A good supply chain should:
- meet needs and wants of customers
- be efficient
- Flexibility is the ability to respond to change
- To meet a sudden increase or decrease in demand
- Change an aspect of the product to meet changing consumer tastes
- Respond to erratic demand
- Flexibility can be improved through managing inventory and supply chain management
- Good relationship with suppliers to respond quickly to changing needs
- Just in time operations
- Technology to quickly change re-order levels
- A trend in increased flexibility is the ability of firms to use mass customisation
- Mass customisation is the ability to tailor goods made in bulk to meet the requirements of individual customers
Benefits and Difficulties of Mass Customisation
Four types of mass customisation
- Collaborative Customisation
- The business works closely with the customer to meet their precise needs
- Adaptive Customisation
- A standardised product which can be customised or adjusted by the customer.
- Transparent Customisation
- This type of customisation occurs when unique products are produced for each customer but these are not identified as mass customised products.
- Cosmetic customisation - where standard products are produced but marketed to different customers in different ways.
- Higher revenue
- Cost reductions
- Greater customer loyalty
- Competitive advantage
- Improved understanding of customer’s wants
- Improved workforce motivation
- Higher profile
Factors required for mass customisation
- A market in which customers value variety and individuality
- Quick responsiveness to market changes
- Ability to provide customisation (a wide variety of alternative versions of the same product).
- Scope for mass efficiency/economies of scale.
Drawbacks/Difficulties related to mass customisation
- Requirement for sophisticated information systems
- Greater expense in terms of IT, capital equipment and staff training
- Problems with rejected products
- Unsuitable supply chains
Speed of response and dependability
- Speed of response
- To meet customers needs within a set time period
- Ability to make changes to products to reflect changing consumer tastes
- This will only be achievable if inventory levels are low a d suppliers can change order sizes and components quickly
- A business operating a just in time system will be reliant on suppliers to deliver the right quantity and quality on time to ensure supply meets demand.
How to make supply meet demand
- Lots of stock/capacity
- Temporary Labour
- Produce to order
Practice exercise 1
- A business trying to use mass customisation might face issues relating to lead times, as suppliers may struggle to deliver products on time when changes have to be made on a per unit basis.
A strategic supplier is a supplier that is essential for the running of a business, whereas a commodity supplier is not completely essential.