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MAnAging suPPliERs ovER TiME 189
Different market requirements

Operations producing one set of products and services may still be serving markets
with different needs. For example, Volvo Heavy Truck Corporation, selling spare parts,
found itself with a combination of poor service levels at the same time as its inventory
levels were growing at an unacceptable rate. Market analysis revealed that spare parts
were being used in two very different situations. Scheduled maintenance was predict-
able, with spare parts ordered well ahead of time. Emergency repairs, however, needed
instant availability and were far more difficult to predict. The fact that the parts are
identical is irrelevant – they are serving two different markets with different charac-
teristics. It is a simple idea and it applies in many industries. Chocolate manufacturers
have their stable lines but also produce ‘media-related’ specials, which may last only a
matter of months. Garment manufacturers produce classics, which change little over
the years, as well as fashions that last only one season.

Different resource objectives
The design and management of supply chains involves attempting to satisfy two broad
objectives – speed and cost. Speed means being responsive to customer demand within
the chain. Its virtue lies in the ability it gives the chain to keep customer service high,
even under conditions of fluctuating or unpredictable demand. Speed can also keep
costs down. Fast throughput in the supply chain means that products do not hang
around in stock and, therefore, the chain consumes little working capital. Other con-
tributors to keeping costs down include keeping the processes, especially manufactur-
ing processes, well utilised.

Achieving fit between market requirements and supply chain resource policies
Professor Marshall Fisher’s advice to companies reviewing their own supply chain poli-
cies is: first, to determine whether their products are functional or innovative; second,
to decide whether their supply chain is efficient or responsive; and third, to plot the
position of the nature of their demand and their supply chain priorities on a matrix
similar to that shown in Figure 5.15.

Reconfiguration
The most fundamental approach to managing network behaviour is to reconfigure the
network so as to change the scope of the activities performed in each operation and
the nature of the relationships between them. This could mean changing the trading
relationships between operations in the network, or merging the activities currently
performed in two or more separate operations into a single operation, or bypassing a
stage in a current supply network. When one or more operations are bypassed in a sup-
ply chain, the rather clumsy term ‘disintermediation’ is used. This need not mean that
those bypassed operations become totally redundant; it just means that for some final
customers they are not used. So, for example, when internet retailers started selling
goods to consumers through their websites, it ‘disintermediated’ retail stores. Yet retail
stores still exist; indeed, the internet has become an alternative channel for providing
service to customers.
Disintermediation is becoming a particularly significant issue because of the potential
of technology to bypass traditional elements in supply chains. For example, originally,
corporate banks serving large business clients borrowed money on the capital markets

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