supply chain generic models, which selection depends on the design criteria
(representative dimension) applicable to the case being studied. Each generic model defines a
typical approximation for the management of processes and the development of some specific
supply chain competencies. Table 2 lists the supply chain generic models along with their
respective author. The second current in literature is geared towards defining methodologies for
selecting the supply chain strategy, which are classified according to the design approach, in: (1)
Generic name Author Year
Criteria for supply chain
design
Representative dimension Author's original name
Umble&
Srikanth
1990
Product flow: plants A, V and
T
Product flow
Hill 1995
Order Winners & Order
Qualifiers
Product differentation
Fisher 1997
Product type: Functional or
Innovative
Product differentation Efficient / Responsive
Christopher 2000
Product variety, demand
uncertainty and volume
Sourcing/ demand uncertainty Lean/ Agil / Leagile
Lee 2002
Uncertainty Framework:
Sourcing/ demand uncertainty
Sourcing/ demand uncertainty
Efficient / Responsive/ Risk
Hedging/ Agile
Christopher
& Gattorna
2005 Customers segmentation Customers segmentation
Lean/ Agile/ Fully flexible/
Continuous replenishment
Gattorna 2006
Demand uncertainty and
customers relationship
Sourcing/ demand uncertainty and customers
segmentation
Lean/ Agile/ Flexible/
Continuous replenishment
Duclos 2003
Flexibility inbusiness
processes
Organizational competences FlexibleSupply Chain
Gunasekaran 2007 Hybrid Hybrid ResponsiveSupply Chain
ATKearney ATKearney 2004
Customers / product
segmentation
Sourcing/ demand uncertainty
Efficient, Quick Response&
Innovative
Lee 2004
Agility, Adaptability and
Aligment
Organizational competences TripleA Supply Chain
Gattorna 2008
Use segmentacin, value
proposal, organizational
competences
Hybrid
TripleA Supply Chain
revisited
Best Value
Ketchen&
Hult
2006
Agility, Adaptability and
Aligment
Organizational competences Best valuesupply chain
Adaptable Christopher 2011 Supply Chain Volatility Index
Sourcing/ demand uncertainty and organizational
competences
AdaptableSupply Chain
They areoriented to
operations management.
Dinamic Supply
Chain
Flexible Supply
Chain
Triple A
No apply
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
17

Specific design processes, in which the focus is the preparation of specific designs in accordance
with the business situation and the environment of the organization being studied.

Table 2, Main generic supply chain models
Source: own elaboration



Among these authors, we highlight the following: Hill (1995 and 2009), who developed a step-
by-step approach for strategic planning that focuses on operations, Chandra (2007), whose
approach is complemented with the use of simulation tools, Schnetzler (2007), who developed the
SCDD (Supply Chain Design Decomposition), the Supply Chain 2020 Project (MIT 2006), which
develops a strategic planning methodology based on the diagnosis and reformulation of the strategy
by means of the controlled convergence technique, and finally, the SCOR Method, which
standardizes supply chain taxonomy, emphasizing the diagnosis of the situation and how to increase
performance through the application of better practices proven by the programs members. The
latter is probably the method with greatest dissemination in the industry and emphasizes the phases
for carrying out the dissemination and implementation of the strategy within the organization. (2)
Refinement of supply chain generic models, where the supply-chain design for the organization
being studied stems from the supply chain generic models. In this group one can highlight the work
of Huang(2002), who relates process factors with the generic chains defined by Fisher, and
Stavrulaki and Davis (2010), who integrate contributions from Fisher, Lee, Hau and other
renowned authors, with concepts regarding the order entry point and the configuration of the
productive process, giving a step forward in integrating generic models to practical concepts, thus
becoming the closest referent to the objective this project intends to develop, but limiting
themselves to developing their methodology under an eminently conceptual approach.
The third and fourth currents are geared towards the level of implementation analysis, seeking to
understand the reasons why different models succeed or fail, some of them by means of qualitative
analysis and others by means of quantitative analysis, among the latter we highlight the works of:
(1) Power (2001), who developed the relations between success factors and agile chains, based on a
1994 survey in the Australian industry, (2) Yusuf (2003), who validated the competitiveness of
industries operating under agile chains in the United Kingdom, (3) Lo & Power (2010), in which
work they validate, by means of a survey in the Australian industry, the relationship of product type
with the supply chain model proposed by Fisher, (4) McKone (2009), whose research develops a
taxonomic supply chain model based on factors regarding environment, competitive priorities and
performance. Finally, there is (5) Li (2009), whose work validates the main factors an agile supply
chain requires, through a study conducted on a group of North American companies associated to a
university in the United States Midwest. At a qualitative analysis level, several case study reports,
Author Generic model type Generic supply chain model
Duclos Flexible Supply Chain
Lee Triple A Supply Chain
Christopher Adaptable Supply Chain
Ketchen & Hult Best Value Supply Chain
Christopher Lean, Agile, Fully flexible, Continuous replenishment
AT Kearney Efficient, Quick Response & Innovative
Mltiple, acordding to design
criterias
Unique and adaptable to each
organization
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
18

are highlighted, both single organizations and sectorial, some of which are the most representative
and applicable for the projects methodology, are detailed in Table 3:

Table 3, Supply chain strategy cases
Source: own elaboration.



Literature offers an abundant availability of supply chain generic models, methodologies for
selecting the supply chain model and reports of case studies, all of which confirm the opportunity of
refining available information and developing a method that unifies the concepts for the
characterization and evaluation of the relevance of the supply chain strategy with respect to the
business environment, thus contributing with an integrating method, which closest development are:
(1) the work of Stavrulaki and Davis (2010), but evolving from the conceptual design to practical
development, by means of the contribution of case analysis and the integration of other design
concepts and criteria. (2) Martinez and Shulks (2006) approach, where supply chain strategy is
defined by some segments as: the decoupling point, process type, product type and process flow,
based on these segments, company may to define alignment between supply chain strategy and
business strategy. Despite the model has several variables that are relevant for characterizing a
companys supply chain, the model is too complex, doesnt have a graphic tool in order to facilitate
strategy understanding and deployment and its supported in a mathematical framework more than
in a managerial model, which is more adequate for understanding and deployment purposes.
4. Methodology
4.1 Selection of the research methodology
The research statement How to validate the alignment and relevance of the supply chain
functional strategy with respect to the business environment of an industrial organization?, is an
open question that guides the development of a conceptual model based on refining existing
theories and supported in qualitative research (p 50 Jonker 2010), which is corroborated in
accordance with Yin (p 10 2009) and Meredith (p 445 1998), who define that How-type research
questions are geared towards case analyses, stories or experiments. This is confirmed in the field of
Operations Management, according to works developed by: (1) Stuart, who describes that research
questions focused on process mapping and the identification of relationships between these
variables, must be resolved with research structures based on case analysis (p 422 Stuart 2002),
Author Companies Sector Focus
Sahay (2003) Several India Indian Supply Chain
Landel (2003) Bacardi Liquours Migrating frompush to agile
Bay (2004) Seagate Electronics Supply chain strategy reconfiguration
Lee (2005) Toyota Automotive Business strategy
Collin (2006) Nokia Telecoms Agile supply chain
Nueno (2006) Zara Apparels Agile supply chain
Hoyt (2007) Crocs Apparels Agile supply chain
Chopra (2007) Wills Apparels Lean Supply Chain
Godsell (2010) BAT FMCG Supply chain strategy reconfiguration
Wee (2009) Ford Automotive Lean Supply Chain
Koskinen (2009) Paper company Paper
Aligning supply chain strategy with
business strategy
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
19

and (2) Voss, who describes the use of cases analyses for developing theories and for refining
existing theories, among others (pp 197, Voss, et al. 2002).
The development of theoretical models deduced from case analyses is methodologically based
on the Grounded Theory, which objective is the development of theories supported by practice (p
84 Jonker 2010), by means of the coding of information gathered in categories, the characterization
of said categories and the identification of relationships among the different categories, nonetheless,
case analysis has two great limitations: (1) the impossibility of covering a large number of cases due
to cost and time limitations, which reduces the possibility of generalizing results (p 355 Lewis
1998) (p 340 Boyer, Swink 1998) and (2) the possibility of bias presented in the researcher (p 104
Jonker) given that it is a qualitative research method, in which the researchers interpretation
contributes to the development of the theory. Both limitations are corrected with a research method
specifically developed for Operations Management (OM), which is based on the Grounded Theory
and is called Iterative Triangulation (Lewis 1998). This method corrects both limitations in the
following manners: (1) a larger number of cases is analyzed, by using cases developed by other
authors and (2) systematic iterations are conducted in order to triangulate the data among the
literature revision, case analyses and the researchers intuition.
The use of cases developed by other authors is also mentioned by Yin (2009), who is one of the
most cited authors in research methodology geared towards cases analyses. Yin mentions five
analytical techniques used for case analyses, the fifth of which he calls Cross-Case Syntheses,
which can be applied when individual case studies have been previously carried out as
independent research studies (written by different people) or as part of one predesigned study,
likewise he mentions that if there is a large number of individual cases available, the synthesis can
incorporate a goal-analysis, as proposed by Lewis (1999). In addition, Yin reports researches he
developed based on cross-case syntheses. Other authors (Voss, et al. 2002) also mention the use
of case retrospectives for the development and/or refining of theories in Operations Management,
highlighting the possibility of sampling by theoretical replication, which is also mentioned by Yin
as a key element for developing multiple cases. We can conclude that works geared towards both
OM and SCH from Lewis (1998) and Voss (2002), as well as works with a more general orientation
from Yin and Lewis (1999), provide relevance to the use of third-party case analyses supported in
the goal analysis (Lewis iterative triangulation or goal triangulation) for developing and/or refining
theories. Table 4 summarizes the projects general methodological framework, based on the general
process proposed by Yin (2009) and enriched with contributions from Lewis (1998, 1999) in
regards to analytical techniques.
Table 4, Methodological framework
Source: own elaboration based on Yin (2009).



Form of
research
question
Method
Case study
design
Analitics
strategy
Analitics
technics
"How?" Case study
Multiple
cases
descriptive
framework
(1) Cross
case
synthesis +
(2) Meta
analisis
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
20

4.2 Analytical technique
The analytical technique selected according to the model proposed by Yin is a combination of
Cross-case Syntheses and Meta analysis, which allow contrasting the analysis of multiple cases
developed by other authors with other sources of evidence. As was previously explained, this
analytical technique coincides with Lewis proposal in Iterative Triangulation in some aspects, a
technique that Lewis subsequently migrated to a concept with greater scope called
Metatriangulation (Lewis 1999, personal communication with Lewis 2011), which bases the
development of the theoretical models on the iterative refining of the researchers deductions on (1)
existing literature (2) cross-synthesis of cases previously developed by other researchers regarding
the issue being discussed and (3) other sources of data. Based on Lewis and Yins contributions, the
analytical technique model to be used in the research process is developed, which process is
detailed in Figure 2 (adapted from Lewis 1998 and enriched with Yin 2009 concepts).


Figure 2, Cross case synthesis +Meta analysis
Source: own elaboration based on Lewis (1998) and Yin (2009).


4.3 Applicability of the selected technique
By means of the systematic iteration of the information sources: (1) Existing theory in literature,
(2) Cross-case synthesis, (3) the authors experience and (4) other sources of evidence, the project
intends to:
Develop a method for characterizing an organizations supply chain functional strategy.
Develop a method that identifies the relevance of the supply chain functional strategy
with an organizations business environment, based on the applicability of supply chain
generic models.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
21

By crossing the previous objectives with the principles of the selected technique, it can be
concluded that: the purpose of the project, the sources of information to be used and the
applicability criteria satisfy the methodological requirements, as detailed in Table 5.


Table 5, Validation of requirements of selected technique
Source: own elaboration based on Lewis (1998).



4.4 Verification of design quality
Yin mentions four tests that are necessary for determining the quality of a case research design:
Validity of the Construction: Questions if there is a relationship and/or subjective effect
between the manner in which the researcher has gathered the data sources and has
constructed the concepts s/he is trying to study. (Adams 2007).
Internal validity: Define causality relationships, where certain conditions are taken into
consideration, other conditions rule.
External validity: Define the domain in which the studys findings can be generalized.
Reliability: Demonstrate that the operations of a study can be repeated with the same
results.
In this research, design quality shall be supported by tactical actions detailed in Table 6, which
are adapted from Yin (2009).
"Cross case synthesis +
Meta analisis"
Adapted from Lewis (1999),
enriched by contributions from Yin (2009)
Research project
Object Refinement of theoretical frameworks
It aims to develop a theoretical model for
characterizing the strategy of the supply chain and
identifying gaps with the business framework.
Existing theory in the literature
Theories of several authors as Gattorna, Hill,
Christopher, Fisher, Hau, and so on., Which are
fragmented into multiple investigations and documents.
Multiple cases
Multiple cases in the literature report the applicability
and results of various models of supply chain strategy.
Other data sources Case developed by the author.
Researcher interpretation
Interpretative non-neutral position, based on their
experience.
(a) there are sufficient cases availables
in the literature
Numerous authors have developed cases and literature
on supply chain strategies
(b) need to redefine and / or alignment
of concepts
There are different theories proposed by several
authors to define supply chain models
(c) search for the integration of multiple
fragmented research
(d) search for relationships between
conflicting theories and / or disposal of
contradictory theories
Aplicability
criterias
Integrating a model that brings together: fragmented
theories, authors contribution and discard
contradictory theories
Information
sources
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
22

Table 6, tactical actions to assure research quality
Source: own elaboration based on Yin (2009).



4.5 Stages and methodology



Figure 3, Conceptual model.
Source: own elaboration.
Test
Tactics applied to case
studies
Phase of research where
the tactic is applied
Application to research
Multiple sources of evidence Data collection
Selecting multiple casesand theory
reported since 1997
Establish chain of evidence Data collection
Matrix of relationships between
questions, data and conclusions
Key informants review the
draft case study
Composition
Validation of questions and made some
of the authors of the cases
Pattern matching Data analysis
Explantation building Data analysis
Use logic models Data analysis
External
validity
Use replication logic in
multiple case studies
Own case
Use case sudy protocol Data collection
Detailed description of the protocol
analysis of individual cases and
synthesis of cross case
Develop case study database Data collection Database cross-case synthesis
Construct
validity
Internal
validity
Reliability
Cross case synthesis
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
23

The conceptual research model is comprised of five elements: (1) the definition of a model for
characterizing the environment (Business Framework) and the organizations supply chain profile
(Supply Chain Profile), (2) the characterization of supply chain generic models (SCGM) presented
in the literature, (3) definition of the Reference SCGM, which will be the role models for
verification of the alignment between the environment and the supply chain profile of a companys
supply chain), (4) the characterization of the environment and the supply chain profile of the
organization being studied, and (5) the search of gaps and opportunities for improving the
organizations supply chain strategy based on the Reference SCGM. The conceptual model is
presented in Figure 3. The research is developed in five stages one after the other, which are
detailed in Figure 4.


Figure 4, Stages and methodology
Source: own elaboration.

Phase Objective Methodology Deliverable
3 Reference Models
Define applicability rangesof supplychain
generic models with the business
framework, based on theoretical
assumptions of models defined in the
literature, author's own experience, and
analysis of cases reported in the literature.
Cross case
analysis. Meta
analysis with
literature and
author's
experience.
Ref erence
Model s
4
Gap Analysis of supply chain
model with the business framework.
Develop a matrix that identifies the
relevance of the functional supply chain
strategy of an organization's business
environment, based on the applicability of
the generic models of supply chain.
Parallel view of
reference models
Ref erence
Model s Mat riz
5
Application of the model in
an organization
Applying the model to evaluate the
alignment of supply chain functional
strategy with business framework in an
organization and identify gaps.
Model validation
based on case
analysis.
Case study.
Suppl y Chain
Framework ,
Suppl y Chain
Prof il e
Characterization of
generic supply
chain
1
Model for characterization of
the business framework and supply
chain profile
Identify: (1) business framework factors
that affect performance and design of the
supply chain and (2) variables that
characterize the functional supply chain
strategy of an organization.
Cross case
analysis. Meta
analysis with
literature and
author's
experience.
2
To characterize generic
supply chain models, using the
model developed in phase 1
Identify Generic supply chain models
reported in the literature, and to
characterize the environment and profile
of these generic models.
Cross case
analysis. Meta
analysis with
literature and
author's
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
24

The first four stages are geared towards the development of a method for evaluating the
relevance of the supply chain functional strategy to the business environment. Stage (1)
Characterization Model, intends to define: (a) the factor of the businesss environment that affect
the design of the organizations supply chain strategy and (b) the variables that define the
organizations supply chain strategy. This stage is conducted by means of a cross analysis of the
literature and the authors experience. This stage defines the first two components of the proposed
method: Business Framework and Supply Chain Profile.
Stage (2) intends to characterize supply chain generic models in accordance with the model
defined in the previous stage and is based on the interpretation of the theoretical models defined by
the authors who developed the supply chain generic models. Stage (3) aims to find the applicability
zone of the supply chain generic models in the different business environments. In this case, we
shall use the cross-case synthesis based on the analysis of cases developed by third parties and
literature that is relevant to the topic. This stage defines the third component of the proposed
method: Reference Models.
Stage (4) develops a matrix that allows evaluating the alignment of the supply chain profile with
the business environment, based on the applicability of the supply chain generic models defined in
the previous stage, which constitutes the fourth component of the proposed method: Reference
models Matrix.
Finally, stage (5) develops a case in which the method deduced in the previous stages is applied,
with the purpose of validating and making the pertinent adjustments.




Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
25

Section 2: Development of Supply Chain Roadmap
TM*


Supply Chain Roadmap provides a method to characterize an organizations supply chain
strategy, in order to identify in a single drawing called Supply Chain Roadmap
TM
: business
framework factors, supply chain profile elements and relationship among them. Based on Supply
Chain Roadmap
TM
, is possible to identify proper alignment between supply chain strategy and
business strategy. Supply Chain Roadmap
TM
could be implemented in several industrial and
services sectors, following a general method oriented to gather information about business
environment and current organizations supply chain profile.
Chapters 5 and 6 cover theory development of Supply Chain Roadmap, chapter 5 presents a
brief definition about Strategy concepts applied to Supply Chain, based on contributions of the
most important thinkers about strategy in the fields of business, operations and supply chain as
Porter, Skinner, Metzer and Hill, among others. In chapter 6 is developed Supply Chain
Roadmap model, which is based on a core concept business framework and organization
capabilities regulates design and performance of the supply chain. Units 6.1 to 6.4 are oriented to
define relationship between Business framework and Supply Chain profile. Unit 6.5 presents
business framework components and how to assess them. Unit 6.6 shows supply chain profile
elements and relationship among order cycle, production cycle and order penetration point, which
are considered as key profile elements because them define critical aspects of a supply chain
strategy. Units 6.7 to 6.8, introduce unique value proposal concept, which is the core of
companys strategy based on winners and qualifiers concepts introduced by Hill.
To close this section, Unit 6.9, presents a final view of Supply Chain Roadmap model and
instructions about how to characterize an organizations supply chain.
Section three is focused in applying characterization to Generic Supply Chain models and
several case studies oriented to find general rules about relationship among business framework
and supply chain profile, in order to support alignment analysis between current supply chain
strategy and business strategy.


*
Supply Chain Roadmap
TM
is a service mark under registration.
Supply Chain Roadmap
TM
method and system to characterize and design an organization's supply
chain strategy is under patent pending in USPTO and other countries.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
26

5. Defining Strategy
5.1 What is strategy?
Michael Porter, in his well-known article titled What is strategy? (Porter, 1996), defines the
following: Competitive strategy consists in being different. It means deliberately choosing a set of
different activities in order to provide a unique combination of value. It is this unique combination
of value that constitutes an organizations strategic positioning, which is based on the mix of three
basic positioning:
Positioning based on variety, in which the source of value is concentrated in offering a
supply of products or services for different Customer segments, and is considered
appropriate when the organization can produce these products or services better than its
competitors, but probably cannot satisfy all the needs of a specific group of Customers.
Positioning based on needs, it is present when the source of value is concentrated on
attending the largest portion of needs of a specific group of Customers.
Positioning based on access, despite the fact that the needs of a group of Customers is
similar, a positioning based on Customer segmentation can be offered in accordance
with the manner of accessing them.
The focus of the basic positions is a more advanced approach of the generic strategies presented
by Porter in 1985, which represented three basic strategic positioning: leadership in costs,
differentiation and access.
Strategy does not end with the definition of the strategic positioning, since it is necessary to
define the manner in which the activities and functions inside the organization are articulated by
means of a fit. The fit defines the manner in which activities connect, complement and reinforce
among them. The fit is, in a few words the assurance of the businesss alignment from top to
bottom, including outside the organizations limits. Porter defines three types of fit:
Simple compatibility, when the competitive advantages of the organizations activities
and functions accumulate throughout the value chain. For example, an organization that
is focused on a cost-based leadership strategy based on the reduction of costs in each
one of the individual activities.
Enhanced compatibility, when the competitive advantages of the organizations
activities and functions mutually reinforce themselves, generating value added and a
competitive advantage greater than the sum of the individual competitive advantages.
For example, an organization geared towards a cost-based leadership strategy, based on
the coherence among the different activities, thus ensuring that product design,
manufacturing setup, inventory policies and organizational structure are geared towards
low cost production and that the actions within a process or activity reinforce the
strategy in activities that come before or after the value chain. Following the previous
example, product design is not only focused on generating cost savings within the
activity in itself, but also on having manufacturing and distribution operations reduce
cost due to an optimized product design and not only to individual improvement
activities in each one of these areas.
Effort optimization, when redundancies are eliminated and waste is minimized in
activities and functions throughout the value chain, supported in both internal activities
and activities carried out by the members of the value network. For example: an
organization focused on a rapid response to the market, which administers the unified
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
27

inventory of the entire network, with the purpose of minimizing arrival time to the
consumer, and additionally, optimizing operative and capital costs associated to excess
inventory in the chain.

The sustainability of strategic positioning is stronger when the fit of the activities and
functions throughout the value network is founded on enhanced compatibility and/or effort
optimization connections, since these connections are more difficult to be interpreted and
replicated by competitors.

Finally, we can conclude that: While operative efficacy deals with reaching excellence in
individual activities or functions, the strategy is in charge of defining the connection and
combination of activities and functions throughout the value chain, in order to achieve a unique
combination of value under Customers perception (own development based on Porter, 1996).
5.2 What is an operations strategy?
One of the most detailed revisions regarding the definition of the operations strategy is
developed by Anderson, Cleveland and Schroeder (Anderson et al 1989), who highlight that it is
difficult to obtain consensus in respect of the definition of operations strategy, but highlight that
most authors refer to long term actions, integrated with the business strategy and implemented by
the operations area. A more concrete definition is given by Wickham Skinner, one of the most
renowned authors in topics concerning operations strategy, who in his article titled The
productivity paradox (Skinner, 1985) defines the operations strategy as the required competitive
leverage and made possible by the production function, in order to produce structural definitions
such as: Buying or Doing, installed capacity, manufacturing network, process technology, quality
assurance system, information systems, policies involving the administration of the work force and
organizational structure.
On the other hand, Terry Hill, another one of the prominent authors in operations strategy,
makes an additional and significant contribution, when he introduces the concepts of order
winners and order qualifiers, so as to ensure an operations strategy oriented towards the market,
and that in Hills words creates the essential interface between marketing and operations in order
to understand markets from the point of view of both functions ..Helping companies move from
the vague understanding of the market to a new, essential level of knowledge. (Hill & Hill, 2009).
While Hill emphasizes the alignment of the operations strategy with market requirements, Skinner,
defines the structural elements that comprise the operations strategy in a precise manner, both of
them constituting complementary approaches regarding the operations strategy.
5.3 From the operations strategy to the supply chain strategy
Literature after year 2000 does not show great contributions in operations strategy, as a
consequence of migration to the wider concept of Supply Chain Management (SCM). While the
concept of operations focuses mainly on infrastructure aspects surrounding the manufacturing
process, the SCM concept focuses on defining activities and connections surrounding processes
related to product flow, information flow, and financial transactions inside and outside the
organization.
According to Mentzer (Mentzer, et al, 2001), the concept of Supply Chain Management
(SCM) has become more popular since 1995, but there is still much confusion regarding its
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
28

meaning. The confusion lies in the conceptual differences among the different approaches for
defining supply chain management (SCM). The three main approaches are:
SCM as a set of activities geared towards implementing a management philosophy, this
approach is focused on defining the corporate competencies that companies must develop in
order to be a competitive supply chain.
SCM in terms of process management, by virtue of this SCM perspective, this is defined as
the synchronization of business functions geared towards the management of flows of
money, materials, and information from the suppliers to the Customers, focused on
fulfilling a Customers requirement.
SCM as a management philosophy, is geared towards defining SCM as competitive
strategy, where companies create connections throughout its supply chain, enhancing and
optimizing efforts so as to create differentiated value proposals.
The first two approaches focus on defining SCM in tactical terms, while SCM as a
management philosophy focuses on defining the orientation and strategic approach of the
companys supply chain.
It is on this basis that I propose a definition of supply chain strategy, as the connection and
combination of activities related to the flow of products, information and financial transactions
within and among the organizations, in order to achieve a unique combination of value in the
competitive environment where the company operates.
6. General vision of the model for characterizing a supply chain
6.1 The structure of a supply chain adapts to the businesss environment

Figure 5, Business Framework and Supply Chain Profile
Source: own elaboration.

The supply chain strategy of an organization is determined by the interrelation between internal
structure of the supply chain and business environment where the organization operates, thus
converting the business environment in the framework of reference for defining the profile of
the supply chain structure, as presented in figure 5. It is clear that in open economies with a high
level of competition, the understanding of the business environment and its interaction with the
supply chain profile is a key factor for designing a unique value proposal to the market, and the
value proposal can only be satisfied with an adequate design and operation of the companys supply
chain.
6.2 Business Environment = Business Framework
The environment of the business where an organization competes has multiple components, but
which of them influence the design and performance of the supply chain?
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
29

Porters model speaks of five forces that regulate competition in any industrial sector, as shown
in Figure 6. Two of these forces, the power of Customers and the power of supplier, are related to
the natural members of the supply chain of any company, reason why they must be considered as
key elements in the supply chain design, and in addition, we must go beyond what Porter proposes
and introduce some new elements inside these forces, which are the key to supply chain
management, such as, product and information flows, the relation of logistics costs on total costs
and the variability of demand, among others. Substitute products or services, the struggle among
current competitors and the entrance of new competitors, rather than independent forces, must be
considered as components of the Customers power and of the suppliers power, given that these are
elements that modify the power relationship and the desire for collaboration among the parties.
This extensive vision regarding the effect of suppliers and Customers leads us to the redefinition of
the concept in a broader manner and naming them as relations with Customers and relations with
suppliers.

Figure 6, Forces governing competition in an industry
Source: Porter 1979

On the other hand, the other fundamental force in any supply chain are the technological and
economic components related to the transformation process (understood as the production process
of the good or service), since they affect structural decisions related to the production process and
therefore affect the design and performance of the supply chain.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
30

Figure 7 represents the three forces of the business environment that regulate the design and
performance of the supply chain: Relations with Suppliers, Relations with Customers and
technological-economic aspects associated to the transformation process. These three forces have
different technological, economic, power relations, collaboration and competitiveness relation
factors that affect key variables in Supply Chain design and performance. We will name this set of
forces and its factors such as Business Framework.


Figure 7, Business framework forces governing supply chain profile
Source: own elaboration.

6.3 Supply Chain Profile
The structure of a supply chain is comprised of three macro processes: Supply, Transformation
and Distribution. The latter process must involve a redefinition of the traditional vision, since the
growing trend of introducing value-added services that accompany the product in the companies
value proposal, has forced developing an infrastructure inside the organizations for the production
of products and for the delivery of value-added services, which leads us to reconsider the traditional
supply chain structure, modifying the traditional concept of order winners / qualifiers introduced
by Hill, to a concept that is more focused on the current value proposal, which we shall call
Product winners / qualifiers and Service winners / qualifiers. This approach intends to
differentiate the competencies and infrastructure that must be developed for each one of the aspects
of the value proposal and ensure that both the product and the service have the importance required
by the market in the organizations supply chain strategy.
Its important to clarify that some authors describe product as the combination of physical
goods and services accompanying and supporting commercial transaction, but, in order to
differentiate competences required under a manufacturing perspective (oriented to physical goods)
and competences required under a supply chain perspective, well be using Product concept as a
definition for Physical goods features and Service as a definition of Other features supporting
companys value proposal.
Figure 8 represents the profile of an organizations supply chain, defined by the interrelation
from the supply, passing through the transformation process and the delivery of the value proposal
to the Customer, comprised by the product and the service. We will define this infrastructure and its
factors as the Supply Chain Profile.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
31


Figure 8, Elements of supply Chain profile
Source: own elaboration.

6.4 Supply chain strategy
As was defined in numeral 5.3, an organizations supply chain strategy is defined by the
connection and combination of the activities related to the flow of products, information and
financial transactions within and among the organizations, in order to achieve a unique
combination of value in the competitive environment where the company operates.
Figure 9 presents the roadmap for the design of the supply chain, where the Activities related to
the flow of products, information and financial transactions interrelate with the competitive
environment, which, in the terms previously introduced in numerals 6.2 and 6.3, are Supply Chain
Framework and Supply Chain Profile respectively. Based on the interaction between them is
defined the unique value proposal. The complete model is designated as Supply Chain Roadmap
TM
, as presented in figure 9.


Figure 9, Supply Chain Roadmap model
Source: own elaboration.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
32

6.5 Supply Chain framework factors
The three forces of the Supply Chain Framework, Customers, Process and Suppliers, must be
assessed in accordance with the different factors of the environment where the business is executed.
In order to define the main components of the factors of the three forces, we make reference to
comparative analysis of relevant authors in issues regarding business strategy, manufacturing
strategy and supply chain strategy, where the main elements of the environment that characterize
the development of the theoretical models proposed by these authors are presented in the columns
under authors name. Later, the elements presented by the authors are classified and clustered under
strategic factors according to similarities among definitions developed by the authors for each
factor.
Table 7, Business framework factors affecting supply chain strategy
Source: own elaboration.

Fisher
1998
Lee 2002,
2010
AT
Kearney
2004
Gattorna
2008
Christopher
2006, 2010,
2011
Stavrulaki
and Davis
2010
Hill & Hill,
2009
Cox 1998
&
Schragen-
heim 2001
Liebeck,
Meyer &
Abele 2008
Porter
1980, 1996
Kaplan &
Norton
1992,
2000,
Cost
Physical
costs, Market
mediation
cost
Cost
efficiency,
Trade off cost
/ responsi-
veness
Labor Cost&
Costof
Capital
Economies of
scale, Cost
disadvantage
s
Financial
perspective
Product life
cycle
"Shortlife
cycle
increases
unpredic-
tability"
Shorter life
cycle
pressures
supplychain
Productlife
cycle
Sourcing
uncertainty
Stable /
Evolving
supply
Supply
volatility
SupplyChain
VolatilityIndex
(SCVI)
Bullwhip effect
Demand
uncertainty
Functional or
Innovative
Products
Uncertainty
Framework
Predictability
& order size /
timing
Standard or
Special
Products,
SCVI
Bullwhip effect
Order
Winners
Innovation,
Mass
Customization
Strategic
objectives
dictated by
marketplace
Product
attributes
Customer's
buying
behavior
perspective
Integrationof
marketing and
supply
strategies
Order Winners
Local
expectations
Strategic
positions
Customer
perspective
Order
Qualifiers
Service
requirements:
Fill rate &
Order lead
time
Order
Qualifiers
Product/
Process
lead time
Dependable /
Variable Lead
time
Replenisment
lead time
Process /
Product
Structure
Production
Process
Types of
manufacturing
processes
Logycal
Product
Structure VAT
Process
Techno-
logy
General
Purpose /
Dedicated
Unitvolume
and flexibility
Substitute
products
Substitute
products
Alternative
distribution
channels /
suppliers
Customers /
Suppliers
Power
Sourcing
complexity
Global / Local
Sourcing
Collabo-
ration level
Cooperative
model manu-
facturer
retailer
Design
collaboration
Demand
collaboration
activities
Suppliers
relationship
Strategy
insertion
Strategic
Factor
Business Strategy Manufacturing Supply Chain
Authors
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
33

Table 7 presents, authors, strategic elements and their classification in strategic factors, as was
explained previously. With the purpose of ensuring the focus on key elements, some important
second-level elements present in the works of these authors are omitted.
According to the previous table is determined that the three forces of the business environment,
Customers, Process and Suppliers, must be assessed in accordance with the different technological,
economic and demand-pattern factors. In addition, in the case of Customers view, the minimum
requirements for competing in the sector (qualifiers) and the differentiated characteristics versus
the competitors (Winners) must be assessed both at the service and the product level, so as to define
the companys differentiated value proposal (Unique Value Proposal), which constitutes the
essence of the companys business strategy. Figure 10 presents a preliminary vision of Supply
Chain Framework, where the groups of factors that must be taken into consideration in each one of
the forces are detailed.


Figure 10, components of three framework forces
Source: own elaboration.

In order to determine how to assess the different technological, economic and demand-pattern
factors, the different attributes in each one of the perspectives must be evaluated and it must be
cautious in conducting the evaluation in accordance with the general perspective of the sector where
company is competing, over the perspective of the company itself, thus avoiding preconceptions or
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
34

maintaining previously defined paradigms. Likewise, the evaluation of each force must be
conducted under the perspective of the entities that comprise each one of the forces, in other words,
How does a supplier of the sector where I compete evaluate these factors?, What is the status of
the development of the technologies associated to the internal transformation processes?, What
are the Customers needs regarding the products and the services offered by the sector?.

Table 8 presents the attributes that must be considered in the evaluation of each one of the views
of the environment.

Table 8, Framework forces evaluation
Source: own elaboration.



6.6 Supply chain profile
The four components of the supply chain profile, Service, Product, Process and Suppliers, must
be defined in accordance with the elements that characterize the flow of the supply chain. In order
to define the elements of the four components, we refer to a comparative analysis of the relevant
authors in issues concerning supply chain design and strategy, using a similar methodology as was
used in Table 7, which is presented in table 9. With the purpose of ensuring the focus on key
elements, some important second-level elements present in the works of these authors are omitted.
View Factor Attributes
Customers:
Product
Process
Suppliers
Demand
Winners
Qualifiers
Cost
Cost
Sourcing
Technological
Fixed Assets
Physical cost: Transportation/Logistics cost relevance in total cost.
Market mediation Cost: Obsolescence, Working Capital, Lost sales.
Demand uncertainty / Customer's power
What are the differentiated services features in order to create an unique
value proposal in the market?
What are the minimun required services features in order to compete in the
market?
Physical cost: Product/Service cost relevance in Customer's business.
Product life cycle. Technological
Winners
Qualifiers
Cost
Cost
Sourcing uncertainty (Risk). Supplier's power. Sourcing complexity (SKUs
/ Suppliers, Local / Global sourcing)
Customers:
Service
What are the differentiated product specifications/features in order to create
an unique value proposal in the market?
What are the minimun required product specifications/features in order to
compete in the market?
Manufacturing cost relevance in total cost.
Process technologycal maturity.
Assets: Magnitude of the increases in capacity. General purpose or
dedicated assets?
Product/Service cost relevance in manufacturer's business.
Economies of scale.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
35


Table 9, Supply chain profile elements.
Source: own elaboration.


The comparative analysis of the supply chain characterization allows identifying some common
elements in the definition of most authors, such as: Range of the product portfolio, cycle from order
up to the delivery, inventory strategy, orders penetration point and suppliers selection model.
Other equally important elements are also mentioned, but which are considered by a small group of
authors, such as: Fulfillment of the delivery promise, delivery frequency, places where the inventory
is located, manufacturing network, process flow and collaborative relations.
Seuring
2009
Fisher
1998
Lee 2002,
2010
AT
Kearney
2004
Huang
2002
Christopher
& Towill
2000, 2009
Stavrulaki
and Davis
2010
Hill & Hill,
2009
General
Framework
Five Ps:
Products,
Partners,
Plants,
Processes
and Planning
Supply chain
focus
A portfolio
approach to
supply chain
design
Customer,
Value Add
focus,
Suppliers,
Capacity,
Assets
Manufacturing
supply chain
Supply chain
segmentation
Integrated
perspective of
how products,
and pro-
cesses should
be aligned
Manufacturing
Strategy
Focus
Manufacturing
Focus / Lead
Time Focus
Value Add
Focus
with strategic
Order Winners
/ Qualifiers
Products
Portfolio,
Performance
(Quality /
Cost)
Product
design
Strategy
Portfolio
design /
Portfolio Mix
Standard or
Special
Product
Variety
Product
Variety /
Volume
Services
Speed,
Flexibility
Lead time
focus
Supply Chain
design
"Speed"
Lead time
focus
Customer Ser-
vice Strategy:
Order Cycle,
Frequency of
delivery, etc.
Order Lead
Time
Order Speed,
Order On time
Compliance
Buffering
Sotcking
holding points,
inventories
Inventory
Strategy
Order
fullfillment
location /
Inventory
optimization
Capacity use
& leverage,
Stock points
Inventory
strategy
Strategic
Inventory
Inventory
strategy
Footprint Plant network
Regional
Network
optimization
Assets
deployment
Processes
Decoupling
point,
Postponment
Manufacturing
Focus
Inventory
Stocking
Model
(decoupling
point)
Manufacturing
focus
(utilization rate
or excess
capacity)
Order
decoupling
point
Decoupling
points,
Production
Flow
Decoupling
point, Process
flow
Suppliers
Approach to
select
suppliers
Cost, Lead
time, Service,
Flexibility
Approach to
select
suppliers
Opportunistic
or
Collaborative
Collabo-
ration
Information
Sharing
Customer &
Supplier
integration
Strategic
Factor
Authors
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
36

Its important to clarify difference between order penetration point and divergence point, the
first one is oriented to define the interrelation between customers order and supply chain flow,
while the last one is oriented to define the stage in the supply chain where the product take features
that are exclusive for an specific customer or group of customers. In a well-designed supply chain
both are located at the same point of the supply chain, but due to that, its important to understand
difference between them, in order to find cases where them are located in different stages of the
supply chain.
It is important to highlight the elements associated to the flow of the order, which despite the
fact that some authors consider them as tactical elements, their definition and interaction among
themselves have strategic implications in the operation of the supply chain, with both Customers
and suppliers. These elements are: the orders penetration point, the orders cycle (lead time or
fixed cycle and the time beginning with the order until receiving) and the size of the order.
Additionally, the orders penetration point, associated with the Manufacturing Cycle (the time it
takes for the process to cover all of the portfolios references) have implications on the inventory
strategy and in the customer service time, given that they define both inventory requirements by
quantity, as well as inventory processing status and the type of production process (continuous
process, lots, processes, assembly, among others.). Figure 11 presents the schematic relationship
among these elements.

Figure 11, Relationship among order cycle, production cycle and order penetration point
Source: own elaboration.

The orders penetration point, production cycle and order cycle, are defined as key elements of
the supply chain profile, since these govern one of the main strategic elements of the supply chain
design: variability buffering, as presented in figure 12. The term Buffering is widely used, given that
it covers diverse elements used for buffering variability, such as inventory strategy, capacity
strategy and pooling.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
37


Figure 12, Relationship among framework factors, profile key elements and buffering
Source: own elaboration.

Figure 13 presents a first approach to Supply Chain Roadmap
TM
, where the elements that
characterize the supply chain profile in its four components and the three perspectives of the
frameworks factors are introduced.


Figure 13, Supply Chain Roadmap profile and framework
Source: own elaboration.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
38

6.7 Unique value proposal
The unique value proposal is the organizations differentiated offer to the market in terms of
product and service, which is determined according to the alignment between the organizations
understanding of the markets needs and the organizations key competencies.
There are many needs and manners of satisfying the market, the important thing is to select
which of these needs can be satisfied better than other market players, supported in the
organizations competencies and strengths. As presented in figure 14, the unique value proposal is
the intersection between the understanding of the markets needs and the organizations
competencies, which means that it is necessary to understand which of the markets needs can be
satisfied in a differentiated manner, supported in the companys current competencies or which
competencies must be developed in order to satisfy the markets needs, which until now have not
been exploited by sector players.
The Unique value proposal is a mixed view of the strategy based on resources and strategy
based on market, because combines aspects of both models, looking for a balance between market
needs and companys capabilities.

Figure 14, Unique Value Proposal
Source: own elaboration.

6.8 Winners and Qualifiers: essence of the unique value proposal
As was explained previously, Product & Service Winners and Qualifiers are essence of the
unique value proposal which is core of companys business strategy, as is shown in Figure 15.

Figure 15, Winners & Qualifiers =Unique Value Proposal
Source: own elaboration based on Hill.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
39

Figure 16 presents the companys offering level with respect to the industrial sector where the
company is competing. The company must develop competencies at a level similar to that of the
industry (Qualifiers) and competencies with a high level of performance and experience so as to
differentiate itself from its competitors (Winners).

Figure 16, Unique value proposal levels
Source: own elaboration based on Hill.

The typical competencies to be developed in each supply chain component are defined in Table
10, which also presents a relationship among the main components of the unique value proposal and
the components of the supply chain profile. As was explained by Skinner (1986) and Porter (1980),
strategy focus is a key element in order to assure alignment among company objectives
(winner/qualifier) and business execution.

Table 10, Supply Chain profile elements focus, according to unique value proposal
Source: own elaboration, based on Hill & Hill (2009).


Winner / Qualifier Market oriented to Service Product Process Sourcing
Price Low cost products Efficiency
Design oriented to low
cost manufacturing
High utilization rate,
Efficiency
Low total cost
suppliers
Performance
A product's primary operating
characteristics
Quality conformance Quality conformance Quality conformance
Features
High performance and
differentiated characteristics
High Performance
Product Design
"state of the art" Innovative suppliers
Product portfolio Multiple products variety Product Range
Assets flexibility,
short set-up times
Customized
Products
Fulfill specific customer needs Collaborative Design Postponment
Small order size(if there
are exclusive materials for
customized products)
Time to market
(Innovation)
Innovative products
Innovative Product
Design
Assets flexibility Fast time to market
Delivery reliability
Service promise conformance
(Perfect orders)
Perfect Orders Reliable suppliers
Delivery speed
Short "Customer order to
receiving" cycle
Order Management
Extra capacity (high
responsiveness)
Minimun order size
Small order size (packages or
LTL dispatches)
Transportation
flexibility
Product Range
(packaging)
Assets flexibility,
short set-up times
Small order size(if there
are "low quantity" materials)
Transactional effort Automatized transactions
Electronic Data
Interchange
Agility to demand
changes
Fast response to demand
changes
Buffering, Visibility
Assets flexibility,
short set-up times
Agile Sourcing
(Multiple Buffering)
Cash Flow
Low inventories (working
capital requirements)
Collaborative Planning
Assets flexibility,
short set-up times
Short lead time
(lower working capital)
Product
Service
Focus
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
40

Figure 17 presents Supply Chain Roadmap
TM
model for characterizing an organizations
supply chain strategy, where the detailed elements of the unique value proposal are introduced
together with the supply chain profile in its four components and the three perspectives of the
supply chain framework.
Table 11 presents Supply Chain Roadmap
TM
model under a Parallel-Table view, which is
recommended to use for multiple supply chain analysis under a parallel view, while graphic view
presented in figure 17 is recommended for a single supply chain analysis and for training and
divulgation purposes.


Figure 17, Supply Chain Roadmap
TM
Graphic view
Guidelines for characterizing an organizations supply chain
Source: own elaboration.




Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
41

Table 11, Supply Chain Roadmap
TM
Parallel-Table View
Guidelines for characterizing an organizations Supply Chain
Source: own elaboration.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
42

6.9 Supply Chain Roadmap
TM
model
An advantage of this method is that organizations supply chain strategy can be gathered
together, reviewed in a systematic and organized approach. This means that an organization can
understand current status of supply chain strategy and to define gaps and/or inadequate alignment
between supply chain strategy and business strategy. Supply Chain Strategy could be updated
according to changes in business framework factors.



Figure 18, Supply Chain Roadmap
TM
model
Source: own elaboration.

Supply Chain Roadmap
TM
uses two different tools for applying the method:
- Supply Chain Framework +Supply Chain Profile, which conform a map where in a
single and simple view is characterized a supply chain strategy, for an own company and for
generic supply chain models, these last, used as parameter of generic approaches.
- Reference SCGM, which develops a general guidelines about compatibility among
business framework and supply chain profile elements, based on generic supply chain
models, which are supported by findings grounded in models developed by recognized
authors, case studies and experience of experts.
Based on both tools, method could be applied to any organization, first, doing an organizations
supply chain characterization using Supply Chain Framework +Supply Chain Profile, and after
that, doing a verification of alignment supported by Reference SCGM.
An alternative use of Supply chain roadmap
TM
is to avoid use of Reference SCGM, and to
do an analysis of organizations supply chain strategy based on experts open discussion of current
organizations supply chain strategy, supported by characterization done in Supply Chain
Framework +Supply Chain Profile.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
43

Section 3: Reference Generic Supply Chain models

Supply Chain Roadmap provides a method oriented to gather information about business
environment and current organizations supply chain profile, in order to characterize an
organizations supply chain strategy under a single drawing called Supply Chain Roadmap
TM
,
which contains business framework factors, supply chain profile elements and relationship among
them. Based on Supply Chain Roadmap
TM
, is possible to identify proper alignment between
supply chain strategy and business strategy.
This section pretends to characterize Generic Supply Chain models under Supply Chain
Roadmap
TM
characterization model, aiming for understanding under a unique method differences
and similarities among the proposal of the most renowned authors as Fisher, Lee, Ketchen,
Gattorna and Christopher. After that, a crossed analysis among the SCGM proposed by the
authors, and authors own experience, will be used to define Reference SCGM, which will be
used as role model in order to fin gaps in a companys supply chain strategy.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
44

7. Characterization of the supply chain generic models
7.1 Fishers approach
One of the most widely known models for Supply Chain strategy, was developed by Marshall
Fisher in his very recognized article What is the right supply chain for your product? (1997), in
this article Fisher introduces two generic supply chain models: Responsive and Efficient and
presents main characteristic of them. Table 12 presents Fishers description of both models.

Table 12, Fishers Efficient and Responsive Supply Chains.
Source: What is the right supply chain for your Product? (Fisher 1997).



Based on Fishers description, we apply Supply Chain Roadmap
TM
model for characterizing
both supply chains, and define more relevant features of these models, which are highlighted and
presented in Table 13.
Functional Products,
Efficient Supply Chain
Innovative Products,
Responsive Supply Chain
Product life cycle more than 2 y 3 m to 1 y
Contribution margin 5% to 20% 20% to 60%
Product variety Low High
Average margin of error in the
forecast at the time production is
committed
10% 40% to 100%
Average stockout rate 1% to 2% 10% to 40%
Average forced end of season
markdown as percentage of full
price
0% 10% to 25%
Lead time required for made to
order products
6 months to 1 year 1 day to 2 weeks
Primary purpose
Supply predictable demand efficiently at
the lowest possible cost
Respond quickly to unpredictable
demand in order to minimize stockouts,
forced markdowns and obsolete inventory
Manufacturing focus Maintain high average utilization rate Deploy excess buffer capacity
Inventory Strategy
Generate high turns and minimize
inventory thoughout the chain
Deploy significant buffer stokcs of parts
or finished goods
Lead Time Focus
Shorten lead time as long as it doesn't
increase cost
Invest aggresively in ways to reduce lead
time
Approach to choosing suppliers Select primarly for cost and quality
Select primarly for speed, flexibility and
quality
Product design strategy
Maximize performance and minimize
cost
Use modular design in order to postpone
product differentiation for as long as
possible
Supply
Chain
Features
Demand
Features
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
45

Table 13, Fishers Efficient and Responsive Supply Chains
characterized under Supply Chain Roadmap
TM
model.
Source: Own elaboration.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
46

Fishers model is easy to understand and very practical, and today 15 years after its introduction, is
used as reference by supply chain experts and it could be enough for a first approach to supply
chain strategy, but, could be restricted to simplest situations.
7.2 Lees Uncertainty Framework
After Fishers approach, one of the most widely known models for Supply Chain strategy, was
developed by Hau Lee in 2002, called Uncertainty Framework, this model recognized Fishers
works, but introduced and additional element: Supply uncertainty, which is defined by Lee in two
levels Stable supply and evolving supply. According to Lee A stable supply is where the
manufacturing process and the underlying technology are mature and the supply base is well
established. An evolving supply process is where the manufacturing process and the underlying
technology are still under early development and are rapidly changing, and as a result the supply
base may be limited in both size and experience. Table 14 resumes supply characteristics of both
supply levels.

Table 14, Stable vs. evolving supply
Source: Aligning supply chain strategies with product uncertainties (Lee 2002)


Lee introduces four different generic supply chain models, based on the relationship between
demand uncertainty and supply uncertainty, as is shown in Figure 19.

Figure 19, Lees Generic Supply Chain Models
Source: Aligning supply chain strategies with product uncertainties (Lee 2002)

Stable Evolving
Less Breakdowns Vulnerable to breakdowns
Stable and higher yields Variable and lower yields
Less quality problems Potential quality problems
More supply sources Limited supply sources
Reliable suppliers Unreliable suppliers
Less process changes More process changes
Less capacity constraints Potential capacity constrained
Easier to changeover Dificult to changeover
Flexible Inflexible
Dependable lead time Variable lead time
Low -Functional Products- -Innovative Products- High
Low
-Stable
process-
Efficient Responsive
-Evolving
process-
High
Risk Hedging Agile
S
u
p
p
l
y

U
n
c
e
r
t
a
i
n
t
y
Demand Uncertainty
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
47

Main characteristics of these models, according to Lee (2002), are:
- Efficient: Oriented to high efficiencies in the supply chain, eliminating non value add
activities and pursuing high utilization rates and scale economies. Inventory is reduced as
smallest is possible taking care of doesnt affect cost.
- Responsive: Oriented to responsiveness to demand changes and diverse needs of customers.
Uses postponement design looking for reducing inventory and increasing delivery speed.
- Risk Hedging: Uses pooling and sharing resources so that the risks in supply disruptions
could be shared among supply chain members or inclusive among competitors.
- Agile: Combines Hedging and responsiveness in order to maintain supply continuity.
They have the capability to be responsive to unpredictable demands, while minimizing
sourcing risks.

Based on Lees description, we apply Supply Chain Roadmap
TM
model for characterizing all
four supply chains, and define more relevant features of these models, which are highlighted and
presented in Table 15. A comparison between Lees and Fishers models according to Supply
Chain Roadmap characterization model permits to deduct some important findings:

- Lees efficient supply chain and Fishers efficient supply chain have several common points,
and, the most relevant differences are that Lees model emphasizes in continuous
replenishment and information sharing as key elements for assuring higher efficiencies.
- Greatest difference between Lees responsive supply chain and Fishers responsive supply
chain is that Lee highlights importance of mass customization as key element of value
proposal to customers, based on that, two elements are relevant, a BTO (Build to order)
order penetration point, looking for increasing agility to customer needs, and, suppliers hub
nearest to assembly site, in order to assure fastest response to demand changes.
- Risk Hedging supply chain in Lees model, is characterized by a demand with high levels of
uncertainties, and due that, product availability became in a key factor of success. Lee
proposes inventory pooling and capacity pooling as buffer system, and emphasizes
importance of inventory visibility among supply chain partners in order to assure fast
movement of inventory between them.
- Agile supply chain in Lees model is the most complex supply chain, because is affected by
uncertainties and variability in both edges, demand and supply. Lee recommends a mix
among Risk Hedging and Responsive supply chains, taking elements from both of them.
According to that, an agile Supply Chain combines information sharing, inventory visibility,
inventory pooling, capacity pooling and a suppliers hub, in order to assure fast response for
customized demands.

Lees approach is a most refined view of generic supply chain models, and constitutes the basis
for further developments realized by several authors in the last decade. Maybe, Fishers article is
most widely known and it is recognized as the breaking point from manufacturing strategy to
supply chain strategy, but Lees article should be recognized as the most complete base of todays
supply chain strategy.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
48

Table 15, Lees proposal characterized under Supply Chain Roadmap
TM
model.
Source: Own elaboration.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
49

7.3 Lees Triple A Supply Chain
All those companies and initiatives persistently aimed at greater speed and cost effectiveness -
the popular grails of supply chain management-. Of course, companies quests changed with the
industrial cycle: When business was booming, executives concentrated on maximizing speed, and
when the economy headed south, firms desperately tried to minimize supply costs.
. As time went by, however, I observed one fundamental problem that most companies and experts
seemed to ignore: Ceteris paribus, companies whose supply chains became more efficient and cost-
effective didn't gain a sustainable advantage over their rivals. In fact, the performance of those
supply chains steadily deteriorated. (Lee, 2004)
Two years after introduction of uncertainty framework model, Lee presents a new approach for
Supply Chain Strategy: The triple A Supply Chain, as it is explained by Lee (see previous
paragraph), when companies are looking for speed and efficiency, they lost competitive advantage
against his peers. Triple A Supply Chain focus companies in a most balanced supply chain
strategy, whose could be applied to todays business framework, which is characterized by high
volatility levels in demand and supply. Table 16 shows main characteristics of Lees Triple A
Supply Chain.
Table 16, Lees Triple A Supply Chain.
Source: Adapted from The Triple A Supply Chain (Lee 2004).



The Triple A Supply Chain could be characterized according to Supply Chain Roadmap
characterization model, as is shown in Table 17, where is clear the similarity with Agile Supply
Chain defined by Lee under Uncertainty Framework model. Triple A Supply Chain is
reloaded versus an Agile supply chain with two main features: (1) Collaborative relationships
with customers/ suppliers, in order to assure free information exchange and objectives alignment
along chain, which is base for risks / gains sharing among supply chain members. (2) Multiple
supply chains for one company, this concept is revolutionary for that moment, and demystify
several paradigms, inviting companies to create parallel supply chains, one for each different market
framework, under a unique umbrella supply chain.
Agility Adaptability Alignment
Definition
React speedily to sudden changes in
demand or supply
Adapt overtime as market structures and
strategies evolve
Align the interests of all the firms in the
supply network so that companies
optimize the chain's performance when
they maximize their own interests.
Objective
Respond to short-term changes in
demand or supply quickly; handle external
disruptions smoothly.
Adjust supply chain's design to meet
structural shifts in markets; modify supply
network to strategies, products, and
technologies.
Create incentives for better performance.
Promote flow of information with
suppliers and customers.
Monitor economies all over the world to
spot new supply bases and markets,
Exchange information and itnowledge
freely with vendors and customers.
Develop collaborative relationships with
suppliers.
Use intermediaries to develop fresh
suppliers and logistics infraestructure.
Lay down roles, tasks, and
responsibilities clearly for suppliers and
customers.
Design for postponement.
Evaluate needs of end consumers, not
just immediate customers/shoppers.
Equitably share risks, costs, and gains of
improvement initiatives
Build inventory buffers by maintaining a
stockpile of inexpensive but key
components.
Create flexible product designs.
Have a dependable logistics system or
partner.
Determine where companies' products
stand in terms of technology cycles and
product life cycles.
Draw up contingency plans and deveiop
crisis management teams.
Methods
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
50

Table 17, Lees Triple A Supply Chain, Ketchens Best Value Supply Chain
characterized under Supply Chain Roadmap
TM
model.
Source: Own elaboration.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
51

7.4 Best Value Supply Chain
Ketchen and Hult introduced in 2007 Best Value Supply Chain, which, are further
distinguished from other chains by how they approach issues of agility, adaptability, and alignment,
and by their ability to pursue competitive priorities: speed, quality, cost and flexibility.
Best Value Supply Chain build an updated version of Lees Triple A Supply Chain, because
is supported in Lees three A, and introduce two additional concepts: (1) Competitive priorities,
whose, are: Speed (cycle time), Quality, Cost and Flexibility (Responsiveness), and (2) Four key
areas, which are: strategic sourcing, Logistics management, Information systems and Relationship
management, where are present Lees main concepts, as: information systems (information sharing,
transactional effectiveness, decision analysis), buffer management and relationship management
(focusing collaboration with key partners).
Table 18 shows a parallel between Best Value Supply Chain and Traditional Supply Chains.
Best Value Supply Chain characterization under Supply Chain Roadmap
TM
model is presented
in Table 17, where is shown a parallel view with Triple A Supply Chain.

Table 18, A comparison of best value and traditional supply chains
Source: Bridging organization theory and supply chain management:
the case of Best Value Supply Chains. (Ketchen & Hult, 2007)



7.5 Gattorna Dynamics Supply Chain
The secret to designing a superior supply chain is to start by re segment our customers by their
purchasing habits, and then design the chain in reverse from there ... in fact, something we have
known for some time, but we've been denying, is that customers are ultimately our frame of
reference. Gattorna (2006)

A paper developed in conjunction by Martin Christopher and J ohn Gattorna (2004), presents a
method for supply chain segmentation based on customers dominant buying behaviors. In 2008
Gattorna reinforces his own theory in a review about Triple A Supply Chain, introducing an
additional concept to Lees approach: the cultural perspective. In own Gattorna words: .in my
experience, over 40% of strategies written into business plans fail to be implemented, and its all
due to a misalignment between those strategies and the values of the people inside the
organization, and the partner organizations in the chain., and based on this concept, Gattorna
segments customers behaviors and creates a new Generic Supply Chain model, which, come back
to Lees first approach, and proposes four different supply chains, according to customers
preferences and behaviors, whose are presented in Table 19.
Issue Best value supply chains Traditional supply chains
View of supply chain
management
Strategic supply chain managementchains
are a strategic weapon
Chains are a method to move products in order
to support strategy
Agility
Strong ability to be proactive as well as
responsive to changes
Modest ability to respond to changes
Adaptability
Maintain a limited set of multiple chains to
ensure distribution
Often limited to single chains or a large number
of chains
Alignment
Interests of participants coincide (or is
developed to be synergistic)
Participants forced to choose between own
and chains interests
Competitive priorities
Total value across speed, quality, cost, and
flexibility
Emphasize one of the four competitive
priorities
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
52

Gattornas model is founded in customers behaviors understanding, and he is very critical
about Porters strategy model, because Porter's philosophy seems to have convinced generations of
managers that the key is to observe their competitors instead customers understanding.
At this stage, could be present a confusion about similarity between Lees uncertainty
framework and Gattorna Dynamic Supply Chains, which could be clarified according to
Gattornas owns words (2006), Lee proposed four types of supply chain strategies, whose are
similar to my own taxonomy: Efficient Supply Chain (equivalent to my Lean), Risk Hedging Supply
Chain (equivalent to my fully flexible), Responsive Supply Chain and Agile Supply Chain (taken
together seem similar to my agile), and finally, Lee doesnt suggest nothing about my continuous
replenishment model. Maybe, some characteristics of this are found in his Efficient Supply Chain.
Additionally, it is important to highlight, that Gattornas Lean supply chain is a market push
model, where customer collaboration is not present, instead, continuous replenishment model, is a
market pull model, a step forward supply chain, where customer collaboration is required.

Table 19, Buying behaviors
Source: Adapted from Christopher & Gattorna, 2004.



Gattornas proposal contributes to understand that product segmentation Fisher, Lee models- is
not always a right approach to supply chain design, instead, proposes to understand customers
behaviors and based on that, understand their implications for supply chain design and operation. In
few words, Gattorna introduces cultural perspective as a key element that must be considered in
supply chain design and operation. Table 20 presents Dynamic supply chains characterization
according to Supply Chain Road map
TM
model.

Collaborative
Efficiency /
Consistency
Demanding /
Quick Response
Innovative
Solutions
Close working
relationships for mutual
gain
Consisten responde to
largelly predictable
demands
Rapid response to
unpredictable supply and
demand conditions
Supplier led development
and delivery of new ideas
Demand Mostly predictable
Predictable demand within
contract
Unpredictable Very unpredictable demand
Order Cycle Regular delivery Regular delivery Time priority/ urgency Flexible delivery response
Focus Cash flow Efficiency low cost focus Opportunity focus Innovation focus
Supply Primary source of supply Multiple sources of supply Ad hoc source of supply For specific services / cases
Relationship Trusting relationship More adversarial Low loyalty For specific services / cases
Information
Sharing
Information sharing
Little sharing of information /
Transactional oriented
No sharing information Solutions oriented
Price Price not an issue Very price sensitive Price aware No price sensitivity
Continuous
replenishment
Lean Agile Fully Flexible
Focus
Focus on developing loyal
customer relationship with
trusty & reliable service
Focus on economies of
scale, synergies and low
cost production and delivery
Focus on responding rapidily
& comercially to
unpredictable supply/demand
conditions
Hedging & deployment
strategies used to improve
responsiveness on a
selective basis
Buying behaviors
Supply Chain Strategy
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
53

Table 20, Gattornas Dynamic Supply Chains
characterized under Supply Chain Roadmap
TM
model.
Source: Own elaboration.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
54

7.6 Christophers Global Supply Chain Strategies
Martin Christopher (2006) proposes an alternative approach to supply chain segmentation, based
on supply and demand characteristics, where demand predictability and replenishment lead time are
the drivers used for selecting the generic supply chain model as is shown in figure 20.


Figure 20, Christophers Generic Supply Chain Models
Source: A taxonomy for selecting global supply chain strategies (Christopher, Peck, Towill, 2006)

Christopher proposes to locate as Long lead times products where order cycle time is in
months rather than days, and, to locate predictability based on variation coefficient.
Although Gattorna and Christopher developed a paper in conjunction in 2005, there are some
differences between both models. Both authors coincide in present similar characteristics to Lean
and Continuous replenishment supply chains, but otherwise, Agile proposal from Gattorna
comprises full characteristics from both Agile and LeAgile supply chains from Christopher, and
additionally, Fully flexible model from Gattorna is not developed by Christopher.
Recently, Christopher theoretical approach has been refined based on DWV five market criteria
(Duration of life cycle, time window for delivery, volume, variety and variability), as Christopher
(2011) says Demand profiling at SKU level is a link between customer segmentation and product
characteristics. It is the customer demand for a product and a natural bridge between the two.
Understanding customer buying behavior may be useful to evaluate the reasons why a demand
pattern occurs, but is not an essential aspect of developing supply chain strategy. It was the
decision, not to pursue the more qualitative analysis of customer buying behavior, and to challenge
its relevance in developing supply chain strategy that led to the development of demand profiling.
This recent approach from Christopher closes the theoretical gap with Gattorna, and highlights
importance of both, customer segmentation and product profile, in the selection of the right supply
chain, only persists a difference between them, the method used for customer segmentation, while
Gattornas approach is oriented to perceived behaviors, Christopher looks quantitative evidence
about customer, based on demand profiling, which is made based on DWV five market criteria.
In a paper of 2011, Christopher presents a case of a FMCG (Fast moving consumer goods)
company, where product volume and variability are used for supply chain strategy segmentation,
finding that low volume-high variability products require agile supply chain and lean supply chains
are oriented to high volume-low variability products. Some supply chain consultancy firms as
McKenzie are using a similar approach (demand profiling at SKU level) to define supply chain
strategy. Table 21 presents Christophers supply chain model characterized under Supply Chain
Roadmap
TM
model.
Predictable Unpredictable
Long
Lean
Plan and Execute
LeAgile
Postponment
Short
Lean
Continuous Replenishment
Agile
Quick Response
Demand Characteristics
S
u
p
p
l
y

C
h
a
r
a
c
t
e
r
i
s
t
i
c
s













-
L
e
a
d

T
i
m
e
-
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
55

Table 21, Christophers Generic Supply Chains
characterized under Supply Chain Roadmap
TM
model.
Source: Own elaboration.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
56

7.7 Stavrulaki and Davis
This is a most recent theoretical approach (2010), where supply chain strategy is selected
according to several factors associated to supply chain processes product, manufacturing and
logistics-, as is shown in Figure 21.


Figure 21, Comparison of supply chain characteristics,
Source: Aligning products with supply chain processes and strategy (Stavrulaki and Davis, 2010)

These proposal segments supply chain strategy according to Order penetration point -
decoupling point in authors words-. Additionally, they define the most important characteristics of
product, manufacturing and logistics under each model. Main contribution of this paper is to
introduce some tactical aspects into the consideration of supply chain strategy, but, criteria used for
supply chain selection are generalized under a theoretical framework. Evidence of the above, is
generalization of a specific order penetration point for each type of supply chain. There are several
examples of agile supply chain under different OPP. Both, Toyota and Dell operate under ATO
OPP, but Toyota is a Lean Supply Chain and Dell is an Agile Supply Chain. Zara is an agile supply
chain operating under Make to forecast OPP.
Build to stock
Assemble to
order
Make to order Design to order
Supply Chain strategic
capability
Lean Agi l i ty
Demand uncertainty,
Profit Margin, Product
Variety, Order Leadtime
Low High
Product life cycle, Forecast
accuracy, Volume
High Low
Production process
Continuous,
Large Volume,
Assy / Batch
Assembly line
Small batch, J ob
Shops
J ob Shops,
Projects
Product design
Low Cost
oriented
Specialized
Manufactures has contact
with end user
Uncommon Common
Manufacturing process
focus
Efficiency Flexibility
Intermediaries between
manufacturer and end
customer
Large Small
Bullwhip effect Prominent Less likely
Supplier relationship
Collaborative
High information
sharing
Oportunistic
collaboration
Logistic processes focus Efficiency Flexibility
Leagi l i ty
Modular (postponment)
Efficiency before decoupling point,
Flexibility after it
P
r
o
d
u
c
t
M
a
n
u
f
a
c
t
u
r
i
n
g
L
o
g
i
s
t
i
c
s
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
57

8. Applicability of the supply chain generic models (SCGM)
8.1 A unique set of Supply Chain Generic Models
In the section 7 were studied several Supply Chain Generic Models under Supply Chain
Roadmap
TM
model, and based on this analysis and my own experience, a first set of conclusions
are:
- Each author presents its own Supply Chain Generic Model under a unique and non-
standardized perspective, which creates difficulties for understanding similarities,
differences, features and application field of each Supply Chain Generic Model.
- Supply Chain Generic models are presented under a reductionist and very simple view,
although subsequent literature developed by the same author or followers of the authors
theory could offer more details about models features, giving a deeper perspective, but
offering difficulties to managers in order to find an easy approach to understand, select
and apply Supply chain generic models in their own and real situations.
- Supply Chain Roadmap
TM
offers a simple but a detailed view of a supply chain, enabling
an unique and standardized view of whatever supply chain, in order to allow a easiest
understanding of a supply chain under an unique reference model.
- There are similarities among some of the Supply Chain generic models presented by the
several authors, which could offer an opportunity to present a unique set of Supply chain
generic models, instead, a specific set of SCGM for each author.

In order to find a theoretical framework of reference for typical Supply Chain Generic Models,
its necessary to compare similar SCGM under a Supply Chain Roadmap
TM
table-view, finding
which of them is the most recognized or, finding, a new model that could represent the most
important features of them.
8.2 Efficient SCGM
This SCGM is widely mentioned by several authors, some of them called this model as lean,
which is a very recognized term in the industry, but misused, because the real lean model was
developed by Toyota in 1950s and is a mix between an agile and efficient models, while an
efficient model uses a make to forecast order penetration point, Toyota Production System uses a
Assembly to order order penetration point. Misunderstanding could be originated because both
models are oriented to lowest total cost. But, a lean supply chain mustnt confuse with Lean
Management which should be understood as a management model that could be overlapped over
any supply chain model in order to improve business performance.
Our Efficient SCGM is built based on efficient models of Fisher and Lee, and Lean models
of Gattorna and Christopher. Main characteristics of a business framework in an efficient SCGM
are predictable demands, long life cycle products, products/services highly representative in
customers cost, assets utilization strongly impacts the total cost, highly competitive market with
several companies fighting by the same group of markets, and principally customers oriented to
low cost.
For this business framework, the focus of the supply chain profile is efficiency, which is
supported in a high utilization rate of assets based on a Make to forecast model, in order to
maintain production continuity and assure the best production sequence, reducing set up time.
In few words, in a make to forecast production is performed before orders are received based
on a detailed planning of production activities in order to assure focus on efficiency.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
58

Table 22 shows a parallel view among most recognized models and the efficiency reference
SCGM, which is based on other authors models and own experience.

Table 22, Efficient Reference SCGM
Source: Own elaboration.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
59

8.3 Continuous replenishment SCGM
Table 23, Continuous Replenishment Reference SCGM
Source: Own elaboration.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
60

Our Continuous replenishment SCGM is built based on continuous replenishment models of
Gattorna and Christopher. Main characteristics of a business framework in a continuous
replenishment SCGM are predictable and stable demands, long life cycle products, low supply
disruption risk, low market mediation cost, and principally customers oriented to process efficiency,
especially low working capital.
For this business framework, the focus of the supply chain profile is collaboration, which is
supported in two main features: information sharing and electronic transactions. Order penetration
point is Make to stock, in order to assure medium-high utilization rates at high levels of perfect
orders. Make to stock and Make to forecast could be understood as the same model, but the
main difference between them is that in a MTF production is made according to sales expectations
(forecast), in a MTS production is made for replenishing predefined stock levels. In both models
high rate of assets utilizations is a key factor. In few words, a Continuous replenishment SCGM
is a most mature model than efficient SCGM, and the main difference is the predictability of
demand, which is highly dependent on customers collaboration. A Continuous replenishment
SCGM is the natural improvement path to a company working in an efficient supply chain, both
of them have a smoothed workload, for the efficient supply chain driven by the forecast and for
the continuous replenishment driven by the market demand. Table 23 shows a parallel view among
most recognized models and the Continuous replenishment reference SCGM, which is based on
other authors models and own experience.
8.4 Agile SCGM
Our Agile SCGM is built based on responsive/agile models of Fisher, Lee, Gattorna and
Christopher. Main characteristics of a business framework in an Agile SCGM are unpredictable
demands, short life cycle products, supply disruption risk, high market mediation cost, and
principally demanding customers oriented to fulfill unpredictable demand in short time.
For this business framework, the focus of the supply chain profile is agility, which is supported
in two main features: extra capacity in production and products oriented to postponement design, as
consequence of this, an Make to order order after divergence/postponement point- order
penetration point is used, looking for reducing order cycle time, but holding opportunity to
customize products in the pending processes according to customers specific requirements.
In few words, production is partially performed before orders are received based on a detailed
planning of production activities in order to maintain minimum levels of efficiency, but end
processes (processes after divergence point) are made according to customer orders are received. In
some cases is possible that processes cant be done before customer orders arrival, due to
technological limitations of the production process or because postponement design is not possible.
Delivery speed is supported in extra-capacity in processes after divergence point. Table 24 shows a
parallel view among most recognized models and the agile reference SCGM, which is based on
other authors models and own experience.









Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
61





Table 24, Agile Reference SCGM
Source: Own elaboration.



Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
62

8.5 LeAgile SCGM
Our LeAgile SCGM is based on LeAgile SCGM of Christopher, which is the nearest model to
Toyota Production Model, which is the real Lean model and is confused with an Efficient
model by several authors. Main characteristics of a business framework in a LeAgile SCGM are
unpredictable demands, medium level of supply disruption risk, long life cycle products,
products/services highly representative in customers cost, assets utilization strongly impacts the
total cost, highly competitive market with several companies fighting by the same group of markets
and principally customers oriented to low cost and fulfill unpredictable demand in short time. It is
the most demanding model, because requires agility with low cost. The most important differences
between an Agile SCGM and a LeAgile SCGM are: Agile SCGM is MTO and extra-
capacity is assigned before and after divergence point, and in some cases dont apply postponement
design, but always are used common components/materials, in the other hand, LeAgile model is
ATO, extra-capacity is located only after divergence point, processes after divergence point are
oriented to assembly and operations before divergence point operate under a efficient SCGM.
For this business framework, the focus of the supply chain profile are efficiency and order
accuracy, the first one is supported in a mixed model: a MTF model before divergence point and a
ATO model after divergence point, the first one driven by forecast and the second one driven by
customized customers orders. Order accuracy is a relevant factor in order to assure fulfillment of
customized orders.
This model is applied in several industries as apparel, computers and automobile, where
customers orders are received before assembly processes and components for assembly where
manufactured based on a forecast, due to their long production time.
Table 25 shows a parallel view among LeAgile Christophers model and the LeAgile
reference SCGM, where main difference is service focus.
8.6 Flexible SCGM
Our Flexible SCGM is totally based on Flexible SCGM of Gattorna. Main characteristics of a
business framework in a flexible SCGM are unpredictable customer needs both in quantity and
features, high supply disruption risk, solutions oriented, and principally customers oriented to pay
whatever if their need is solved quickly.
For this business framework, the focus of the supply chain profile is capacity/inventory pooling
and/or outsourced capacity, which is supported in sharing information of capacity and inventory
with suppliers, customers and inclusive, competitors. Order penetration point is variable, according
to each specific case. In few words, a Flexible SCGM is oriented to solve unexpected events,
nearly to urgencies or emergencies. A typical example of these supply chains are companies
oriented to corrective maintenance as flood control, in which own equipment could be insufficient
and companies must share equipment with suppliers, customers or inclusive competitors.
Table 25, includes too, a view of the Gattornas Flexible SCGM, which is adjusted in some
features and is used as reference model.






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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
63

Table 25, LeAgile Reference SCGM and Flexible Reference SCGM
Source: Own elaboration.



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Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
64

8.7 Other SCGM
In previous numerals were deducted reference Supply Chain Generic Models, which are based
on cross analysis among several authors and own experience, however, three important approaches
werent consider, Triple A Supply Chain, Best Value Supply Chain and Stavrulaki and Davis.
About Triple A Supply Chain and Best Value Supply Chain, they must be considered more
than as a SCGM, as a Supply Chain Management Philosophy, where main concepts are: Alignment,
as an element to assure coordination of purposes and rewards in the supply chain, Adaptability as a
multiple supply chains under a same company in order to fit supply chain with specific market
requirements, and Agility as a responsiveness concept. Specifically, Alignment and Adaptability
are concepts that could be superposed over any supply chain strategy, regardless of which SCGM
models are applied by the company. About Stavrulaki and Davis, their model is similar to
Christophers model, due to introduces three of the four SCGM presented by Christopher: Lean,
Agile and Leagile, which were considered in our reference models.
8.8 Reference SCGM
Table 26, Full view of Reference SCGM
Source: Own elaboration.

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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
65

Reference models as shown in Table 26 are used for comparing a companys supply chain
strategy with a role model, in order to find gaps between supply chain framework and supply
chain profile. Reference SCGM are nearly to Gattornas and Christophers proposals, but
includes a more detailed characterization of the business framework and supply chain profile, in
addition to that, Reference model presents five SCGM, three of them presented by Gattorna and
Christopher (Efficient, Agile and Continuous replenishment) and two of them presented in an
individual way for Gattorna (Flexible) and Christopher (LeAgile). Reference SCGM presents a
wide spectrum of supply chain typologies which cover all the main supply chain strategies, not
intended to be a straitjacket but a reference to typical characteristics of business framework and
supply chain profile, allowing to supply chain professionals to verify their current strategies against
the most recognized strategies.
8.9 Criterias for the Gap Analysis
Gap analysis is supported by the reference supply chain generic models and some practical
criterias, which are based on my own experience:
8.9.1 Product and Service factors
Order Entry Point (OPP): Mainly affected by the level of uncertainty in demand and market
mediation costs (obsolescence and cost of inventory). For portfolios involving a wide range of
products, where the products divergence point is located upstream the process (manufacturing or
assembly), this allows improving the response to changes in demand or offering personalized
product characteristics, without increasing inventory levels. Classic examples of this are the BTO
(Build to order) model and Dell and the Toyota production system.
Order cycle and size: Order cycle and order size are affected by Customers power and the
relevance of transportation costs. In an industrial sector customers are powerful, when the
combination of some of the following factors are present: (1) High number of suppliers, (2) excess
capacity installed by the providers, (3) products with low differentiation, (4) products that do not
influence greatly on the final quality of the Customers product and (5) a high possibility of
substitution. When the Customer has a lot of power on suppliers, there are high demands on a rapid
response and smaller dispatch lots. An example of this in corrugated packaging industry, where
demands in service time and smaller dispatch lots have increased in the past years. On the other
hand, sectors where transportation cost is relevant in total cost, are obligated to define policies
regarding order size, which avoid transportation by packages, with the purpose of ensuring a
competitive price in the sector. An example of this is the disposable products industry for personal
hygiene, where transportation cost is relevant in the total cost and policies regarding order size and
delivery time based on fixed cycles consolidating deliveries to a same region on one day of the
week - instead of lead time, so as to increase the consolidation of cargo towards regions and thus
optimize transportation cost.
Buffering: There are several manners of protecting the supply chain against fluctuations in
demand and/or supply, inventory being the most familiar of them, but there are also others such as
excess installed capacity and poly-functionality, among others. The level and type of buffering used
in the supply chain depends on several factors: (1) high levels of uncertainty in demand and supply
require greater buffering, (2) with a high relevance of product cost in the Customers or consumers
cost structure comes an increase in buffering requirement, since the Customer wishes to have a
lower level of product inventory, but wants the supplier to have the capacity to cover fluctuations in
demand, (3) collaboration programs for joint planning of demand and supply, allow reducing the
Aligning the supply chain to business strategy
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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
66

buffering level, given that the level of demand uncertainty is reduced, and (4) products with a short
life span require a higher level of buffering in installed capacity than inventory, with the purpose of
reducing risks of obsolescence (a market mediation cost).
Product segments/portfolio and personalization: The scope of the product portfolio and its level
of personalization is increased by: (1) products in their mature stage of their life span, given that it
is necessary to present a greater variety of product to the market, so as to satisfy the Customers
specific needs, (2) sectors with a high Customer power require the development of broad portfolios,
thus avoiding Customer migration to the competitors. On the other hand, products which cost is
relevant for the Customer and with high-cost productive assets, pressure towards a smaller
portfolio, with the purpose of having more efficient production lots.
On the other side, sectors where the product offered by the supplier is significantly important in
the Customers or the consumers perception of the products value, require a greater variety of
portfolio, and even in personalized products. An example of this is institutional products for the
restaurant sector, where Customers request the printing of their logos in the products and in some
cases, personalized specifications.
8.9.2 Process factors
Production cycle: as one of the profile key elements it is the most important element of
process quadrant, as is defined as time required for production of whole products portfolio. It
depends of several factors as (1) portfolio size, expressed as number of SKUs, (2) setup time for
changing from one product to another product, (3) economical batch size, which depends on assets
utilization rate, because while organizations where assets cost is negligible or low are oriented to
lower utilizations rates, organizations with high assets investment cost are oriented to high use rate
in order to dilute fixed cost in a higher number of units produced.
Production cycle and variability domain buffering size, at longer production cycle greater buffering
is required.
Process flow selection depends on volume/portfolio relationship and logical product structure,
where product variety is high, are required flexible process flows as job shop, non-dedicated
batches or non-dedicated assembly lines, instead, where product variety is low combined with high
production volumes, high throughput flows are used, as continuous process, dedicated batches or
dedicated assembly lines.
Workload leverage is an important element for understanding gap, which could be understood as
the peaks and valleys of the workload on assets scheduled by the production/manufacturing plan.
Workload leverage could be very smooth due to low demand variability (for example a
continuous replenishment supply chain) or, could be smoothed by artificial methods, as in a MTF
make to forecast OPP (in an efficient supply chain). A smoothed workload is required by: efficient
supply chain, continuous replenishment supply chain and in a Leagile supply chain before
divergence point.
8.9.3 Sourcing factors
Order Entry Point (OPP): Mainly affected by the specialization of raw materials and suppliers
power. For raw materials/ components produced by suppliers under exclusive specifications for the
organization is very common a MTO (make to order) model, for raw materials / components
produced by suppliers for several customers under common specifications is very used a MTS
(make to stock) model, however, where suppliers power is high, suppliers pressure to transfer
inventory holding to manufacturer, offering MTO models.
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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
67

Order cycle: Mainly affected by transit time and order entry point. For having shorter order
cycle is necessary to implement collaborative programs with suppliers, based on reducing time
spent in transactional processes and increasing demand visibility.
Buffering: As was explained before, buffering size depends of order entry point, but additional to
that sourcing risk is an important factor that must be considered when sourcing buffering is defined.
Risk, associated to poor service level, critical materials or non-replaceable suppliers or materials,
forces to increase buffering size or buffering by pooling as several suppliers, alternative materials,
or shared buffering with competitors or affiliates among others.



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Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
68

Section 4: Supply Chain Roadmap
TM
method application
This section pretends to apply Supply Chain Roadmap
TM
method in several case studies in
order to validate relevance of the method for characterizing a supply chain strategy and find gaps
between supply chain strategy and business framework. Based on the application of the Supply
Chain Roadmap
TM
method to several cases, the method will be adjusted and finally, the method
will be used in a full case developed for the application of the Supply Chain Roadmap
TM
.




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Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
69

9. Case Analysis
9.1 Crocs
TM
: Revolutionizing an industrys supply chain model

9.1.1 Excerpts from the Crocss case
Some excerpts from the case developed by Stanford University (Hoyt 2007):
The original Crocs shoe was a clog design. Visually, its two most distinctive features were
large ventilatio holes and bold colors. The key to the shoe, however, was the croslite material. This
proprietary closed-cell foam material molded to the shape of the wearers foot, providing an
exceptionally comfortable shoe... Croslite could be produced in any color.
In addition to a popular product and a global strategy, Crocs developed a supply chain that
provided a competitive advantage. Traditional industry practice was for retail distributors to place
bulk orders for each seasons inventory many months in advance, with little ability to adjust to
changes during the selling season. The Crocs model did not impose these limitations on retailers
the company could fill new orders within the season, quickly manufacturing and shipping new
product to retail stores.
The raw material for the croslite in Crocs shoes are relatively inexpensive chemicals
purchased in pellet form from suppliers such as Dow Chemical. These chemicals are then combined
in a process called compounding, in which they are converted into new pellets. As part of the
compounding process, color dyes are added. The compounded pellets are then ready to be molded
into croslite products. Croslite components for Crocs products are made by injection molding. This
requires an injection molding machine, and molds for each style and size. After the parts are
molded, they must be assembled. This might involve gluing croslite parts together. .The finished
products are then tagged and placed in boxes containing 24 pairs of shoes for distribution to
retailers. Standard industry practice was for each pack of 24 to contain only one style and color.
Crocs, however, would custom configure 24-packs to meet the needs of its smaller customers.
Crocs early sales were to small retailers. These stores were willing to take more risk than the
large chains, and work with a supplier that provided a high level of support and rapid shipment of
product.. Crocs saw the small retailers as important to building the brand, and providing a brand
presence, even after the majority of sales went to large retailers. After Crocs initial success in small
stores, large retailers approached the company. Since the large retailers had seen the market
acceptance of the Crocs shoes, Crocs was in a much stronger negotiating position than it would
have been earlier in its development..
The footwear industry was oriented around two seasons: spring and fall. The standard practice
was for footwear companies preparing for the upcoming fall season to take their products to shows
around the world in January. Buyers would book orders for fall delivery following these shows
(pre-books). The fall orders that were received at the beginning of the year would be planned for
delivery in August, September, October, and November. These scheduled shipments would drive the
production plan. The manufacturers would add some excess to the build, typically about 20 percent
of the pre-booked orders, to take advantage of potential additional orders. A very aggressive
company might add 50 percent to the build, but all the product would be manufactured before the
season began. Most shoes were produced in Asia (primarily China and Vietnam), with some
manufactured in South America. This production and supply model had obvious limitations.
Retailers had to estimate what their customers would want well in advance of the selling season. If

Based in: CROCS: Revolutionizing an industrys supply chain for competitive advantage. Stanford
graduate school of business. Case GS-57. 2007
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Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
70

they underestimated, they would have empty shelves and forego potential sales. If they
overestimated, they would be stuck with unsold stock at the end of the season and be forced to have
clearance sales in order to get rid of this excess stock at discounted prices. Making this even more
difficult was the consideration that fashion was subject to trends that were difficult to predict
history was of only limited value, particularly with new products that incorporated novel design
elements that might either become wildly popular or fall flat.
Key Crocs executives were accustomed to producing what the customer needed, when it was
needed, and responding rapidly to changes in demand. They decided to develop a model focused on
customer needs when a customer needed more product, they would get it..Under the Crocs model,
retailers would not need to take a big risk in January by placing large orders for their fall season
they could place smaller pre-booked orders, and order more when they saw how well the products
sold.
We realized very quickly that third party [manufacturers] with our new model werent going to
work [outside of Asia]. Third parties in Asia are absolutely great. They are very flexible. They can
be both flexible and high volume. They move very quickly. They [contract manufacturers] take risks
with us, where they buy equipment.. No [third party manufacturers in] other countries were
willing to even entertain that. Wed have to give them long term forecasts, long term contracts
Crocs took control of the compounding activity, creating state-of-the-art compounding
facilities in Canada, China, and Mexico. Crocs could now ship raw materials to each of these
plants. The plants could compound material as need for production, delaying the colorizing
decision until a specific color product was needed
The company added warehousing operations to each factory, including labeling and other
value added activities such as installing hand tags and putting products into bags or boxes. For
customers that ordered large quantities,. the orders could be shipped directly from the Chinese
warehouse small shops accounted for a much larger percentage of orders (although at much
lower dollar levels) than the large retailers To meet the needs of small customers, product
would be shipped to the company-owned warehouse in Colorado, where the orders were configured
and shipped.
While these stores might send orders to Crocs by fax for small quantities to be delivered
directly to their stores, the large retailers had an entirely different fulfillment model. These
companies had their own distribution centers, and sent orders electronically.
Molds were frequently transferred between production locations. If they needed fast response
to meet a growing demand in the U.S., they might move production to Mexico, which was closer to
the customers. For products with lots of pre-booked orders, a relatively dependable forecast, and
high volume, production might be shifted to China.
In order to be able to respond immediately to increases in demand, Crocs kept total
manufacturing capacity at about 1 million pairs per month beyond the actual production plan. This
capacity could be turned on at a moments notice. The company also planned its infrastructure
(both systems and people) slightly ahead of demand, so that it could respond quickly.
While Crocs did not build inventory in excess of expected orders, the company did acquire
excess capacity (sometimes as much as 2 to 3 times the expected capacity) in the form of molds and
molding machines so that it could quickly ramp capacity in case a product took off.
Inventories turn over for Crocs was 3.5 times, compared with 5.6 times industry median.

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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
71

9.1.2 Crocs 2007s: Supply Chain Roadmap
TM

Based on case information, Figure 22 shows Supply Chain Roadmap for Crocs, in which are
defined several aspects about the situation at the cases time. Crocs made a industrys revolution
because they understood demand behaviors and customers needs and beyond a revolutionary
product, Crocs create a new and radical value proposal conformed by shorter order cycle time
(delivery speed), agility to changes in demand, inexpensive product, simple product design, and
supported for a revolutionary and fashion product.


Figure 22, Crocs 2007: Supply Chain Roadmap
Source: Own elaboration




Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
72

Crocs understood production complexity of traditional shoes supply chain and designed a
simple production process, with shorter production cycle reducing capital investment-, and they
found that traditional third party manufacturers outside of Asia, were not able to be agile, which
could be a supply risk in their strategy to locate production hubs in Europe and America. Crocs
discovered a big opportunity in the power relationships among traditional shoes manufactures and
small distributors, when customers were obliged to put orders in advance assuming high market
mediation costs. Crocs create an adaptable supply chain, conformed by two chains: an efficient
and a Agile, supported in a MTF order penetration point for preorders and a MTO order
penetration point for replenishment orders. Agility was supported in two pillars: first, a
companys policy Crocs kept total manufacturing capacity at about 1 million pairs per month
beyond the actual production plan, and second, moving croslite compound coloring process from
a global hub to each manufacturing facility. Efficiency was supported in using Asian third party
manufactures for large preorders and dispatches to big retailers.
9.1.3 Crocs 2007s: gap analysis based on Reference SCGM
Table 28 presents gap analysis against reference SCGM, where is shown Crocss dual strategy, a
predominant agile supply chain, supported by an efficient supply chain. Crocss agile supply chain
meets all the requirements in terms of value proposal and supply chain profile, Crocs defined an
agile supply chain in order to meet customers main need: market mediation cost reduction, based
on delivery speed (short order cycle). For assuring that, Crocs comply with the main requirements
for an agile supply chain: excess capacity, production hubs near to customers in order to reduce
transportation time, changed divergence point from raw material supplying to molding factories
(when they moved coloring process from Croslite manufacturing site to molding sites), and capacity
pooling across molding facilities (moving molds among them). But Cross didnt meet one of the
most important requirements for an agile supply chain: low inventory level. When Crocs
performance is compared against peers, inventory rotation was very poor, as is shown in Table 27.

Table 27, Crocs 2007: Financial ratios compared with peers
Source: (Hoyt 2007)


A quick view to financial statements at the end of 2007 shows 260 days of inventory ($248 MM
inventory for $349 MM of COGS), this situation was very risky, but was underestimated by the
management, according to 2007 annual report: Our inventories increased to $248.4 million at
December 31, 2007 from $86.2 million as of December 31, 2006. During the quarter ended
December 31, 2007, we increased our inventory positions in order to meet anticipated demand for
the six months ending June 30, 2008 and, at the same time, made available production capacity for
new product lines for delivery in the quarters ending March 31, 2008 and June 30, 2008 One year
later, in 2008, Crocs made an inventory write-off as consequence of a wrong execution of the
supply chain strategy. It was reported in his 2008 annual report. Our write-down of inventories
relates to certain products that were or are going to be discontinued of $76.3 million, including
core products in colors that have experienced substantial declines in consumer demand.
Financial ratio Crocs
Dockers
outdoor
Nike Timberland
Industry
Median
Gross Profir Margin 56,5% 46,4% 43,7% 47,3% 24,5%
Return on invested capital 51,1% 15,9% 18,4% 19,0% 4,7%
Inventory turnover 3,5 5,0 4,3 4,7 5,6
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
73

Table 28, Crocs 2007: gap analysis based on Reference SCGM
Source: Own elaboration.



9.1.4 Crocs 2007s: Conclusions
In an adaptable supply chain, as Crocs 2007, with a dual supply chain (efficient +agile),
inventory policy could be contradictories, because efficient supply chain requires higher inventories
level, while, agile supply chain requires low inventories level in order to avoid market mediation
cost (obsolescence), this contradiction could be solved, assuring low inventory level for fashion
products and high inventory level for products less oriented to fashion.
As was explained previously, Crocs supply chain strategy was revolutionary for that moment,
but they failed in a key factor, an agile supply chain must maintain low inventories level in order to
Service Winners
Information sharing
for cost improvement
Collaborative
relationships
Agility to unpredictable
demand
Order accuracy (for
customization)
Solutions proposal
Service Qualifiers Implementation time
Product Winners Lowest cost Solutions proposal
Product Qualifiers
Low middle High
Low middle High
High middle Low
Long middle Short
High middle Low
Mainly dedicated middle Mainly General Purpose
Low middle High
Supply Chain Efficiency
Collaborative
relationships
Agile to unpredictable
demand
Postponment
Flexible to unpredic-
table events
Service Transactional oriented
Information sharing for
improvement
Information sharing for
fulfill demand
Order accuracy (for
customization)
No sharing information
Product
Quick manufac-
turability
Postponment Customization
Production
Short set-up times
and extra-capacity
Extra capacity after
divergence point
Assets flexibility /
Pooling
Sourcing Low total cost supplier
Collaborative
relationships
Agile response / Risk
management
OPP MTF MTS MTO ATO Configurable
Order size,
according to
Lowest transportation
cost
Replenishment needs
Lowest production
bath
Customer's needs Customer's needs
Order cycle Fixed Regular delivery Shortest Variable Flexible
Partnership Possible Required Not necessary Not necessary Improbable
Buffering
Inventory / Capacity
pooling
Inventory Strategy
High inventory level for
optimizing production
batches
High rotation to reduce
working capital
Common
components/
materials (pooling)
Inventory before
divergence point
Pooling for increasing
responsiveness
Personalization Improbable Improbable
Not necessary, but
possible
Not necessary, but
possible
Not necessary, but
highly possible
Product Segments Low Low - Medium Low-Medium High Undetermined
Process Flow
Tippically Continuous
line
Indifferent No a continuous line
Assembly after
divergence point
Indifferent
Batch Size
smallest possible
looking for lowest
obsolescence
Production Cycle Longest possible Shortest possible Shortest possible
Probably, Long lead
time
Shortest possible
Utilization rate Probably Low
OPP Desirable MTS Desirable MTS
Order size,
Order Cycle
Partnership It's possible Highly possible Non usual
Buffering
Inventory and multiple
sources of supply
Primary source of
supply
Ef f i c i ent
Cont i nuous
r epl eni shment
Agi l e LeAgi l e Fl ex i bl e
Perfect orders / Lowest transactional cost Delivery speed, Order accuracy
Product Features (innovation)
Product Performance U
n
i
q
u
e

V
a
l
u
e

p
r
o
p
o
s
a
l
It's important
Multiple sources of supply
P
r
o
d
u
c
t
P
r
o
d
u
c
t
i
o
n
Largest possible in order to increase
efficiency
smallest possible in order to
increase delivery speed
According to lowest transportation cost Smallest possible in order to reduce obsolesce risk
Fixed, looking for lowest transaction cost Shortest possible in order to increase delivery speed
S
u
p
p
l
y

C
h
a
i
n

F
r
a
m
e
w
o
r
k
Market Mediation Cost
Demand Uncertainty
Customers power
Cycle life
Cost sensitivity
Assets
Supply risk
S
U
p
p
l
y

C
h
a
i
n

P
r
o
f
i
l
e
F
o
c
u
s
Lowest cost at standard performance
High utilization rate
Agile response
S
e
r
v
i
c
e
Inventory, smallest as possible
Inventory before divergence point / Extra
capacity
Probably Very High Probably Medium-High
S
o
u
r
c
i
n
g
Desirable MTO for exclusive components/
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Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
74

avoid high market mediation cost. One year after the case was written Crocs did a write-off nearly
to $76 MM of obsolete products, which was originated by changes in customers preferences.
Crocs learned the lesson and in the following years, they switched to a low inventory strategy.
This case confirms that when a company has a hybrid strategy composed from two supply chains
(agile +efficient), is important to assure high utilization rates without increase inventories level,
especially in perishable products (as foods or fashion), where obsolescence is very high.
Crocss case is a good example about the importance of the alignment between business
framework and supply chain strategy, a very innovative supply chain strategy failed due to
incoherence between supply chain objectives (high inventories looking for production efficiency)
and demand behavior (short cycle products, fashion products).


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
75

9.2 Tamago-Ya of Japan: Delivering lunch boxes to your work

9.2.1 Excerpts from the case
Some excerpts from the case developed by Stanford University (Whang 2007):
By 2007, Tamago-ya was unique in that:
1) Tamago-ya produced and delivered high-quality lunch boxes at low price to office
workers in the Tokyo Metropolitan area.
2) It received orders at 9 a.m. until 10:30 a.m. every day, and delivered by noon..Tamago-ya
hardly ever missed a delivery deadline, although demand was large and fluctuated from day to day
(ranging between 60,000 to 75,000 deliveries).
3) Tamago-yas average loss ratio (the disposal ratio due to over-production or returns) was
only 0.06 percent... while the Japans industry average was 2 percent.
Tamago-ya offered only one menu per day. Each lunch box contained more than six items,
most of which were made from organic and natural ingredients. Although it served only one menu a
day, the menu changed daily.
Instead of disposable lunch boxes (US$0.25 each), Tamago-ya used reusable ones (US$4 each)
that could be used for up to one year. The overall cost of using reusable boxes was slightly higher
than that of disposable boxes, since it took up to nine hours a day to wash and clean all the lunch
boxes using specialized equipment and specially-treated water. But reusable boxes offered multiple
benefits to Tamago-ya.. Also, reusable boxes provided van drivers with more opportunities to talk
to customers as they collected boxes after the lunches were finished. Valuable customer feedback
could be obtained just after the meal
A typical delivery van could carry 200 to 250 industry standard boxes. Tamago-yas
compartmented box was slightly narrower but deeper than the standard design, with rounded-off
corners. The rounded corners made it easy to wash away any food stuck inside the boxes. Most
importantly, the design allowed a van to load 430 boxes without reducing the amount of food in the
box. This special design had improved profitability far beyond its break-even point, which was
estimated to be around 200 boxes per van.
Each Tamago-ya lunch box, complete with fooda COGS-to-price ratio of 53 percent. This
ratio was high relative to the industry average of less than 40 percent. This was primarily because
Tamago-ya used high-quality, and consequently expensive, ingredients. The company did not want
to compromise the quality and taste of its lunches, which it viewed as its primary competitive
advantage. Further. believed that the company should keep the net income at 5 percent (healthy
but not greedy) as a way of sharing the value with the community.
Tamago-yas primary customers were businesses or other groups in the Tokyo metropolitan
area. Usually, someone in the office gathered orders from all the individuals in the office and
placed one big order (e.g., 20 or 40 lunch boxes) on their behalf over the phone. The same person
received the lunch boxes, distributed to individuals, and gathered back empty boxes for a later
pickup between 1:30 p.m. and 2 p.m.
Tamago-yas basic sales criterion was to secure at least 10 lunch box orders per customer per
day. However, Tamago-ya did not require customers to commit to a minimum number of orders,
since it believed that flexibility in ordering is one of the most important drivers of customer
satisfaction.

Based in: Tamago-Ya of J apan: Delivering lunch boxes to your work. Stanford graduate school of
business. CASE: GS-60
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
76

Tamago-ya did not accept all potential customers. The company would accept a very small
customer whose average daily order size could have been less than 10. if the customer was in the
same building as existing customers, or if its office was located along an existing delivery route.
Tamago-ya might refuse to take orders . if its location was on the opposite side of the existing
van route and required time-consuming U-turns of delivery vans.
Every day, van drivers wrote a report including their own forecasts of the next days orders as
well as customer feedback on todays menu.The driver also asked for an estimate of the number
of orders the customer might have the next day.
their empirical studies showed that they received more orders on rainy days or very hot/cold
days since people did not want to go out... Largest orders arrived on a snowy day especially when
the previous nights weather forecast failed to predict it.. they received more orders just before
pay days or after national holidays.
Dual-response production: First, build a stock of lunches up to a low-end forecast of the
demand, and later, build more (if necessary) based on the up-to-date estimate as actual orders
arrive. Tamago-ya counted on five key suppliers who were both nimble and flexible. Tamago-ya
committed to the low-end forecasted quantity of ingredients on the previous day and also carried an
option to ask for more if necessary on the morning of production.
Time-phased prepositioning of stocks: Divide the entire market into two regions by distance
from the factory. Dispatch the first batch of vans early to the remotest region well before the order
closing hour, with each van carrying an estimated quantity of lunch boxes. After order receipts
were completed, dispatch the last batch carrying the exact amount of orders to the nearest region.
Transfer stocks across vans to fill any demand-supply gap within and across regions. Use standby
vans to adjust any remaining gaps.
Tamago-ya started with a forecast.about 85 percent of its point estimate to order
ingredients from its suppliers on the previous evening. After it started receiving orders, Tamago-ya
updated its database every 15 minutes and shared it with all parties including its five key suppliers.
These key suppliers, strategically located near Tamago-ya, were involved in the last-hour demand
fulfillment process. They brought ingredients to Tamago-ya every 15 minutes in response to the
updated orders
We want to keep inventory of perishable ingredients as small as possible. Although wholesalers
need a 2-3 percent markup, they manage inventories. The markup is smaller than the inventory cost
we would incur, and good relationships with wholesalers make it possible for us to place occasional
urgent orders.
Tamago-ya had its production facilities close to its suppliers not to its customers, so that it
had more flexibility in procurement in the case of unexpected demand. It also maintained relatively
small warehouses, since it believed larger warehouses tended to lead to larger inventories.
Tamago-ya only kept condiments (e.g., soy sauce) in stock for one week. All other fresh ingredients
were delivered on demand, and were discarded if left unused for the day.
In addition to other lunch box manufacturers, convenience store chains such as Seven Eleven
Japan were major competitors to Tamago-ya. Convenience stores had larger economies of
scale, which enabled them to sell a variety of lunch box menus at a low price (less than US$5).
However, convenience stores could not change menus frequently due to the inertia of its large
scale. Also, people rushed to convenience stores for lunch boxes during lunch time, which resulted
in long waiting lines and frequent stockouts.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
77

9.2.2 Tamago-Ya 2007s: Supply Chain Roadmap
TM

Based on case information, Figure 23 shows Supply Chain Roadmap for Tamago-Ya, in which
are defined several aspects about the situation at the cases time.


Figure 23, Tamago-ya 2007: Supply Chain Roadmap
Source: Own elaboration

Tamago-ya create a efficient supply chain, where the main competitive advantage was to
eliminate the market mediation cost, transforming the most difficult condition of the business
framework for the industry in his core competence. Market mediation cost was eliminated by the
implementation of a unique menu per day and collaborative demand planning, the first one,
reducing customers choices to two options: request or no request a delivery, and the uncertainty
associate to customers choice is solved by the collaborative planning performed by the trucks
drivers. All the other supply chain processes are oriented to reinforce these two competences, as
example of that: reusable boxes and a minimum order size per office, for to allow driver-customer
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
78

face to face contact and based on that a collaborative forecast, which is adjusted at the last moment
in order to assure a minimum market mediation cost. Tamago-ya achieve a high efficiency supply
chain, which allow to use high quality ingredients in order to offer a superior value to their
customers.
9.2.3 Tamago-ya 2007s: gap analysis based on Reference SCGM

Table 29,Tamago-ya 2007: gap analysis based on Reference SCGM
Source: Own elaboration.

Table 29 presents gap analysis compared to reference SCGM, where is shown a predominant
efficient supply chain, which complies with all the main requirements of these type of strategy:
Low cost, low market mediation cost, predictable demand (supported by a simple but effective
Service Winners
Information sharing
for cost improvement
Collaborative
relationships
Agility to unpredictable
demand
Order accuracy (for
customization)
Solutions proposal
Service Qualifiers Implementation time
Product Winners Lowest cost Solutions proposal
Product Qualifiers
Low middle High
Low middle High
High middle Low
Long middle Short
High middle Low
Mainly dedicated middle Mainly General Purpose
Low middle High
Supply Chain Eficciency
Collaborative
relationships
Agile to unpredictable
demand
Postponment
Flexible to unpredic-
table events
Service Transactional oriented
Information sharing for
improvement
Information sharing for
fulfill demand
Order accuracy (for
customization)
No sharing information
Product
Quick manufac-
turability
Postponment Customization
Production
Short set-up times
and extra-capacity
Extra capacity after
divergence point
Assets flexibility /
Pooling
Sourcing Low total cost supplier
Collaborative
relationships
Agile response / Risk
management
OPP MTF MTS MTO ATO Configurable
Order size,
according to
Lowest transportation
cost
Replenishment needs
Lowest production
bath
Customer's needs Customer's needs
Order cycle Fixed Regular delivery Shortest Variable Flexible
Partnership Possible Required Not necessary Not necessary Improbable
Buffering
Inventory / Capacity
pooling
Inventory Strategy
High inventory level for
optimizing production
batches
High rotation to reduce
working capital
Common
components/
materials (pooling)
Inventory before
divergence point
Pooling for increasing
responsiveness
Personalization Improbable Improbable
Not necessary, but
possible
Not necessary, but
possible
Not necessary, but
highly possible
Product Segments Low Low - Medium Low-Medium High Undetermined
Process Flow
Tippically Continuous
line
Indifferent No a continuous line
Assembly after
divergence point
Indifferent
Batch Size
smallest possible
looking for lowest
obsolescence
Production Cycle Longest possible Shortest possible Shortest possible
Probably, Long lead
time
Shortest possible
Utilization rate Probably Low
OPP Desirable MTS Desirable MTS
Order size,
Order Cycle
Partnership It's possible Highly possible Non usual
Buffering
Inventory and multiple
sources of supply
Primary source of
supply
Ef f i c i ent
Cont i nuous
r epl eni shment
Agi l e LeAgi l e Fl ex i bl e
Perfect orders / Lowest transactional cost Delivery speed, Order accuracy
Product Features (innovation)
Product Performance U
n
i
q
u
e

V
a
l
u
e

p
r
o
p
o
s
a
l
It's important
Multiple sources of supply
P
r
o
d
u
c
t
P
r
o
d
u
c
t
i
o
n
Largest possible in order to increase
efficiency
smallest possible in order to
increase delivery speed
According to lowest transportation cost Smallest possible in order to reduce obsolesce risk
Fixed, looking for lowest transaction cost Shortest possible in order to increase delivery speed
S
u
p
p
l
y

C
h
a
i
n

F
r
a
m
e
w
o
r
k
Market Mediation Cost
Demand Uncertainty
Customers power
Cycle life
Cost sensitivity
Assets
Supply risk
S
U
p
p
l
y

C
h
a
i
n

P
r
o
f
i
l
e
F
o
c
u
s
Lowest cost at standard performance
High utilization rate
Agile response
S
e
r
v
i
c
e
Inventory, smallest as possible
Inventory before divergence point / Extra
capacity
Probably Very High Probably Medium-High
S
o
u
r
c
i
n
g
Desirable MTO for exclusive components/
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
79

demand planning process), large production batches, strong partnership with suppliers, among
others.
9.2.4 Tamago-ya 2007s: Conclusions
As was explained previously, Tamago-ya complies with the main requirements of an efficient
supply chain, but, is so important to highlight the change of industrys condition, because in a
framework dominated by high market mediation cost (for both, loss sales or expired product), they
created a new value proposal, which is located among the most predominant market proposals (fast
food/home cooking restaurants or packaged food), giving the most valuables features of both: fresh
food in the case of fast food/home cooking restaurants and fast service, without waiting lines, in the
case of packaged foods.
Tamago-yas case is a example about the importance of the alignment between business
framework and supply chain strategy, a very pioneering supply chain strategy succeed based on a
coherent strategy, where the sources of misalignment are eliminated (demand uncertainty and high
market mediation cost) by an innovative approach.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
80

9.3 Toyota: Demand Chain Management, Scion experience

9.3.1 Excerpts from the case
Some excerpts from the case developed by Stanford University (Lee 2005):
In the late 1950s Toyotas production systems were improved, culminating in the establishment
of the Toyota Production System (TPS) by Taichi Ohno, a system that has become the basis for
highly efficient lean manufacturing in industries worldwide.
The ordering process operates in three planning cycles: monthly, weekly and daily.
(a) The monthly planning starts one month in advance of production, when they conducts market
analysis and order/sales planning to determine total production volume for the next month. Based
on this information, they produce a preliminary production plan for the next three months by series,
engine, body type, and major functions.
(b) Weekly Cycle: Every Tuesday, dealers place their weekly orders with Toyota in full car
specs, with the order for the first week of the month being placed seven working days before the
beginning of the month. Once orders are received, the Sales division makes adjustments between
the monthly plan and actual weekly orders.
(c) Daily Cycle: Up to three days prior to actual production, dealers can change the order spec
as part of the online system. No changes can be made in the number of cars ordered for each engine
type, but within engine type, colors and options can be changed for up to 20 percent. However,
Toyota does not guarantee that all changes will be met.
Toyota uses various means to temporarily adjust its production capacity; e.g., more shifts,
holiday work, changing the number of job processes for each worker, increasing the number of
workers, and higher line speed. Toyota also recognizes that frequent production capacity changes
can have an adverse effect on product quality.
In addition, dealers can swap or trade their stocks using a secondary market running on
Dealer Daily. A dealer in search of a specific car to sell has several options:
1. Check the pipeline in the coming month for allocated inventory via Dealer Daily.
2. If none, check the pipeline in the coming month for other dealers via Dealer Daily.
3. If none, the dealer can preference it in upcoming dealer allocation, which would increase
the probability of getting the product from the regions next dealer allocation.
4. If there is none in the regions order, the dealer can wait and submit a request in PPR2, which
takes 60 to 90 days. Such cases are very rare, constituting less than 1 percent of all orders.
Toyotas first attempt to target younger consumers was through the creation of the Genesis
group in 1999, which was largely a marketing function to launch the 2000 Celica, Echo, and MR2
Spyder, three new car models that were believed to have a good chance of attracting younger
customers. The lesson was that just marketing was not sufficient, and that an end to end initiative,
including product differentiation and different dealership experience, would be required to attract
the younger consumer group.
The Scion business would have some key distinctive elements:
Product: A customized product that stands out, with European feel and unique features that also
provide luxury. The goal is to build a premium small car that offers a lot of value for its relatively
low price.

Based in: Toyota: Demand Chain Management. Stanford graduate school of business. Case GD-42.
2005.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
81

Marketing: Customers are not influenced by mass marketing, but rather want to experience the
product personally and learn about it from their friends and family. Toyota has to allow consumers
to discover the product on their own terms, and spread the message through word-of-mouth and
authentic interactions.
Dealership experience: . They want the buying experience at the dealership to be much
simpler and shorter than the typical 4 to 5 hours buying process.
In June 2003, Toyota launched the Scion brand, with two models: xA and xB, in California.
Each model has about 40 different types of accessories that customers can choose from, versus
about 15 offered for a typical Toyota sedan. Customers can use the detailed information available
online or at the dealership to configure the car (color, transmission, exterior, interior, wheels, and
sound). Once they place an order with the dealer -the car built exactly to their specifications- will
be ready for pickup within 5 to 7 business days. Those who want the car faster and are willing to
compromise can choose a car from the dealers local inventory and have it ready overnight.
Other car manufacturers offer a high level of customization only for luxury cars, and then the
delivery time is usually much longer, especially when the cars are made overseas. For example, it
takes three months to get a custom-made BMW from Germany.
Production takes place in Japan. All features at the factory level, except for color and
transmission (automatic/manual), are standardized (except for side airbags for the xA). That way,
even though each car has an extensive spec, the assembly process remains simple.
From the factory the cars are delivered to a port pool in Japan, and then shipped to a U.S.
port total lead-time from the factory to the port in US is about three weeks.
Customization of the cars takes place either at the US port or at the dealership, based on
actual customer orders.... When an order is placed, the dealer will first check if he has in stock a
car with the right color and transmission. If the car is available in his local inventory, he will install
the ordered accessories and have it ready for the customer. If the car is available in the dealers
stock at the port, the Customization Center at the port will install the ordered accessories . If the
dealer doesnt have the desired car in stock, he can exchange inventory electronically with other
dealers . In that case, again, installation of the accessories will take place at the port. No matter
from which inventory the car is taken, it will be accessorized and available to the customer within 5
to 7 business days.. Most of the accessories are designed and manufactured in the U.S. To ensure
lean delivery, Toyota modified its business processes for Scion cars, including cutting down the
delivery time of parts to the Customization Center from two to one day, and priority-processing
Scion vehicles at the port.
In undersupply situations, as was the case with the xB, then cars are moved through the system
as fast as possible, with priority shipping and processing at the ports. In addition, the xB cars were
allocated to dealers in the port on the dock in Japan, to provide dealers with as much visibility to
their available stock by product. On the other hand, early demand for xA was overestimated by
50 percent. Consequently, production was shut down for four months. Excess inventory was stored
in Long Beach, with only limited quantity allocated to dealers to retain the 20 to 30 days of
supply.
The distribution system resembles a multi-echelon inventory network to address demand
uncertainties: a very flexible plant; a port pool in Japan; a port pool in Long Beach; and 10
percent discretionary pool that can be shifted between regions based on demand.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
82

To improve local customization, Toyota may design future Scion cars to be prewired and have
snap-on and -off accessories. This will simplify the installation of such accessories as DVDs and
will make local customization even more efficient, with higher quality and lower cost to customers.

9.3.2 Toyotas Scion: Supply Chain Roadmap
TM



Figure 24, Toyota Scion: Supply Chain Roadmap
Source: Own elaboration

Based on case information, Figure 24 shows Supply Chain Roadmap for Toyotas Scion, in
which are defined several aspects about the situation at the cases time.
Toyota Scions Supply Chain framework is characterized by a highly competitive industry,
where customers have a large number of options, which results into a highly unpredictable market.
Toyota developed a value proposal based on an innovative, fashion and unique product, with an
affordable cost for Y generation people. In order to support this value proposal, Toyota created an
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
83

efficient supply chain before divergence point, based on a MTF order penetration point, and they
developed a customization process, which must be done near to the market at the distributor site or
in the customization center, nearest to the market-. This is a Leagile supply chain, where an
efficient process is done before OPP and an agile process is performed after OPP.
9.3.3 Toyota Scion: gap analysis based on Reference SCGM

Table 30, Toyota Scion: gap analysis based on Reference SCGM
Source: Own elaboration.


Table 30 presents gap analysis compared to reference SCGM, where is shown a pure Leagile
supply chain, which complies with all the main requirements of these type of strategy: efficiency at
Service Winners
Information sharing
for cost improvement
Collaborative
relationships
Agility to unpredictable
demand
Order accuracy (for
customization)
Solutions proposal
Service Qualifiers Implementation time
Product Winners Lowest cost Solutions proposal
Product Qualifiers
Low middle High
Low middle High
High middle Low
Long middle Short
High middle Low
Mainly dedicated middle Mainly General Purpose
Low middle High
Supply Chain Efficiency
Collaborative
relationships
Agile to unpredictable
demand
Postponment
Flexible to unpredic-
table events
Service Transactional oriented
Information sharing for
improvement
Information sharing for
fulfill demand
Order accuracy (for
customization)
No sharing information
Product
Quick manufac-
turability
Postponment Customization
Production
Short set-up times
and extra-capacity
Extra capacity after
divergence point
Assets flexibility /
Pooling
Sourcing Low total cost supplier
Collaborative
relationships
Agile response / Risk
management
OPP MTF MTS MTO ATO Configurable
Order size,
according to
Lowest transportation
cost
Replenishment needs
Lowest production
bath
Customer's needs Customer's needs
Order cycle Fixed Regular delivery Shortest Variable Flexible
Partnership Possible Required Not necessary Not necessary Improbable
Buffering
Inventory / Capacity
pooling
Inventory Strategy
High inventory level for
optimizing production
batches
High rotation to reduce
working capital
Common
components/
materials (pooling)
Inventory before
divergence point
Pooling for increasing
responsiveness
Personalization Improbable Improbable
Not necessary, but
possible
Not necessary, but
possible
Not necessary, but
highly possible
Product Segments Low Low - Medium Low-Medium High Undetermined
Process Flow
Tippically Continuous
line
Indifferent No a continuous line
Assembly after
divergence point
Indifferent
Batch Size
smallest possible
looking for lowest
obsolescence
Production Cycle Longest possible Shortest possible Shortest possible
Probably, Long lead
time
Shortest possible
Utilization rate Probably Low
OPP Desirable MTS Desirable MTS
Order size,
Order Cycle
Partnership It's possible Highly possible Non usual
Buffering
Inventory and multiple
sources of supply
Primary source of
supply
Ef f i c i ent
Cont i nuous
r epl eni shment
Agi l e LeAgi l e Fl ex i bl e
Perfect orders / Lowest transactional cost Delivery speed, Order accuracy
Product Features (innovation)
Product Performance U
n
i
q
u
e

V
a
l
u
e

p
r
o
p
o
s
a
l
S
U
p
p
l
y

C
h
a
i
n

P
r
o
f
i
l
e
F
o
c
u
s
Lowest cost at standard performance
High utilization rate
Agile response
S
e
r
v
i
c
e
Inventory, smallest as possible
Inventory before divergence point / Extra
capacity
P
r
o
d
u
c
t
P
r
o
d
u
c
t
i
o
n
Largest possible in order to increase
efficiency
smallest possible in order to
increase delivery speed
Probably Very High Probably Medium-High
S
o
u
r
c
i
n
g
Desirable MTO for exclusive components/
S
u
p
p
l
y

C
h
a
i
n

F
r
a
m
e
w
o
r
k
Market Mediation Cost
Demand Uncertainty
Customers power
Cycle life
Cost sensitivity
Assets
Supply risk
Multiple sources of supply
According to lowest transportation cost Smallest possible in order to reduce obsolesce risk
Fixed, looking for lowest transaction cost Shortest possible in order to increase delivery speed
It's important
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
84

upstream processes, agility after OPP, highly customizable products, inventories concentrated
before OPP, among others.
9.3.4 Toyota Scion: Conclusions
As was explained previously, Toyota Scions Supply Chain complies with the main
requirements of a Leagile supply chain, where the OPP is managed in a perfect way: low product
variety before OPP, products designed to customization, an efficient supply chain upstream of OPP,
customization processes performed as nearest as possible to customers location (dealers site or
customization center) and inventory pooling among dealers.
Scion case is an example about the importance of the alignment between business framework
and supply chain strategy, where an agile supply chain at downstream processes, oriented to product
customization, is supported by a very efficient upstream supply chain.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
85

9.4 Wills Lifestyle in India
**

9.4.1 Excerpts from the case
Some excerpts from the case developed by the Kellogg School of Management (Chopra 2007):
.despite the companys efforts to increase flexibility, including a 2003initiative that brought
manufacturing in-house, production costs remained about US$1.1 per unit higher than those of
third-party manufacturers
ITC launched the Wills Lifestyle brand in an effort to capture this market in India in 2000. By
2003, however, the business faced multiple challenges. The buildup of unsold inventory equaled
about 60 percent of the annual sales turnover of that period, and a lack of popular stock keeping
units (SKUs) increased the frequency of lost sales. On-time in-full delivery (OTIF), an unimpressive
40 percent, often delayed the seasons launch... In addition, low sales volumes meant the Wills
Lifestyle management team was finding it difficult to retain garment vendors, forcing it to seek new
ones each season.
.the retail team constructed the product portfolio based on the number of options and
projected sales volume at each price point, also known as range architecture (RA).. Once the
range was approved, sales quantities were forecast for each product by consensus of the
management team and the sales head.. Garment quantities were constrained by the requirement
to order fabrics in minimum lot sizesnumbers determined by fabric millsthough customers
could pay a surcharge for lower quantities..manufacturing vendors (manufacturers) were
identified and charged with production for each product.. The chief criterion for vendor selection
was experience with international brands of high quality. Because the full range was to come to
market simultaneously, the entire volume had to be manufactured together in a small time window.
This requirement further increased the number of vendors, despite a low overall production
volume.. All finished goods were delivered to an ITC warehouse, from which they were shipped to
retail stores. The lead time for delivery of garments to the warehouse was about eight months after
the finalization of the style and quantity. The main constituents of the lead time were:
Fabric finalization and placement of the fabric order: 30 days
Delivery lead time for fabric: 60 to 90 days
Prototyping and manufacturing lead times: 60 to 90 days
Delivery lead time: 15 to 25 days (from vendors to stores via the warehouse)
Because of the two- to three-month lead time for fabric and the three- to four-month lead time
for manufacturing and delivery, a single manufacturing order was placed for the whole seasons
requirement. Most vendors produced large volumes at low cost, with minimum batch sizes ranging
from 2,000 to 3,000 pieces per style. The large minimum batch sizes of most garment vendors, in
contrast to the lower volume required by Wills, resulted in the entire seasons requirement being
produced at the seasons start, as vendors were reluctant to split already small volumes further.
ITC had a single warehouse in Delhi that received all garments and replenished all stores. The
national sales head. determined allocation of stock to stores. The allocation took into account the
sales turnover target of each store and region and balanced available stock. found that the rapid
expansion of stores during 2001 and 2002 created significant problems with its supply chain
performance. Large amounts of inventory became obsolete at the end of a season, and sales were
lost because popular products and sizes were out of stock.

**
Based in: Wills Lifestyle in India. Kellog School of management. Case Kel362. 2009
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
86

They uncovered several issues. The first was the difficulty of making accurate forecasts; given
the inherent unpredictability of demand for specific styles, forecast errors averaged 50 percent.
production volumes far lower than industry standards for garment manufacturing.. different
Wills function was responsible for each stage of the planning and forecasting process, and between-
function handoffs did not occur until all decisions within a given function had been made.
They conceived the idea of implementing just-in-time (JIT) manufacturing with the goal of
shifting the risk from finished goods inventory to fabric inventory and manufacturing capacity.
The project team studied the weaknesses in existing processes and concluded that a responsive
and flexible supply chain should be designed to enable several specific outcomes:
Rapid response to winning styles, reduction of financial risk associated with losers and
development and production of new styles using fabric left over from early losers
The team set a goal of increasing sales seasons from two (with five deliveries to stores) to six
(with more frequent deliveries to stores). This increase required the restructuring of manufacturing
and a reorganization of the entire supply chain for greater flexibility and responsiveness. While
these changes meant increased unit production costs, they were expected to reduce obsolescence
and lost sales significantly.
The team recommended the following major change...to improve flexibility and
responsiveness: Creation of concept-to-product cells, SKU reduction and the use of design
platforms, creation of manufacturing cells and demand-driven replenishment
The sourcing cycle was fundamentally changed from primarily forecast-driven to demand-
driven. Given a specific demand forecast, sales decided on the base lot order for each store to be
delivered at the beginning of the season. Then a pool stock quantity was added to the base stock
order for the initial production quantity. The pool stock consisted of seven days estimated sales to
buffer the production queuing, manufacturing, and delivery lead times. After the launch of the
product to market, new orders, which were based on actual sales figures from store managers,
drove the replenishment production plan for the week. The goal of production was to enable
replenishment on a weekly basis by generating replenishment orders for each store based on its
actual sales once the enterprise resource planning implementation was complete.
Chairman Y.C. Deveshwars vision was to create a world-class supply chain from fiber to
fashion and to make the division Indias leading fashion brand for ready-to-wear Western
clothing. To this end, a master facility in Gurgaon (near Delhi) was established to provide a
platform for research and development activities related to fabrics and washes and to facilitate the
prototyping of designs. Necessary product-focused capabilities included design, garment
construction, specifications, sourcing/manufacturing, and testing of all inputs.
In 2003 the team reconstructed the supply chain to be more responsive to customer demand
and reduce obsolete inventory and lost sales. While the effort succeeded in matching supply and
demand, internal costs of production continued to be higher than those of third parties, giving
management much to debate at the retreat and upon their return.
...an initial opening of the retail sector in India to foreign direct investment. The new rule
allowed retailers such as The Gap, Zara.to enters the Indian market with majority ownership.
Another major issue for LRBD was an analysis of its cost structure and decisions regarding how
best to use internal manufacturing capacity. While it was much more flexible and responsive than
third-party manufacturing, internal capacity was more expensive than third parties.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
87

9.4.2 Wills: Supply Chain Roadmap
TM



Figure 25, Wills: Supply Chain Roadmap
Source: Own elaboration

Based on case information, Figure 25 shows Supply Chain Roadmap for Wills, in which are
defined several aspects about the situation at the cases time. Supply Chain Roadmap
characterization is based on some assumptions:
- Retail stores (owned by Wills) are the customers.
- Suppliers perspective, understood as fabrics and raw materials sourcing is not include in the
analysis, due case doesnt include information about this portion of the supply chain.

Willss Supply Chain framework is characterized by typical features of fashion industry: High
market mediation cost, transformation processes outsourced and products with short life cycle.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
88

Wills defined a new approach to the business, moving from outsourced operations to owned
operations, in order to increase responsiveness and to reduce market mediation cost. Aiming for
that, they defined a J ust in Time -Agile- approach as the core of the supply chain strategy
9.4.3 Wills: gap analysis based on Reference SCGM

Table 31, Wills: gap analysis based on Reference SCGM
Source: Own elaboration.


Table 31 presents gap analysis compared to reference SCGM, where is shown an Agile supply
chain with a service perspective oriented to Continuous replenishment, which was defined by
Wills when they said The goal of production was to enable replenishment on a weekly basis by
generating replenishment orders for each store based on its actual sales.
Service Winners
Information sharing
for cost improvement
Collaborative
relationships
Agility to unpredictable
demand
Order accuracy (for
customization)
Solutions proposal
Service Qualifiers Implementation time
Product Winners Lowest cost Solutions proposal
Product Qualifiers
Low middle High
Low middle High
High middle Low
Long middle Short
High middle Low
Mainly dedicated middle Mainly General Purpose
Low middle High
Supply Chain Efficiency
Collaborative
relationships
Agile to unpredictable
demand
Postponment
Flexible to unpredic-
table events
Service Transactional oriented
Information sharing for
improvement
Information sharing for
fulfill demand
Order accuracy (for
customization)
No sharing information
Product
Quick manufac-
turability
Postponment Customization
Production
Short set-up times
and extra-capacity
Extra capacity after
divergence point
Assets flexibility /
Pooling
Sourcing Low total cost supplier
Collaborative
relationships
Agile response / Risk
management
OPP MTF MTS MTO ATO Configurable
Order size,
according to
Lowest transportation
cost
Replenishment needs
Lowest production
bath
Customer's needs Customer's needs
Order cycle Fixed Regular delivery Shortest Variable Flexible
Partnership Possible Required Not necessary Not necessary Improbable
Buffering
Inventory / Capacity
pooling
Inventory Strategy
High inventory level for
optimizing production
batches
High rotation to reduce
working capital
Common
components/
materials (pooling)
Inventory before
divergence point
Pooling for increasing
responsiveness
Personalization Improbable Improbable
Not necessary, but
possible
Not necessary, but
possible
Not necessary, but
highly possible
Product Segments Low Low - Medium Low-Medium High Undetermined
Process Flow
Tippically Continuous
line
Indifferent No a continuous line
Assembly after
divergence point
Indifferent
Batch Size
smallest possible
looking for lowest
obsolescence
Production Cycle Longest possible Shortest possible Shortest possible
Probably, Long lead
time
Shortest possible
Utilization rate Probably Low
OPP Desirable MTS Desirable MTS
Order size,
Order Cycle
Partnership It's possible Highly possible Non usual
Buffering
Inventory and multiple
sources of supply
Primary source of
supply
Ef f i c i ent
Cont i nuous
r epl eni shment
Agi l e LeAgi l e Fl ex i bl e
Perfect orders / Lowest transactional cost Delivery speed, Order accuracy
Product Features (innovation)
Product Performance U
n
i
q
u
e

V
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Lowest cost at standard performance
High utilization rate
Agile response
S
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Inventory, smallest as possible
Inventory before divergence point / Extra
capacity
P
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Largest possible in order to increase
efficiency
smallest possible in order to
increase delivery speed
Probably Very High Probably Medium-High
S
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g
Desirable MTO for exclusive components/
S
u
p
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n

F
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a
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w
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r
k
Market Mediation Cost
Demand Uncertainty
Customers power
Cycle life
Cost sensitivity
Assets
Supply risk
Multiple sources of supply
According to lowest transportation cost Smallest possible in order to reduce obsolesce risk
Fixed, looking for lowest transaction cost Shortest possible in order to increase delivery speed
It's important
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
89

9.4.4 Wills: Conclusions
The mixture of an agile supply chain with a service perspective oriented to continuous
replenishment creates a dichotomy, because a continuous replenishment requires stable demand
behavior in order to assure service without increasing costs associated to transformation processes.
In a highly unpredictable demand behavior, agility is a good choice, but it implies higher product
cost because assets utilization rate is lower in order to allow responsiveness, and it resulted in
higher cost than industry for Wills, which was one of the main complaint of Willss management.
The gap analysis of this case shows two main inconsistencies:
- Wills expected in an agile supply chain, both objectives: reduce market mediation cost
and product cost similar to outsourced operations (to efficient supply chains).
- Wills designed a continuous replenishment process in a supply chain with high
uncertainty in demand behavior.
Both inconsistencies are the root cause of the poor behavior of Wills at the early stages of the
introduction of his Agile Supply chain, and as a consequence of that, they expressed difficulties
in obtaining high levels of efficiency, as is explained in his annual reports in 2004 Effective
operating strategies enabled the business to shrink market respnse time resulting in a decrease in
the obsolescence levels of finished goods .. the business is engaged in addressing the challenge of
gearing up the supply chain to significantly higher scale of operations, later, in order to fill the
efficiency gap, they increased assets utilization rate based on higher volumes for exports market, as
is explained in his annual reports in 2005 In the area of apparel exports, your company made a
healthy beginning during the year, establishing relationships with key customers. The business is in
the process of enhancing its manufacturing capacities to take full advantage of the emerging growth
opportunities.
In addition to that, this case is a good opportunity to highlight the misunderstanding that remains
in several practitioners about Toyota Production System TPS- (Also miscalled J ust in Time),
because TPS is oriented to Leagility as was shown in previous case (See Scion case) more than
Agility, as was understood by Wills. Confusion lies in some tools (Kanban, one piece flow,
manufacturing cells, etc.) that were developed by TPS, which could be used in several supply
chain strategies, as Agile or Leagile.







Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
90

10. Own Case Analysis
10.1 Applying Supply Chain Roadmap
TM
in your own case
In order to apply Supply Chain Roadmap
TM
to real cases is necessary to develop the three
steps defined in the left side of the Figure 26, right side indicates the tools used in each step.


Figure 26, Steps to apply Supply Chain Roadmap
TM
method in a real case
Source: Own elaboration


Assessment guide is composed of three tools: (1) Framework Assessment, which is oriented to
evaluate business environment, (2) Profile Assessment, which is oriented to evaluate current supply
chain profile, and, (3) Focus Assessment, which is used to define the current focus of each supply
chain process, understanding focus as the driver of the management decisions at strategic, tactical
and operative levels.
Assessment could be done in two different approaches:
For large size companies, in a two stages approach, first stage at individual level, and later,
should be done a consensus assessment based on team discussion and agreement.
For small/medium size companies, in a single stage approach, where assessment is developed in
conjunction by a small group of people (1 to 3 people).
After that, supply chain roadmap is filled based on consensus assessment, and again, the result
is reviewed, evaluated and adjusted by the team.
Finally, Supply Chain Roadmap is compared against Reference SCGM, and a group
discussion should be done in order to find the most relevant gaps, and how they should be solved.
Supply Chain Roadmap
TM
method, is a guide about how to challenge discussions about
supply chain strategy based on a friendly method, but, quality of the results depends of the
representativeness of the team and the depth of the discussions done.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
91

Tools are presented in: Table 32 presents Framework assessment, Table 33 presents Profile
assessment, Table 34 presents Focus assessment, Figure 27 presents Supply Chain Roadmap
and Table 35 presents Reference SCGM.

Table 32, Framework assessment tool
Source: Own elaboration.











Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
92

Table 33, Profile assessment tool
Source: Own elaboration.












Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
93

Table 34, Focus assessment tool
Source: Own elaboration.









Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
94


Figure 27, Supply Chain Roadmap
TM
tool
Source: Own elaboration





Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
95

Table 35, Reference SCGM tool (Gap Analysis)
Source: Own elaboration.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
96

10.2 First case: FMCG Company
Company Omega (for confidentiality reasons its name has been changed) is a multinational
company with operations in several countries around the world, they compete in several categories
of fast moving consumer goods. Analysis is restricted to one of these categories (category B) in a
Latin American country.
10.2.1 Application of the method
Assessment was developed by a consensus among medium and top managers of several
functions as operations planning, distribution, sales, marketing and supply chain, tables 36 to 38
present results of the assessments.

Table 36, Supply Chain Profile Assessment, Omega Company, Category B
Source: Omega Company




Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
97

Table 37, Framework Assessment, Omega Company, Category B
Source: Omega Company


Table 38, Framework Assessment, Omega Company, Category B
Source: Omega Company

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
98

Based on assessment was developed Supply Chain Roadmap and gap analysis, which are
presented in Figure 28 and Table 39.


Figure 28, Category B, Omega Company under Supply Chain Roadmap
TM
.
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
99

Table 39, Category B, Omega Company gap analysis under reference SCGM.
Source: Own elaboration



Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
100

10.2.2 Gap analysis

Gap analysis shows:
- Omega supply chain is a predominant efficient supply chain, with some Leagile features,
especially at the end of month, where production plan after divergence point is adjusted
according to forecast inaccuracies.
- Main market driver is low cost, due to two main conditions: high customers power
(industrys capacity exceeds demand) and similar product features under consumer eyes.
- Brand awareness is an important qualifier in order to assure customer preference under
similar Qualifiers.
- While unique value proposal does not have a real Winner, market should be oriented
to low cost condition.
- Freights are an important cost driver, and they are affected by current service policies
(no minimum order size, no fixed order cycle).
- There are four conditions generating lower efficiencies: High number of SKUs, forecast
inaccuracy, variable order cycle, and no minimum order size policy. All of them are
factors affecting in a negative way the main driver of the market: Low cost.
Probably others companies are affected by the same conditions, but if some of the
competitors is able to adjust these conditions (assuming low cost as main market driver),
could affect current market status.

- Main recommendations are:
o Maintain efficiency oriented supply chain, in order to assure lowest cost.
o Adjust Unique value proposal in order to find a real Winner that could
move market in a different condition than Lowest cost.
o While there is not a real change in market driver (Lowest cost), its important to
adjust factors affecting efficiency:
Number of SKUs, in order to increase efficiency and to reduce forecast
inaccuracy.
Service policy, in order to assure better efficiency dispatches (FTL
policy, supported by fixed order cycle).

10.2.3 Managers Feedback
Method results were shared and discussed with Omegas Supply Chain Manager:

Q: What is your opinion about the method?
A: It is easy and fast. With the aim of assure method quality is so important to support
assessment stage with a previous training in order to unify concepts and definitions among
participants.
Note: Assessment stage for Omega required adjustment in the consensus stage because some
participants misinterpreted some concepts. As result of this, assessment for Alpha was supported
with a one hour introduction session, in order to assure understanding of questions and technical
concepts.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
101

Q: What is your opinion about the Supply Chain Roadmap graphic?
A: It is an understandable summary on one page of the factors of a supply chain.
I like it because it is a clear vision of the interaction between companys processes and market.
Initial explanation about roadmap components is required to understand it. It is important to place a
brief explanation that is each of the elements (profile, framework, unique value proposal).
Note: First version of Omegas Supply Chain Roadmap, hadnt explanations about the meaning
of each element, they were added in a second version (Fig 28), as a result of this comments.

Q: What is your opinion about the gap analysis stage and its recommendations?
A: Spectacular, is very simple and allows us to understand where we are and where we should
run the business. The results are clear, precise and confirm our perceptions about the adjustments
required by the business.

Q: How do you qualify easy to use of the method?
A: Assessment stage requires a leverage of participants, in order to assure similar understanding
of the question among all, but, method is easy and fast to use in its different stages.

Q: How do you qualify relevance of recommendations generated by the method?
A: As I explained before, results are clear and relevant for our business, and it is a confirmation
about our perceptions, which, obliges us to speed up the changes.

Q: Have you met any similar tool or method?
A: No, I think this is a unique method. I like to apply this method to the other companys
categories.

Note: Tables and figures of Omega case were updated in order to include the modifications
suggested by the case analysis and feedback.



Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
102

10.3 Second case: Manufacturer of raw materials for textile industry
Company Alpha (for confidentiality reasons its name has been changed) is a multinational
company headquartered in USA, with operations in some countries around the world, they are
focused in the manufacture of a very important raw material for textile industry. Analysis is
restricted to one of his factories located in a Latin American country.
Assessment was developed by General Manager, tables 40 to 42 present results of the
assessments.

Table 40, Supply Chain Profile Assessment, Alpha Company
Source: Alpha Company








Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
103

Table 41, Supply Chain Framework Assessment, Alpha Company
Source: Alpha Company


Table 42, Supply Chain Focus Assessment, Alpha Company
Source: Alpha Company

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
104

Based on assessment was developed Supply Chain Roadmap and gap analysis, which are
presented in Figure 29 and Table 43.


Figure 29, Alpha Company under Supply Chain Roadmap
TM
.
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
105

Table 43, Alpha Company, gap analysis under reference SCGM.
Source: Own elaboration




Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
106

Gap analysis shows:
- Alpha supply chain is an upstream efficient supply chain, at the downstream, both
product and service, are oriented to a continuous replenishment supply chain.
- Management is focused in an efficient supply chain.
- Unique value proposal is oriented to a continuous replenishment supply chain, but, they
are not focused in the two main drivers for customers: low working capital and no
minimum order size.
- Efficiency is required in order to assure competitive price, compared against
international suppliers (who are oriented to low cost).
- Customers are oriented to compare offers based on landed cost.
- Regular delivery and LTL order size are the most important features of the alphas
supply chain, due to support two of his winners: Low working capital and no minimum
order size (lower than FTL).
- Market is driven primarily by low cost and in a second importance level by low
working capital, due to the impact of both in the final cost of the products.
- Product quality (backed in technical support in site), supply stability (low risk) and low
working capital are important winners in order to assure customer preference against
imported products.
- Alphas supply chain is a continuous replenishment supply chain, but they are not using
collaborative relationships in a strategic way.

- Main recommendations are:
o Maintain efficiency oriented upstream supply chain, in order to assure a
minimum price gap against international competitors.
o Maintain Unique value proposal oriented to Product Quality and Low
working capital, which are real winners for customers.
o Increase tactical actions in order to deep collaborative relationships with
customers seeking to enhance low working capital and low risk supplier
features.
o Tactical actions should be oriented to enhance Low working capital by two
actions:
Reduce working capital
Increase delivery frequency and collaborative planning in order
to reduce customers inventory, inclusive, offering VMI
(vendor management inventory) programs to customers.
Increase working capital value perception
Estimate product total cost (landed cost +inventory handling +
inventory holding cost + financial cost), looking to make
relevant these costs to customers.





Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
107

10.3.3 Managers Feedback
Previous to Alphas evaluation Supply Chain Roadmap was improved and adjusted based on
Omegas feedback.
Method results were shared and discussed with Alphas General Manager:


Q: What is your opinion about the method?
A: This method helps to see the entire business picture and also helps to understand the impact
of internal processes, external forces in the market place and measure if the unique value proposal is
properly working the best way to accomplish goals. In summary, it creates a link with the business
strategy.

Q: What is your opinion about the Supply Chain Roadmap graphic?
A: Its a one snap shot picture that allows seeing all the forces together, very similar to what you
can get from a balanced scorecard tool, but focused in supply chain strategy. It also helps to
question how clear do we know, what we are, and what market are we competing in creating
connections Cause and effect. This graphic helps to detect where resources are not been used
worthy.

Q: What is your opinion about the gap analysis stage and its recommendations?
A: Gap analysis reflects what supply chain we are in, and helps to find opportunities, producing
recommendations and action plans that need to be addressed. Also, it brings new elements to cover.
In our case, we have used Gap analysis output in our annual strategic planning meeting adding
new action plans and recommendations in order to reformulate our supply chain strategy.

Q: How do you qualify easy to use of the method?
A: Method is very easy to apply (assessment) and very easy to understand (Roadmap and gap
analysis).

Q: How do you qualify relevance of recommendations generated by the method?
A: As we explained before, conclusions are very important and very relevant for us, and, based
on them we redefine our supply chain strategy in our annual strategic meeting.

Q: Have you met any similar tool or method?
A: We have not; this is the very first time.

10.4 Adjusting Supply Chain Roadmap
TM
method
After application of Supply Chain Roadmap in previous cases, and based on my own
perceptions and feedback from managers, is necessary to do some minor adjustments in method
described previously in numeral 10.1, which are shown in table 44.





Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
108

Table 44, Adjustments of the model.
Source: Own elaboration


Figure 30 shows Three-step method updated to adjustments made after cases feedback.



Figure 30, Three-step method for applying Supply Chain Roadmap
TM
.
Source: Own elaboration

As a result of my own feedback of the results of both cases and in order to facilitate gap analysis
was introduced a new factor into the supply chain profile, which is Workload leverage, this helps
to explain in an easy way differences of process cadence / timing among different kind of supply
chains and means the adaptation of the supply chain profile to the demand. Process cadence is
called by Germans as takt and by J apanese is kwon as Cycle time, and in its means the time
required for producing a single item, supposing a smoothed workload on the assets during a fixed
planning horizon.

Assessment
Previous traininginorder to unify terms
andconcepts
Short training(<1hour) inorder to unify
concepts andterms
Very clear andeasy to apply. Previous
explanationwas simple.
Supply Chain Roadmap
Requires explanationof the figure, after
explanation, is easy to understand
Small descriptioninto the figure of the
three sides (framework, profile and
proposal)
Very clear andsimple drawing.
Gap Analysis Color code of the mapis not clear
Code color for primary features, secondary
features andadjusments. Change of
graphic model.
Very clear andsimple drawing.
Less than4hours None Less than3hours
Relevance of results
Very relevant, confirms our previous
perceptions
None
Relevant, results were usedfor annual
strategic plan
Adjusments made
between both cases
Easy to
understand
Fast to apply
Omega Feedback Alpha Feedback Feature
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
109


Section 5: Model validation
This section pretends to show Supply Chain Roadmap
TM
method evolution, where are
explained the validity test used for assuring method quality and relevance. In addition to that, are
presented the projects conclusions.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
110

11. Model validation
11.1 Quality of research design
As was explained previously in section 4.4, Yin mentions four tests that are necessary for
determining the quality of a case research design:
Validity of the Construction: Questions if there is a relationship and/or subjective effect
between the manner in which the researcher has gathered the data sources and has
constructed the concepts s/he is trying to study. (Adams 2007).
Internal validity: Define causality relationships, where certain conditions are taken into
consideration, other conditions rule.
External validity: Define the domain in which the studys findings can be generalized.
Reliability: Demonstrate that the operations of a study can be repeated with the same
results.
Table 45 shows where are applied the recommend practices throughout the method development
in order to assure its quality.

Table 45, Method Validity and Reliability
Source: Own elaboration


The main elements that assure research quality are:
- In several sections of the research were used multiple sources of evidence, which were
analyzed in a parallel view in order to find the most relevant factors (pattern matching).
o Definition of framework factors and supply chain profile.
o Definition of Supply Chain Generic Models.
- As consequence of the previous analysis, were defined the reasons why some definitions
were made. (Chain of evidence combined with explanation building).
- Logic models are used in the definition of the Supply Chain Roadmap model and
reference SCGM.
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5. Supply Chain Strategy definition O
6.1 to 6.4 F5-9 Supply Chain Framework / Profile O O O
6.5 T7, F10 Supply Chain framework factors O O O O O
6.6 T9, F11-13 Supply Chain profile elements O O O O O
6.7-6.8 F14-16, T10 Unique value proposal O O O O
6.9-6.11 T11-T14 Supply Chain profile Quadrants O
6.12 F17-18, T15 Supply Chain Roadmap O O
7. T16-25, F19-20 Supply Chain Generic Models (SCGM) O O O
8. T26-T32 Reference Supply Chain Generic Models (SCGM O O O O
9. F22-25, T33-37 Case aplications O O
10. Own case O O O
Section
Validity
Reliability
Internal Construction
Topic
Figures (F) /
Tables (T)
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
111

- Meta-analysis in an iterative way, in order to adjust model under two perspectives,
easy understanding/application and applicability to several cases, which is explained in
section 11.2, due to its importance in assure iterative trial of the method proposed.
11.2 Meta-analysis or iterative triangulation
As we advanced in developing the method, some failures were revealed, which were leveled out
according to project progress, the most relevant of them are illustrated in sections 11.2.1 to 11.2.3.
11.2.1 Supply Chain Roadmap
TM
graphic model
Supply Chain Roadmap
TM
graphic model was developed after four previous prototypes, which
were abandoned due to their complexity. Previous prototypes are shown in Figures 31 to 34.
Prototype number 4, was selected as the graphic view for the supply chain roadmap, due to its
simplicity and easy understanding, which later evolved to the first version of 2S2P, the first
commercial name for the Supply Chain Roadmap.


Figure 31, Supply Chain Roadmap, prototype 1.
Source: Own elaboration


Figure 32, Supply Chain Roadmap, prototype 2.
Source: Own elaboration

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
112


Figure 33, Supply Chain Roadmap, prototype 3 Matrix-.
Source: Own elaboration




Figure 34, Supply Chain Roadmap, prototype 4 Cross-.
Source: Own elaboration

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
113

11.2.2 Framework factors and Profile elements
Supply Chain Roadmap
TM
Cross graphic model was adjusted after several versions, where the
main changes were related to the framework factors and profile elements that must be included into
the model. Previous versions are shown in Figures 35 to 38.

Figure 35 shows Supply Chain Roadmap under its first version, called at this moment 2S2P, and
where is visible a lower factors/elements quantity than in the final model.


Figure 35, Supply Chain Roadmap, first version
Source: Own elaboration












Technol ogical
Fact or s
Technol ogical
Fact or s Sour cing Fact or s
Fixed Asset s
Fact or s
Focus Pr ocess Fl ow
Cost Fact or s Cost Fact or s
Buf f er ing Buf f er ing
Or der Cycl e Pr oduct ion Cycl e
OPP Focus
Buf f er ing Pr oduct Segment s
Ser vice Qual if ier s Ser vice Winner s Pr oduct Winner s
Pr oduct
Qual if ier s
Or der Cycl e Or der Size Per sonal izat ion
Demand Fact or s
Cost Fact or s
OPP Focus Focus Diver gence point
Cost Fact or s
Technol ogical
Fact or s
Suppl y Chain 2S2P Pr of il e
Ser vice Pr oduct
Sourcing Pr ocess
SourcingView Process View
Customer's Service View Customer's Product View
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
114

Figure 36 shows Supply Chain Roadmap under its second version, where is introduced for first
time the name Supply Chain Roadmap. The main changes versus previous version were:
introduction of unique value proposal concept, customers power effect in business framework,
removal of divergence point due to its redundancy with other elements as OPP and introduction
of inventory strategy as key element of supply chain strategy.


Figure 36, Supply Chain Roadmap, second version
Source: Own elaboration











Sourci ng Process
Service Winners Product Winners
Supplier's Power
Technological Factors
Cost Factors
Servi ce Product
Buffering
Batch Size
Supply Risk
Uni que Val ue Proposal
Demand uncertainty
Service Qualifiers
Focus
Product Segments
OPP Focus
Order Cycle Order Size
Buffering Cost Factors
Technological Factors
Fixed Assets Factors
Technological Factors
Cost Factors Inventory Strategy
Personalization
Product Qualifiers
Customer's power
Cost Factors
Buffering
Order Cycle
OPP Focus Focus Process Flow
Production Cycle
Customers Vi ew: Servi ce Customers Vi ew: Product
Suppl y Chai n Framework
Supply Chain Roadmap
SM
Suppl i ersVi ew Internal Process Vi ew
Suppl y Chai n Profi l e
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
115

Figure 37 shows Supply Chain Roadmap under its third version, where is introduced a more
detailed view of the unique value proposal, in order to do a more friendly definition of this. In
addition to that, Cost factors related to service are divided in its two main components: Transport
and market mediation cost, and, Assets factors are divided in its two main components: utilization
rate and dedicated/general. All of these changes aiming for a easier understanding of the supply
chain strategy in a single view.

Figure 37, Supply Chain Roadmap, third version
Source: Own elaboration



Figure 38 shows Supply Chain Roadmap under its intermediate version, where are introduced
forms changes, moving name of the four elements of supply chain profile to the corners of the
central box.
Cash Flow (Inventories):
Agilityto demand
Transactional effort
Minimun order size
Deliveryspeed
Deliveryreliability
Other:
Buffering
Relative batch size Assets:
Dedicated/ Owned
Assets:
Utilization rate
Batch Size Production Cycle
Focus Process Flow
Process
Order Cycle
OPP Focus
Supply disruptions
risk
Product
My Unique Value Proposal
Focus Focus Inventory Strategy OPP
Productportfolio
Customized Products
Sourci ng
Order Cycle Order Size
Buffering
Servi ce
Other:
Service: Qualifiers/Winners/Non Value Product: Qualifiers/Winners/Non Value
Market mediation cost
Buffering
Product life cycle
Supplier' s cost
relevance in total cost
Customer' s power
Demand behavior
Transportation cost
Time to market
Price
Performance
Features
Manufaturing cost
relevance in total cost
Process flow
Relative batch size
Batch Size
Cost relevance in
customer' s business
Personalization
Product Segments
Supplier' s Power
Customers perspecti ve: Servi ce Customers perspecti ve: Product
Suppl y Chai n Framework
Supply Chain Roadmap
SM
Suppl i ers perspecti ve Transformati on process perspecti ve
Supply Chain Profile
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
116



Figure 38, Supply Chain Roadmap, intermediate version
Source: Own elaboration

In addition to that, are introduced substance changes, as:
- Make or Buy, definition of sourcing strategy as part of the supply chain strategy,
which was evidenced when method was applied to Crocs case, were sourcing strategy
was key factor of the company results.
- Utilization rate is an internal factor more than external factor, and it was causing
misunderstanding when the model was applied to Tamago-ya, because utilization rate
was critical for Tamago-ya strategy, but it was a non-critical factor for the market.
- Relative batch size was removed, due to it could be very changing from one industry
player to another one.
Minimunorder size Features
Transactional effort
My Unique Value Proposal
Demand behavior Service: Qualifiers/Winners/Non Value Product: Qualifiers/Winners/Non Value
Product life cycle
Deliveryreliability Price
Productportfolio
Agilityto demand Customized Products
Deliveryspeed Performance
Customer' s power CashFlow (Inventories): Time to market
Other: Other:
Product Cost relevance
in customer' s business
OPP Inventory Strategy
Service Focus Product Focus
Market mediation cost
Order Size Portfolio
Buffering Make or Buy
Order Cycle Personalization
Transportation cost Patnership
Buffering Buffering
Supplier' s cost
relevance in total cost
Manufaturing cost
relevance in total cost
Patnership Utilization rate
Order Cycle Process Flow
Batch Size Batch Size
Focus Focus
OPP Production Cycle
Sourcing complexity Technological Maturity Supply disruptions
risk
Supplier' s Power
Assets: Magnitude
of the increases in
capacity
Assets: Dedicated/
General Purpose
Customers perspecti ve: Servi ce Customers perspecti ve: Product
Suppl y Chai n Framework
Supply Chain Roadmap
SM
Suppl i ers perspecti ve Transformati on process perspecti ve
Suppl y Chai n Profi l e
Sourci ng Process
Servi ce Product
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
117

- Suppliers / Customers partnership was introduced as key element on the supply chain
strategy, which was evidenced in Tamago-ya case, where partnership in both sides was
key success factor.
- Sourcing complexity, understood as SKU numbers/ Suppliers number is inserted as a
factor that shows industry complexity in sourcing side. It was relevant, because from
one industry to another one, it changes supply chain focus and it could be source of
innovative strategies, as was seen in Crocs case, where Crocs changed industry rules,
moving from a complex sourcing industry to a supply chain strategy with lower
complexity.
All of these changes affected equally Supply Chain Generic Model Matrix, where the
same elements are presented but in a tabular view.


Figure 39, Supply Chain Roadmap, final version before Omegas case
Source: Own elaboration

Figure 39 shows Supply Chain Roadmap under its definitive version previous to Omegas
evaluation. Changes are related to visualization aspects, which were defined after the development
of the real own case, where was found understanding difficulties due its complexity. This version
was simplest, clearest and friendliest for understanding. However, after Omegas feedback, version
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
118

was updated in three main aspects: a brief description of each component (Profile, Framework and
unique value proposal) was included, design was improved in order to do clearest the three
components (Profile, Framework and unique value proposal).


Figure 40, Supply Chain Roadmap, final version after cases feedback
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
119

11.2.3 Gap analysis
Gap analysis is based on reference of Supply Chain Generic Models, which was updated
simultaneously with the changes of the Supply Chain Roadmap, as was explained previously, but,
in addition to that, in the development of the cases were found several difficulties to understand the
gap analysis, due to, the view of the reference SCGM was modified in several versions.


Table 46, Reference SCGM, first version
Source: Own elaboration






















Efficient Continuous replenishment Agile LeAgile Flexible
Predictable
Predictable and stable
demand
Unpredictable
Unpredictable w/ long supply
time
Very unpredictable demand
Normally High Oriented to collaboration Low-Medium Low Very Low
Winners
Information sharing for cost
improvement
Collaborative relationships
efficiency oriented, automated
transactions
Agility to unpredictable
demand
Order management for
customized products
Solutions proposal
Winners Lowest cost Product Features Product Features Customization Solutions proposal
Long life cycle Mainly long life cycle Short life cycle Mainly short life cycle
Very price sensitive Price not an issue
Price aware, but not highly
sensible
Very price sensitive No price sensitivity
Process Fixed Assets Dedicated Assets Dedicated Assets General purpose assets Dedicated Assets General purpose assets
Suppliers Supply risk Low risk of disruptions Low risk of disruptions
Prepared for high risk of
supply disruption
Prepared for high risk of
supply disruption
High risk of supply disruption
Efficiency Collaborative relationships Quick response Postponment
Flexible to unpredictable crisis
/ requirements
Service MTF MTS MTO ATO Configured for each case
Minimize cost Minimize cost Quick manufacturability Postponment Customization
Driven for production batches High rotation Pooling
Inventory before divergence
point
Pooling
High utilization rate High utilization rate
Assets flexibility, short set-up
times and extra-capacity
Extra capacity after
divergence point
Assets flexibility,
short set-up times
Longest possible Shortest possible Shortest possible Probably, Long lead time Shortest possible
Inventory Inventory
Inventory before divergence
point / Extra capacity /
Capacity pooling
Inventory before divergence
point / Extra capacity
Inventory / Capacity pooling
Low total cost supplier Collaborative relationships Agile response Agile response
Agile response / Risk
management
Multiple sources of supply Primary source of supply Multiple sources of supply Multiple sources of supply Mutliple sources of supply
Factors/ Elements
Service
Demand uncertainty
Customer's power
Unique
Value
Proposal
Product
Technological
Cost
S
u
p
p
l
y

C
h
a
i
n

P
r
o
f
i
l
e
Supply Chain Focus
OPP
Product
Focus
Sourcing
Focus
Buffering
Inventory Strategy
Process
Focus
Production Cycle
Buffering
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
120


Next version introduced signs in order to understand where or not apply the element/ factor in the
supply chain under analysis, as is shown in Table 47.


Table 47, Reference SCGM, second version
Source: Own elaboration



Efficient Continuous replenishment Agile LeAgile Flexible
Market mediation cost: Lowest
possible
Transportation cost could be
high
Market mediation cost: High
Transportation cost could be
high
High
Predictable Predictable and stable demand Unpredictable
Unpredictable w/ long supply
time
Veryunpredictable demand
NormallyHigh
Customer is oriented to
collaborative relationship
wherebycustomer's power
losess relevance
Low-Medium Low VeryLow
Winners
Information sharing for cost
improvement
Collaborative relationships
efficiencyoriented, automated
transactions
Agilityto unpredictable demand
Order management for
customized products
Solutions proposal
Qualifiers
Order fullfillment (Perfect
orders) / Lowest transactional
cost
Order fullfillment (Perfect
orders)
Deliveryspeed, Order accuracy
Agilityto unpredictable
requirements
Implementation time
Winners Lowest cost Product Features (innovation) Product Features (innovation) Product Features (innovation) Solutions proposal
Qualifiers Product Performance Product Performance Product Performance Product Performance Product Performance
Long life cycle Mainlylong life cycle Short life cycle Mainlyshort life cycle
According to specific industry's
characteristics
Veryprice sensitive Price not an issue
Price aware, but not highly
sensible
Veryprice sensitive No price sensitivity
Fixed Assets Mainlydedicated Assets Mainlydedicated Assets MainlyGeneral purpose assets Mainlydedicated Assets MainlyGeneral purpose assets
Mature Mature
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
Supplyrisk Low riskof disruptions Low riskof disruptions
Low or high riskof supply
disruption
Low or high riskof supply
disruption
High riskof supplydisruption
Eficciencyand lowest service
cost based on planning
Collaborative relationships for
continuous improvement
Quickresponse to
unpredictable supply/ demand
conditions
Postponment
Flexible to unpredictable crisis /
requirements
Little sharing of information /
Transactional oriented
Information sharing
Information sharing for fulfill
demand, order accuracy(for
customization)
Agility, Order accuracy(for
customization)
No sharing information
TipicallyMTF (make to forecast) TipicallyMTS (make to stock)
Make to order (order after
pospontment point)
TipicallyATO/BTO (assembly/
build to order)
Tipicallyconfigured accorded to
each case
According to lowest
transportation cost
According to replenishment
needs
Smallest possible in order to
reduce obsolete
According to customer's needs According to customer's needs
Fixed, looking for lowest
transaction cost
Regular delivery
Shortest possible in order to
avoid stockouts
Variable order cycle Flexible deliveryresponse
Parnership Possible Highlypossible No Not necessary, but possible Non usual
Finished product looking for
scale economies / Distribution
capacity
Inventory
Inventorybefore divergence
point / Inventorypooling /
Capacity
Inventorybefore divergence
point
Capacitypooling
Minimize cost at standard
performance
Minimize cost at standard
performance
Quickmanufacturability,
Postponment design (mass
customization) when it could be
possible
Postponment Customization
Required for optimizing
production batches, reduce
working capital w/o affect
product cost
High rotation to reduce working
capital
Common
components/materials (pooling),
Inventoryreconfiguration
(postponment)
Generic inventory
(Assy/configure/distribute)
Pooling for increasing
responsiveness
Improbable Improbable
Not necessary, but in some
cases could be possible
Not necessary, but possible
Not necessary, but highly
possible
Make or buy
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
Low Low - Medium Low-Medium High Undetermined
High utilization rate High utilization rate
Assets flexibility, short set-up
times and extra-capacity
Extra capacityafter divergence
point
Assets flexibility,
short set-up times
TippicallyContinuous line Indifferent No a continuous line Assemblyafter divergence point Indifferent
One/few in production cycle to
increase efficiencyw/o affect
working capital
Smallest in trade off with low
production cost
Smallest possible in order to
reduce obsolesce risk
Smallest possible in order to
increase deliveryspeed
Smallest possible in order to
increase deliveryspeed
Longest possible, in balance
with low inventory
Shortest in trade off with low
production cost
Shortest possible in order to
increase deliveryspeed
Probably, Long lead time
Shortest possible in order to
increase deliveryspeed
Utilization rate ProbablyHigh ProbablyHigh
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
Inventory, smallest as possible Inventory, smallest as possible
Inventorybefore divergence
point / Extra capacity/ Capacity
pooling
Inventorybefore divergence
point / Extra capacity
Inventory/ Capacitypooling
Low total cost supplier: Cost &
Quality
Collaborative relationships /
Information sharing
Agile response , Suppliers near
to assyfacility, Information
sharing
Agile response / Information
sharing
Agile response / Risk
management
Desirable MTS Desirable MTS
Desirable MTO for exclusive
components/materials
Desirable MTO for exclusive
components/materials
Desirable MTS for generic items
According to lowest
transportation cost
Oriented to reduce
transportation cost
Smallest possible in order to
reduce obsolesce risk
Smallest possible in order to
reduce obsolesce risk
Smallest possible in order to
reduce obsolesce risk
Fixed, looking for lowest
transaction cost
Oriented to reduce
manufacturing cost
Shortest possible in order to
increase deliveryspeed
Long lead time
Shortest possible in order to
increase deliveryspeed
Partnership It's important It's important It's possible Highlypossible Non usual
Inventory, smallest as possible
and multiple sources of supply
Primarysource of supply Multiple sources of supply Multiple sources of supply Mutliple sources of supply
Factors/ Elements
S
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l
y

C
h
a
i
n

F
r
a
m
e
w
o
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k
S
e
r
v
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Cost
Demand uncertainty
Customer's power
Unique
Value
Proposal
P
r
o
d
u
c
t
Technological
Cost
P
r
o
c
e
s
s
Technological
Cost
S
u
p
p
l
i
e
r
s
Supplier's power
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
According to specific industry's
characteristics
Sourcing complexity
Cost
According to specific industry's
characteristics
S
u
p
p
l
y

C
h
a
i
n

P
r
o
f
i
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e
Supply Chain Focus
S
e
r
v
i
c
e
Focus
OPP
Order Size
Order Cycle
Buffering
P
r
o
d
u
c
t
Focus
InventoryStrategy
Personalization
Product Segments
P
r
o
c
e
s
s
Focus
Process Flow
Batch Size
Production Cycle
Buffering
S
o
u
r
c
i
n
g
Focus
OPP
Order Size
Order Cycle
Buffering
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
121

Second version improved too little versus previous version, due to that, it was made a full change of
the view of Reference SCGM, in a cleanest and most friendly view as is shown in Table 48.

Table 48, Reference SCGM, version before own cases application
Source: Own elaboration








Low middle High
Low middle High
High middle Low
Long middle Short
High middle Low
Mainly dedicated middle Mainly General Purpose
Low middle High
Service Winners
Information sharing
for cost improvement
Collaborative
relationships
Agility to unpredictable
demand
Order accuracy (for
customization)
Solutions proposal
Service Qualifiers Implementation time
Product Winners Lowest cost Solutions proposal
Product Qualifiers
Supply Chain Efficiency
Collaborative
relationships
Agile to unpredictable
demand
Postponment
Flexible to unpredic-
table events
Service Transactional oriented
Information sharing for
improvement
Information sharing for
fulfill demand
Order accuracy (for
customization)
No sharing information
Product
Quick manufac-
turability
Postponment Customization
Production
Short set-up times
and extra-capacity
Extra capacity after
divergence point
Assets flexibility /
Pooling
Sourcing Low total cost supplier
Collaborative
relationships
Agile response / Risk
management
OPP MTF MTS MTO ATO Configurable
Order size,
according to
Lowest transportation
cost
Replenishment needs
Lowest production
bath
Customer's needs Customer's needs
Order cycle Fixed Regular delivery Shortest Variable Flexible
Partnership Possible Required Not necessary Not necessary Improbable
Buffering
Inventory / Capacity
pooling
Inventory Strategy
High inventory level for
optimizing production
batches
High rotation to reduce
working capital
Common
components/
materials (pooling)
Inventory before
divergence point
Pooling for increasing
responsiveness
Personalization Improbable Improbable
Not necessary, but
possible
Not necessary, but
possible
Not necessary, but
highly possible
Product Segments Low Low - Medium Low-Medium High Undetermined
Process Flow
Tippically Continuous
line
Indifferent No a continuous line
Assembly after
divergence point
Indifferent
Batch Size
smallest possible
looking for lowest
obsolescence
Production Cycle Longest possible Shortest possible Shortest possible
Probably, Long lead
time
Shortest possible
Utilization rate Probably Low
OPP Desirable MTS Desirable MTS
Order size,
Order Cycle
Partnership It's possible Highly possible Non usual
Buffering
Inventory and multiple
sources of supply
Primary source of
supply
Ef f i c i ent
Cont i nuous
r epl eni shment
Agi l e LeAgi l e Fl ex i bl e
Assets
Supply risk
V
a
l
u
e

Perfect orders / Lowest transactional cost Delivery speed, Order accuracy
Product Features (innovation)
Product Performance
S
U
p
p
l
y

C
h
a
i
n

P
r
o
f
i
l
e
F
o
c
u
s
Lowest cost at standard performance
High utilization rate
Agile response
S
e
r
v
i
c
e
S
u
p
p
l
y

C
h
a
i
n

F
r
a
m
e
w
o
r
k
Market Mediation Cost
Demand Uncertainty
Customers power
Cycle life
Cost sensitivity
Inventory, smallest as possible
Inventory before divergence point / Extra
capacity
Probably Very High Probably Medium-High
S
o
u
r
c
i
n
g
Desirable MTO for exclusive components/
According to lowest transportation cost Smallest possible in order to reduce obsolesce risk
Fixed, looking for lowest transaction cost Shortest possible in order to increase delivery speed
It's important
Multiple sources of supply
P
r
o
d
u
c
t
P
r
o
d
u
c
t
i
o
n
Largest possible in order to increase
efficiency
smallest possible in order to
increase delivery speed
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
122

Final version (previous to cases application) introduced a distinction between Unique value
proposal and Supply Chain Framework in order to present a simplest and clearest distinction
among Framework, Profile and Value proposal, as is shown in Table 49.

Table 49, Reference SCGM, version before omega case application
Source: Own elaboration




After Omegas feedback, version was updated in its graphic interface in order to do clearest the
information and distinction among the generic models, as is presented in Figure 41.


Service Winners
Information sharing
for cost improvement
Collaborative
relationships
Agility to unpredictable
demand
Order accuracy (for
customization)
Solutions proposal
Service Qualifiers Implementation time
Product Winners Lowest cost Solutions proposal
Product Qualifiers
Low middle High
Low middle High
High middle Low
Long middle Short
High middle Low
Mainly dedicated middle Mainly General Purpose
Low middle High
Supply Chain Efficiency
Collaborative
relationships
Agile to unpredictable
demand
Postponment
Flexible to unpredic-
table events
Service Transactional oriented
Information sharing for
improvement
Information sharing for
fulfill demand
Order accuracy (for
customization)
No sharing information
Product
Quick manufac-
turability
Postponment Customization
Production
Short set-up times
and extra-capacity
Extra capacity after
divergence point
Assets flexibility /
Pooling
Sourcing Low total cost supplier
Collaborative
relationships
Agile response / Risk
management
OPP MTF MTS MTO ATO Configurable
Order size,
according to
Lowest transportation
cost
Replenishment needs
Lowest production
bath
Customer's needs Customer's needs
Order cycle Fixed Regular delivery Shortest Variable Flexible
Partnership Possible Required Not necessary Not necessary Improbable
Buffering
Inventory / Capacity
pooling
Inventory Strategy
High inventory level for
optimizing production
batches
High rotation to reduce
working capital
Common
components/
materials (pooling)
Inventory before
divergence point
Pooling for increasing
responsiveness
Personalization Improbable Improbable
Not necessary, but
possible
Not necessary, but
possible
Not necessary, but
highly possible
Product Segments Low Low - Medium Low-Medium High Undetermined
Process Flow
Tippically Continuous
line
Indifferent No a continuous line
Assembly after
divergence point
Indifferent
Batch Size
smallest possible
looking for lowest
obsolescence
Production Cycle Longest possible Shortest possible Shortest possible
Probably, Long lead
time
Shortest possible
Utilization rate Probably Low
OPP Desirable MTS Desirable MTS
Order size,
Order Cycle
Partnership It's possible Highly possible Non usual
Buffering
Inventory and multiple
sources of supply
Primary source of
supply
Ef f i c i ent
Cont i nuous
Repl eni shment
Agi l e LeAgi l e Fl ex i bl e
Multiple sources of supply
S
u
p
p
l
y

C
h
a
i
n

F
r
a
m
e
w
o
r
k
U
n
i
q
u
e

V
a
l
u
e

P
r
o
p
o
s
a
l
According to lowest transportation cost Smallest possible in order to reduce obsolesce risk
Fixed, looking for lowest transaction cost Shortest possible in order to increase delivery speed
It's important
Market Mediation Cost
Demand Uncertainty
Customers power
Cycle life
Cost sensitivity
S
u
p
p
l
y

C
h
a
i
n

P
r
o
f
i
l
e
F
o
c
u
s
Lowest cost at standard performance
High utilization rate
Agile response
S
e
r
v
i
c
e
Inventory, smallest as possible
Inventory before divergence point / Extra
capacity
P
r
o
d
u
c
t
P
r
o
d
u
c
t
i
o
n
Largest possible in order to increase
efficiency
smallest possible in order to
increase delivery speed
Probably Very High Probably Medium-High
S
o
u
r
c
i
n
g
Desirable MTO for exclusive components/
Assets
Supply risk
Perfect orders / Lowest transactional cost Delivery speed, Order accuracy
Product Features (innovation)
Product Performance
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
123


Figure 41, Supply Chain Roadmap, final version after cases feedback
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
124


11.3 Own Case results
Own cases allowed us to find some conclusions about Supply Chain Roadmap method:
- Previous to the assessment is required to leverage people in some basic supply chain
concepts.
- Assessment stage required less than 1 hour for processing.
- Assessment consensus requires less than 11/2 -3 hours for discussion.
- Mapping /Gap analysis stages are no longer than 1 1/2 -3 hours.
- Gap analysis results are very focused and practical.

According to feedback received from managers of the companies where the model was applied,
Supply Chain Roadmap model meets its value promises:
- Short time for processing.
- Easy way for understanding supply chain strategies.
- Easy understanding of map, which is useful for training/deployment objectives.
- Gap analysis recommendations are relevant to business strategy.
11.4 Brand and Patent Pending
Actually Supply Chain Roadmap method has a Provisional Patent under the number
61530997 in the US patent and trademark office and is under Patent Pending status.
Supply Chain Roadmap brand is under registration number 85414829 in the US patent and
trademark office.
11.5 Future work
Although Supply Chain Roadmap was applied in six cases (four existing cases and two own
cases), future work should be oriented to apply method to several cases in order to evaluate its
performance in several business.

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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
125

12. Conclusions
Supported in cases analysis, feedback of managers of companies analyzed under model and
visitors in Poster session in MIT, main conclusions about Supply Chain Roadmap
TM
are:

- Method is easy and fast to apply, supported in the three-step methodology.
- Gap analysis recommendations are relevant for the business.
- Supply Chain Roadmap tool is friendly and easy of understanding, for both,
analysis and deployment within the organization.
- Gap analysis tool, provides an accurate understanding of the gaps when the supply
chain under analysis is compared against reference supply chain generic models.
- Assessment step requires a previous leverage of participants, about supply chain
concepts and terms.
- Gap analysis stage and conclusions elaboration requires a facilitator, trained in
supply chain models.
- Reference supply chain generic models and mixes among them, covered all the six
cases analyzed (two own developed and four from other authors).
- Supply Chain Roadmap
TM
fulfills the promise of to be a method for validating
the supply chain functional strategy, in which the needs of the productive sector are
satisfied in regards to aligning the theoretical concepts to business realities, concepts
that are understandable by people in different levels and with different training, and
ensuring ease in implementation and deployment.

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Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
126

Section 6: Model & Tools

Probably in your career, you have been challenged by a big question ... What is the best supply
chain strategy for my business?
And maybe, you also have bumped into the same difficulties faced by many companies ... It is
very difficult to define the right criteria to select and deploy the most appropriate supply chain
strategy for your company.
This is precisely the value proposition of "Supply Chain Roadmap", a three-step method for
understanding, mapping and redesign of your supply chain strategy, assuring linkage with business
strategy by understanding market forces and companys competitive positioning.




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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
127

13. Introduction to Supply Chain Roadmap guide
13.1 Several approaches to business strategy
There are different approaches about the strategy, some of them focused on the competitive
positioning based on the understanding of power of external forces governing competition in an
industry, as Porters approach, which is classified in the positioning based view model PBV-.
Others focused on competences and capabilities of the organization, as Resources-based view -
RBV- approach, where company capabilities are intangibles as reputation, know how, culture,
innovation process, among others, are capabilities very hard to imitate for competitors, and based
on them, companies could create competitive advantage.
A newest oncoming about collaborative relationships and networking as a basis for business
strategy has been introduced in more recent years, where synergy among partners in the value
network could create competitive advantage that is inimitable for other value networks.
13.2 Supply Chain Roadmap approach
Supply Chain Roadmap is positioned in the middle of positioning-based view and resource-
based view approaches and defines an additional element as a result of the interaction among
external forces an internal capabilities: the unique value proposal, which constitutes in the
competitive positioning of the company in the marketplace, supporting strategy in the
understanding of external forces and internal capabilities. In addition to that, Supply Chain
Roadmap introduces collaborative relationships as a factor of the internal capabilities. Supply
Chain Roadmap approach considers than strategy is the result of the interaction of several factors
covered by the three approaches: RBV, PBV and collaborative strategy.


Figure 42, Several approaches about strategy
Source: Own elaboration

13.2.1 Supply Chain Framework
The environment of the business where an organization competes has multiple components, but
which of them influence the design and performance of the supply chain?
Porters model speaks of five forces that regulate competition in any industrial sector. Two of
these forces, the power of Customers and the power of supplier, are related to the natural members
of the supply chain of any company, reason why they must be considered as key elements in the
supply chain design, and in addition, we must go beyond what Porter proposes and introduce some
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
128

new elements inside these forces, which are the key to supply chain management, such as, product
and information flows, the relation of logistics costs on total costs and the variability of demand,
among others. Substitute products or services, the struggle among current competitors and the
entrance of new competitors, rather than independent forces, must be considered as components of
the Customers power and of the suppliers power, given that these are elements that modify the
power relationship and the desire for collaboration among the parties. This extensive vision
regarding the effect of suppliers and Customers leads us to the redefinition of the concept in a
broader manner and naming them as relations with Customers and relations with suppliers. On the
other hand, the other fundamental force in any supply chain are the technological and economic
components related to the transformation process (understood as the production process of the good
or service), since they affect structural decisions related to the production process and therefore
affect the design and performance of the supply chain.
13.2.2 Supply Chain Profile
The structure of a supply chain is comprised of three macro processes: Supply, Transformation
and Distribution. The latter process must involve a redefinition of the traditional vision, since the
growing trend of introducing value-added services that accompany the product in the companies
value proposal, has forced developing an infrastructure inside the organizations for the production
of products and for the delivery of value-added services, which leads us to reconsider the traditional
supply chain structure, modifying the traditional concept of order winners / qualifiers introduced
by Hill, to a concept that is more focused on the current value proposal, which we shall call
Product winners / qualifiers and Service winners / qualifiers. This approach intends to
differentiate the competencies and infrastructure that must be developed for each one of the aspects
of the value proposal and ensure that both the product and the service have the importance required
by the market in the organizations supply chain strategy.
Its important to clarify that some authors describe product as the combination of physical
goods and services accompanying and supporting commercial transaction, but, in order to
differentiate competences required under a manufacturing perspective (oriented to physical goods)
and competences required under a supply chain perspective, well be using Product concept as a
definition for Physical goods features and Service as a definition of Other features supporting
companys value proposal.

13.3 Supply Chain Roadmap model

Figure 43, Supply Chain Roadmap model
Source: own elaboration.

Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
129

Figure 43 presents the roadmap for the design of the supply chain, where the Activities related
to the flow of products, information and financial transactions interrelate with the competitive
environment, which are Supply Chain Framework and Supply Chain Profile respectively.
Based on the interaction between them is defined the unique value proposal. The complete model
is designated as Supply Chain Roadmap
TM
.
In few words, Supply Chain Roadmap method understands supply chain strategy as the
interaction of external forces, internal processes/capabilities and companys competitive
positioning.

13.4 When/Where to apply Supply Chain Roadmap?

Figure 44, Scenarios where is applicable Supply Chain Roadmap
Source: own elaboration.

In order to obtain better results, for large companies, Supply Chain Roadmap should be applied
in an independent way to each business unit or product category, in order to have more accurate
results, because of is very common to have several supply chains under a same company.
In addition to that, Supply Chain Roadmap should be applied in several business scenarios:

- For new business, the method supports base zero strategy development based on
the information of business framework and parallel view of Generic supply chain
models, a detailed understanding of both could support to define factors of the
strategy.
- For Ongoing business, Supply Chain Roadmap, supports the understanding of gaps
between supply chain strategy and business strategy, supported by Generic Supply
Chain Models. Is very important to highlight than gaps may be a competitive
advantage companies could be running business out of the standard parameters,
based on internal competences and it could be a practice very difficult to imitate for
the competitors- or gaps could be a failure than must be solved.
Aligning the supply chain to business strategy
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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
130

- In addition to previous practice, for ongoing business, Supply Chain Roadmap
could be used for understanding of competitors strategy and potential failures (gaps)
of their strategy than could be exploited in a favorable way.
- Supply Chain Roadmap, could be used for studying What if?, in order to be
prepared against hypothetical business situations. For example, if oil prices are too
high, transportation cost became in a relevant issue and supply chain strategy must to
have in consideration additional factors that could affect service policies and unique
value proposal.
14. Three-step method
Supply Chain Roadmap is applied in a three-step method:


Figure 45, Supply Chain Roadmap three step method.
Source: Own elaboration

Supply Chain Roadmap method pretends to support understanding about supply chain strategy
by a systematic and analytical approach, but results are highly dependent of team discussions, due
that in each stage of the method are several team discussions in order to allow full understanding of
scenario under review.

14.1 First step: Supply Chain Assessment
Before apply supply chain assessment is necessary to define assessments scope, in both:
scenario to evaluate and business unit range (geography, product category, group of customers,
etc.), as is explained in Figure 46.
Aligning the supply chain to business strategy
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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
131



Figure 46, Supply Chain Roadmap Assessment scope
Source: Own elaboration

After defining assessment scope, should be applied assessment, according to activities defined in
figure 47.

Figure 47, First step.
Source: Own elaboration

Assessment is applied using questionnaires detailed in figures 48 to 51.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
132


Figure 48, Assessment, questionnaire 1: Supply Chain Framework
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
133


Figure 49, Assessment, questionnaire 2: Supply Chain Profile
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
134


Figure 50, Assessment, questionnaire 3: Unique Value Proposal.
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
135


Figure 51, Assessment, questionnaire 4: Management focus.
Source: Own elaboration


14.2 Second step: Mapping
Mapping stage pretends to support understanding of supply chain scenario, by giving a graphical
single view of supply chain strategy, due that, there is an activity related to discuss Supply Chain
Roadmap in order to adjust topics that werent found in assessments step.

Figure 52, Second step
Source: Own elaboration

Mapping is applied using tool detailed in figure 53.

Aligning the supply chain to business strategy
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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
136


Figure 53, Mapping tool.
Source: Own elaboration



Aligning the supply chain to business strategy
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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
137

14.3 Third step: Gap analysis
Gap analysis stage pretends to find dominant behavior of supply chain, factors that are out of the
dominant behavior gaps-, discussion about gaps Are gaps a competitive advantage inimitable for
competitors? Or Are gaps failures of the scenarios that must be solved?- and finally, an updated
version of supply chain roadmap and action plan to fix or strengthen the gap, according if gap is a
competitive advantage or a models failure.
This is one of the most important steps of the Supply Chain Roadmap method and should be
focused in the understanding if the gaps are factors that create value and competitive advantage or if
them are in the wrong direction.


Figure 54, Third step.
Source: Own elaboration

Based on definitions of previous step, Gap analysis is applied using model detailed in figure 55,
dominant factors of each group are differentiated by an asterisk at the right side and they define
what the dominant supply chain is.
First, dominant behaviors are highlighted in gray color at Gap Analysis tool, as is shown in
Figure 56.
Second, dominant Supply Chain models are defined by the key dominant behaviors (with an
asterisk) and they are highlighted in blue color, as is shown in Figure 57.
Third, Dominant behaviors out of the dominant supply chain models are defined as the gaps,
as is shown in Figure 58. Gaps will be analyzed in a team discussion in order to define their
relevance.
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
138



Figure 55, Gap analysis tool or SCGM parallel view.
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
139



Figure 56, Gap analysis tool, Dominant Behaviors.
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
140



Figure 57, Gap analysis tool, Dominant Supply Chain models.
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
141



Figure 58, Gap analysis tool, Gaps definition.
Source: Own elaboration
Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
142

14.4 Key question for the Gap Analysis
Gap analysis is supported by the reference supply chain generic models, some practical criteria
(presented in section 8.9) and some tips presented in sections 14.4.1 to 14.4.2:
14.4.1 Supply Chain Framework and value proposal
When supply chain framework and value proposal are misaligned or when product value
proposal and service value proposal are misaligned (They have different dominant supply chains),
its important to evaluate if unique value proposal satisfies customers requirements. In this
situation is highly probably that companys market understanding is wrong.
14.4.2 Gap, a competitive advantage or a misalignment that must be fixed?
In order to define if a gap is a competitive advantage or a misalignment, there are some
questions that should be discussed by the team involved in the strategy discussion:
How is affected the value proposal by the gap?
If the answer to previous question is positive:
o Do the customers perceive the gap effects as relevant element of unique value
proposal?
Are there elements of supply chain profile affected by the gap?
What would happen if gap is solved? (under customers perspective and companys
performance perspective).
14.5 Update and deployment
After gap analysis is done, Map tool (Figure 53) is updated according to teams consensus, and it
is used as element for training and deployment purposes, closing the supply chain strategy
assessment, map and rethink cycle
.
Figure 59, Three-step methods cycle
Source: Own elaboration





Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
143

Supply Chain Strategy is a field in evolution, normally so complex and it is the most important
contribution of supply chain roadmap, a systematic and analytical approach to understand and
rethink supply chain strategy of industrial companies.
Supply Chain Roadmap pretends to change the way companies define supply chain strategy,
doing easier, simpler the process of understanding and definition of supply chain strategy for
everybody at any level and/or function at the organization.
A future, the method will be deployed for a massive use by a networking approach using
internet, looking for:
- Update of factors and supply chain generic models based on recommendations of
users.
- Sharing of results / cases using the model.

Supply Chain Roadmap changing the way companies define supply chain strategy!!.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
144

Acknowledgements
These project is the result of several years of previous work as a professional in supply chain and
as professor of these topics in several universities in Colombia, however, this work would not have
been possible without the support of a lot of friends and my family. I like to express my
acknowledgements to Sandra, Isabella and Simon, for their love and patience during those long
days and endless weekends, without them this work would havent be possible. To Cristina for her
advice, patience and support over many years. In La Sabana University, to J airo Guzman, for his
confidence and support during these years, to J airo Montoya and Luis Alejandro Rodriguez, for his
comments, suggestions and advice for improving this work. In MIT, to Edgar and his team for their
invaluable lessons about supply chain. Finally, a special gratitude to Luis and Alex, to allowed me
to apply Supply Chain Roadmap in their companies and its invaluable feedback.


Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
145

Appendix
A1. Definition of the terms of reference
With the purpose of unifying concepts used throughout the document, the following terms of
reference are defined:
Supply chain: The combination of processes, functions, activities, relationships and
flows throughout which the products, information and financial transactions move
within and among the organizations. (Adapted from Gattorna 2006)
Supply Chain Strategy: Process factors and connections among the processes
Throughout the supply chain, enhancing and optimizing efforts to create differentiated
value proposals in accordance with the factors that describe the business environment.
Supply chain generic models (MGCS, generic chains or generic Supply chains): A
specific approach for administrating the supply chain, in which processes, functions,
activities, relationships and flows are typified, with the purpose of developing specific
functional competencies in the supply chain. Functional competencies and their level of
development vary from one generic model to another.
Factors of the business environment: Elements surrounding the supply chain being
studied, affecting its design and/or performance.
Business strategy: The deliberate selection of a set of different activities for providing a
unique combination of value (Porter 1980).
Generic business strategy: Specific approach of the business strategy that allows the
creation of a long-life defendable positioning in order to surpass other organizations in
the same industry where one competes. Positioning can be a result of the individual
combination or application of: (1) leadership in costs, (2) differentiation, and (3)
Segmentation. (Adapted from Porter 1980)
Environment-Profile Matrix: The combination of Supply chain framework factors and
the supply chain profile, where the optimal performance of a specific supply chain
generic model is achieved.
Alignment matrix: Analysis of the environment-profile of a specific supply chain, with
the purpose of discovering the gaps with respect to its performance potential.
Supply chain profile: A set of variables that define a businesss supply chain strategy.
Supply chain environment: A set of supply chain framework factors that affect the
design and /or performance of a businesss supply chain.




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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
146

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Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
147

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Aligning the supply chain to business strategy
Hernn David Prez-Arroyave


Maestra en Gerencia de Operaciones, Universidad de La Sabana
Graduate Certificate in Global Logistics & Supply Chain Management, MIT
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