Building the Right Supply Chain

There’s really no such thing as a “perfect supply chain” because supply chain

performance depends on so many factors. But there are clear differences between

a good supply chain and a bad one. A good supply chain will give your customers

what they want for a price that they’re willing to pay, while leaving a sufficient

profit margin for your company.

That definition may sound simple, but actually designing and managing a supply

chain that can profitably meet your customers’ expectations is tricky for a couple

of reasons. First, the real world is full of surprises that force you to choose

whether to spend more money to fill an order or take a chance on disappointing

your customers. Second, over time, your customers’ priorities will change, and

your business will evolve, so your supply chain will need to adapt to those

changes.

Four goals can help you evaluate how your supply chain should be designed:

capacity, responsiveness, flexibility, and cost. All these goals are important, but

many supply chain decisions will require you to make trade-offs between them.

To understand how important they are for your supply chain, it may help to rank

them. You could create a chart, like the one shown in Figure 3-2, that shows how

important each of these factors is for your customers. In this chart, the farther to

the right a star is, the more important that supply chain attribute is to your

customers. Prioritizing your supply chain goals in this way can help everyone

on your team understand what it will take for your supply chain to meet your

customers’ needs while enabling your company to make a profit

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