Corporate Strategy and Supply Chain Network Design

Obviously Corporate Strategy should have an effect on the supply chain network design and its parameters. In their exploratory study Demeter, Gelei and Jenei (2006) show two examples of how supply chains are affected by different corporate strategies.

Setting

The authors analyzed the supply chains of two major car manufacturers with assemblies in Hungary. The focal companies were Audi and Suzuki. They conducted several interviews with the focal companies themselves and their best rated suppliers.

Results

From the interviews the following supply chain was extracted:

Audi / Suzuki Supply Chain (Demeter et al. (2006))

Strategies

Audi and Suzuki follow different strategies when deciding for Hungary as a production location. The major differences were: Audi came for the resource basis (skilled and cheap labor), Suzuki came for the european market and lower cost.
Audi decided to invests heavily in capacity (which was enlarged later) to produce for the world market, Suzuki only produces for the regional market (with step-by-step enlargements).

Effects

The authors find that the strategy affects supply chain configuration as well as supply chain practices.
Due to its high capacity strategy, it was possible for Audi to bring some of its suppliers to Hungary, resulting in the same sourcing pattern as elsewhere. Suzuki was not able to achieve this, instead had to insource, due to missing Integrators.
Supply chain practices can be divided into buyer-supplier relationships and the use of different management tools:
Due to the missing Integrators in the Suzuki supply chain, it was possible for them to have a much tighter control over their suppliers.
The strategies affected also the tools chosen (eg. directprice negotiations or the establishment of industrial parks by Suzuki)

Conclusion

As long as the corporate strategy is implemented effectively it must affect the supply chain as well, especially critical parameters as configuration and practices. For managers, this has to be kept in mind to forecast effects of strategic change.