Innovation Strategies: Time to modernize supply chain design

This is an excerpt of the original article. It was written for the January-February 2020 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2020

If the holidays at your household were like most, the gifts were chosen and wrapped with care, and then half were returned in the week after Christmas. Maybe more than half. After all, who among us hasn’t bought four shirts in a variety of sizes and colors with the intent of keeping one and returning three. And why not: Retailers and e-tailers alike have made returns seamless, easy and cheap. At least for the shopper. For the supply chains of the retailer, manufacturer or brand owner, returns are a once-neglected area that is growing into a major focus of supply chain managers who don’t want to see their organizations lose their shirt taking…

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In light of the dramatic changes that supply chains have undergone over the last 20 years, companies need new, innovative approaches to supply chain design that shift the focus from cost-minimization toward value creation. And the design process must mature to capture the complexity, volatility and uncertainty of the competitive environment in which modern supply chains operate.

These challenges can be met with the support of advanced methods that combine the power of analytical models with the implicit knowledge of expert human-decision makers. The new approach improves decision-making transparency, enriches design solutions and reflects the real-life challenges that companies now face.

A new environment

The field of supply chain design is rooted in conventions developed through studies carried out in the 1990s. These studies primarily focused on the physical configuration of supply chains, such as facility location and customer allocation decisions. Supply chains were designed to minimize costs such as those associated with facilities, warehousing and transportation. Also, in the conventional approach, the design of a sup¬ply chain is typically reviewed once every few years; these exercises are rarely linked with tactical planning decisions.

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