Paste your essay in here..Supply Chain Management is becoming crucial for all types of companies: start-ups, Small / Medium-Sized Businesses and large companies. In fact, a study published by PricewaterhouseCoopers (PwC), late 2012, assumes that companies including the supply chain in their significant strategic vision and decisions, generate a 30% higher EBIT (Earnings Before Interests and Taxes) and maintain a 50% lower annual stock. In fact, the main finding in “the global supply chain survey” conducted by PwC was that firms with efficient supply chain strategies have the best financial results.
This literature review will discuss Marshall L Fisher theory on supply chain strategy and alignment. We will explain and criticize his approach using a different model such as Martin Christopher’s.
Review of Literature
Marshall L fisher strategy model:
Fisher considered that despite the technological breakthroughs in the supply chain management field, companies still endure huge losses mainly caused by miscommunication and miss-coordination between the supply chain actors. This problem leads to either overstocks or shortages. The trigger was the demand unpredictability and fluctuation mainly caused by the product nature ignorance. In fact, Fisher considered that there are two main distinct product natures: “they are either primarily functional or primarily innovative. And each category requires a distinctly different kind of supply chain” (fisher, 1997). Consequently, the root cause for the supply chain inefficiency is the mismatch between the supply chain strategy adopted and the product nature.
Product nature Characteristics
Functional products Fulfil the basic needs
Low profit margins
Stable and predictable demand
Frequent purchase
foods, beverages, toiletries etc.
Innovative products Short life cycle
Unpredictable demand
High uncertainty
Higher risk
High profit margins
High variety range
High-tech gadgets, fashion etc.
Table 1. The different product types
Furthermore, Fisher assumed that the supply chain is fulfilling two different key functions linked to the product:
The physical function, intrinsic to the supply chain, includes goods transportation, production, manufacturing and procurement.
The market mediation, extrinsic to the supply chain but equally important as the physical function, ensure that the right product is sent to the right market.
According to an analogic reasoning, Fisher assumed that the supply chain is not static, immutable and unchangeable. Consequently, based on the requirements of the product nature, one of the two functions seen above will be enhanced, resulting in the distinction of two different types of supply chains. For functional products a supply chain with an enhanced physical function is more suitable. In the other hand for innovative products a supply chain with an enhanced market mediation function fit more:
Supply chain strategy Characteristics
Physically efficient supply chain Suitable for functional products
Cost reduction
Maintain high quality
Reducing inventory levels
Higher turnover and utilization rate
Market responsive supply chain Suitable for innovative products
Fulfilling the demand as quick as possible
Flexibility
Maintaining high quality
Usage of buffer-stocks to minimize shortages
Invest aggressively to reduce leadtime
Table 2. the different supply chain strategies
Fisher assumed in his article “What is the Right Supply Chain for Your Product?” that products may be categorized under to families innovative and functional and the supply chain strategy must be aligned with the product nature therefore he explained that two different supply chain strategies may be adapted to reach business efficiency. Yet, Fisher identified an interesting new trend which is the mass customization strategy. This strategy is focused on the product customization requirement level and not its innovative or functional characteristics. It allows the creation of numerous ranges of the same product but at the price of a standardized one. In fact, the mass customization strategy explained by Fisher is the ancestor of the Assembly-To-Order (ATO) production strategy which is expensive, resource consuming and requires a huge stock levels.
Critics:
Fisher paper’s is very instructive coherent and follow a certain logical flow whereas after reading his work some concerns may appear. The first problem I detected through fisher’s work is the continuous and permanent imbalance of the triple constraint triangle.
Figure 1. Triple constraint triangle
Fisher suggested mainly two different supply chain strategies. The physical efficient strategy which pulls on cost and quality and ignores the time constraint, leading to higher lead time, consequently that will cause stock-outs. This strategy requires loyal customers to succeed. The generation Y born in the 21st century customers are less brand loyal they are looking for speed, fast service and availability. The second strategy is the market responsive supply chain which prioritize quality and time at the expense of higher costs. This strategy was designed to innovative products with short life cycle, unpredictable demand, harsh competition and high risk. Investing in such strategy considering the product nature is extremely risky for the company’s business. That is why Fisher paper is from my point of view absolutely old fashioned or even obsolete.
The second critic is the strategical orientation taken from the beginning by Fisher. Meaning he built and designed all his supply chain philosophy based on the product characteristics and that’s the mistake. Who purchases the product? Who owns the funds? Who pay the investment done by the company? it’s the costumer and he was absolutely ignored by Fisher. The customer is the key success factor for any business. Microsoft Zune was built better than the Apple iPod and made the most of the optimized Microsoft’s well established and optimized supply chain, but it was a huge market failure for the hi-tech American firm. The customer needs to be in the hurt of the supply chain strategy. “The success or failure of any business will be determined by the level of customer value that it delivers in its chosen market.” (Martin Christopher, 2016). In fact, Christopher considered the customer value as :
customer value=(Quality . Service)/(Cost .Time)
Martin Cristopher’s strategy is to design the supply chain based on the customer value optimization. The strategy needs to be “customer-centric” and not product-oriented meaning building the supply chain in order to fulfil the customers desires. Therefore, based on the customer needs and the product characteristics the supply chain is designed. Which provide it with more flexibility, capacity to change, adjust and adapt to new emerging factors. Consequently, more sustainable and viable. That is why the whole design process needs to be inversed: starting from customer backwards and not from the factory outwards.
Figure 2. Martin Christopher Supply Chain strategy approach
Conclusion:
As it is increasingly recognised that the supply chain strategy and alignment is a key success factor for the company success. Marshall Fisher developed his own product-oriented approach. It may be a good theory from the manufacturing perspective but not from business point of view that’s why Martin Christopher tried to suggest an opposed customer-oriented approach.