Micro supply chains
Get closer to customers with decentralization, additive manufacturing, last mile advances and machine learning.
Demand for variety and customization is exploding, adding huge complexity and cost. To compete, companies must find ways to identify and deliver value to profitable customer segments at an appropriate cost.
Micro supply chains are finite, decentralized, agile ‘mini operating models’, with flexible supplier contracts and relationships, and manufacturing closer to the point of purchase. Most importantly, supply chain leaders should balance complexity and variety by understanding the sources of value from variety – like speed, service and cost – and optimizing their delivery systems to offer value, using standard processes.
It’s vital to identify market opportunities – or ‘profit pools’ – and align your operations to extract as much value as possible from the segments you serve.
Yatish Desai
Managing Director, KPMG Procurement & Operations Advisory
Because micro supply chains are largely independent, mini operating models, the way in which one customer segment is served should not impact other segments. Companies can run multiple standard work processes in parallel, reducing the costs of complexity that would typically be associated with multiple variations of products.
Three key steps to building a micro supply chain are:
- identify and understand the sources of value in the market – like speed, quality, price, convenience, service levels, product features and customization
- understand the drivers of cost along the supply chain, by measuring the cost of complexity within each segment including labor, infrastructure, supplier and logistics costs
- produce models of different value streams, in order to pinpoint the optimum balance of variety and cost, and to generate performance trade-offs.
To be competitive, future supply chains should aim to offer the variety that customers seek while achieving a lower cost-to-serve. By segmenting the market into ‘profit pools’, companies can gain greater value from the most attractive and fastest growing market segments.
An agenda for the future of supply chain
The biggest limitation for supply chains is no longer technologies and what they can do, but rather the imagination of the people who leverage them. As enterprises around the world are facing a perfect storm of change, today’s supply chain leaders must transform business models, organizational structures and operations to thrive today and in the future.
