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A central question in designing and planning a supply chain strategy is how to match products, markets, and supply-chain systems. Fisher (1997) addresses the issue of matching products and supply-chains. He categorizes supply chain strategies as either the physically-efficient supply chain, sometimes referred to as a push strategy, or the market-responsive supply chain, sometimes called a pull strategy. The primary purpose of the push strategy is to supply forecasted demand efficiently at the lowest possible cost. Whereas, the purpose of the pull strategy is to respond quickly to actual demand in order to minimize stock outs, forced markdowns, and obsolete inventory. He proposed two different types of goods, namely, functional products and innovative products. Functional products satisfy basic needs, which do not change much over time, they have stable, predicable demand, long life cycles, and low profit margins. Examples include products that people buy in a wide range of retail outlets, such as diapers, milk, and tires. Innovative products are associated with fast product-innovation speed, unpredictable demand, and high profit margins. Typical examples in this category include fashion products, cosmetics, or high-tech products. He claimed that the right supply chain for the functional products is the push strategy, and the one for the innovative products is the pull strategy.
Simchi-Levi (2010) addressed the need for designing and managing multiple supply chains. He claimed that as a business diversifies, companies deliver a variety of both functional and innovative products, and thus, may need more than one supply chain. For instance, Dell has achieved significant success by transforming from a single supply chain to multiple supply chains. They used to employ a (single) market-responsive configure-to-order supply chain to sell personal computers through its online channel. Its build-to-order (BTO) approach allowed customers to configure individual personal computers (PCs) to their specifications. As the personal computer has become part of our everyday lives, the PC has become a commodity in the sense that there is very little differentiation between computers, and the primary factor that controls their sale is their price. In another word, most of the PCs have become functional products from innovative products, and thus, no longer fit the responsive supply chain. Dell transformed its supply chain into four supply chains, namely build-to-order, build-to-plan, build-to-stock and build-to-spec, considering product characteristics and customer characteristics. This transformation brought about the greater cost reduction and improvement of customer service level. It can be concluded that for products with different characteristics and for customers who have different needs, a one-size-fits-all supply chain will not work well.
Although companies such as Dell have achieved success by employing multiple supply chains, the efficient design of multiple supply chains is a major challenge for many companies, given a number of factors and interactions involved. An important factor is using synergies across different supply chains to reduce complexity and exploit economies of scale (Swaminathan, 2001). While customized supply chains for different product types match each customer’s needs better, delivering multiple products via shared supply chains can attain cost synergies. Thus, in addition to the customization of supply chains for product types, firms must also consider the number of chains to deliver their product portfolios. This standardization-customization trade-off addresses the need for more holistic global view of the entire supply chains.
Several papers develop mathematical models to overcome this complex nature of aligning the supply chain portfolio with the product portfolio. Landenberg et al. (2011) termed a supply chain portfolio problem (SPP). This model aims to find the best assignment of products to supply configurations in order to balance the product delivery costs and the supply chain portfolio complexity costs. This setting enables decision makers to analyze whether, how, and to what extent a firm might benefit from product and supply chain realignment.