Page 215 - Operations Strategy

190 CHAPTER 5 • PuRCHAsing And suPPly sTRATEgy

Figure 5.15 Matching the operations resources in the supply chain with market
requirements

INNOVATIVE Unpredictable Many changes High variety Price mark-downs Short lead-time High margin Mismatch Match

Market requirements FUNCTIONAL Predictable Few changes Low variety Price stable Long lead-time Low margin Match Mismatch

Low cost Fast response
High utilisation Low T/P time
Min. inventory Deployed inventory
Low-cost suppliers Flexible suppliers
EFFICIENT RESPONSIVE
PROCESSES PROCESSES

Operations resources
Source: Adapted from Fisher, M.C. (1997) ‘What is the right supply chain for your product?’ Harvard Business
Review, March–April, pp. 105–116.

at one rate of interest and lent it to their corporate clients at a higher rate of interest.
This ‘spread’ between the two interest rates was how they earned their revenue. Other
services that may have been provided to clients were used to justify, or even increase, this
spread. Now large corporations have direct access to those same capital markets, partly
because information technology makes it easy for them to do so. Corporate banking
now makes its revenue by guiding and facilitating this process, advising clients on the
best way to exploit capital markets. Corporate banks charge fees for these services. Dis-
intermediation has caused the whole business model of corporate banking to change.

Purchasing and supply chain risk

The increased significance of purchasing and supply strategies reflects the growing
importance of outsourcing and the reliance on global supply networks. We have already
discussed the numerous significant benefits associated with these trends (i.e. efficiency,
improved business focus, reduced capital investment, etc.) but, inevitably, increased
dependency on suppliers increases exposure to suppliers’ risk profiles. Consider the
attractions of building a strong relationship with a single source of supply. This might

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