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Every Supply Chain has more than one virtual supply chain in it.
Virtual supply chain indicated here is
neither a web enabled supply chain nor a concept that practitioners
cannot relate to. It has nothing to do with IT and it is not a theoretical
framework. It is experienced daily by managers involved in managing
supply chain, developing supply chain strategy and those who are planning
to compete in the market place through an efficient and effective supply
Consider a simple supply chain, where
- It has physical set of facilities - suppliers, plants, warehouses,
distributors, dealers etc.
- This physical supply chain caters to customers through a mix of
products and services.
- All customers are neither same nor are their requirements common.
- Each customer segment has different expectations from the supply
- This calls for a different set of stocking, ordering policies and
different planning and execution processes catering to the needs of
each customer segment.
- These are the virtual supply chains existing within the boundaries
of one physical supply chain.
However, at times, these virtual supply chains are not visible to operational
mangers. Hence, they keep on changing supply chain systems and processes.
As a result in spite of best efforts, optimization tools and highly
skilled people, the best out of supply chain is not extracted.
To extract the maximum value from your supply chain, it is imperative
to examine closely the existing processes and recognize the virtual
supply chains operating within.
Take a case of a cement company
with a single product.
The company has its own integrated manufacturing plant, which produces
cement at a steady rate. It has a fleet of vehicles for moving cement
from plant to the respective sales points. The company caters to diverse
customer segments that include Ready Mix Concrete manufacturers, Asbestos
sheet manufacturers, Homebuilders, Commercial contractors (office and
commercial complex builders), Project contractors (contractors engaged
in large projects like bridges), Small contractors (catering to home
builder segment) etc.
An RMC company is interested in uninterrupted supply of cement at a
lower cost and so is willing to accept the product in large quantities
and pack sizes. On the other hand, a commercial contractor requires
prompt delivery of cement to the site so that the labor force does not
sit idle. A homebuilder requires small quantities packaged in easy to
seal, move and store bags which remain free from moisture for a longer
duration. Thus the supply chain manager needs to design a different
set of policies for inventory, storage, logistics, order execution and
have a different metrics to measure performance for each of these customer
Thus for managing these Virtual Supply Chains existing within the physical
supply chain, same set of rules, policies, systems and tools cannot
Situation is not different in other industries.
In pharmaceutical industry, the products behave in a different
manner - they may be seasonal or scheme driven; having very stable or
highly volatile demand patterns. Most of the time all these products
are produced with the similar planning parameters, facilities and dispatch
A well designed supply chain caters to the
needs of different customer segments and at the same time manages common
facilities, management, suppliers and distribution channels.
There are two important steps in identifying the virtual supply chains
existing in your supply chain:
This helps to build a customer centric Supply Chain and to acquire the
much desired competitive edge.
- Understanding the End Customer requirements
either from Marketing or from a Supply Chain driven market research.
This will capture the needs of different customer segments from supply
- Supply Chain Assessment, where
the existing processes, performance levels are reviewed and supply
chain processes are redesigned for catering to the identified needs.
2000-10 DecisionCraft Inc.