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Nowadays, there is an increase trend for globalization. The companies are trying to expand their production and distribution globally. This makes a huge challenge for every organization to follow up on the market changes. Thus it is very complex decision to choose the right production strategy for appropriate customer characteristics as predictability, and supplier behavior in terms of lead time. Interconnection between the Riga Wood upstream and downstream analyses can show hot to secure the downstream with available upstream. It is very vital to choose the right production strategy for all products Riga Wood is producing, to gain as much profit as possible.
Martin Christopher Generic Supply Chain Strategies
In our globalized manufacturing world, every company is analyzing and continuously searching for improvements for their production strategies. Thus, when the company is producing diversified products, diversified strategies can be applied. In this way, the company can apply the most appropriate strategy for each specific product (Christopher, 2005).
Long lead time
Plan and optimize
De-coupe through postponement
Short lead time
One way to define the most suitable strategy is by applying ”Martin Christopher generic supply chain strategies” portfolio. The company can already describe which strategy type they are using right now, which will be discussed later. When defining the supply and demand characteristics, it is possible to find out, which strategy could be the most useful for the current production.
As it can be seen in table xx, there are four different production strategies which can be used. In order to locate the most appropriate strategy type, Riga Wood has to analyze their supply characteristics and demand characteristics. These analyses will lead to the most appropriate strategy type, according to the current upstream and downstream behavior.
It is important to determine supplier characteristics, in regard of Riga Wood supplier lead time period, considering that Lignums production plant is running 24 hours 7 days a week. Riga Wood therefore has to define forestry lead time for birch supplies, in one hand as there are many small forestry units who are providing Riga Wood within birch supplies, company have to keep up with the situation in the forest what are facing these forestry units. Hence leverage and strategic supplier, like forestry’s, where lead time shortening should be the main focus for purchasing departments, otherwise where non-critical and bottleneck supplier e.g. glue and packing materials have a low impact on company’s profit (Krajlic P. , 1983).
On other hand, demand characteristics are even more vital to determine, the company has to define their market predictability. For defining the market as predictable or either unpredictable, the company has to evaluate customer behavior and ability of buying. For Riga Wood producing made to order only, unpredictable market should apply, but in the same time as Riga Wood are limited with factories production capacity, it also show predictability. Therefore further analyze is carried out, to see which strategies fits the best for Riga Wood.
Agile and Hybrid, an approach for unpredictable behavior
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To deal with unpredictable demand characteristics, ”Hybrid” and ”Agile” strategies are most suitable. Hybrid strategy can be complex, because it is acting as postponement of de-coupling point between made to stock (MTS) and MTO. Hence ”The goal of a hybrid strategy should be to build an agile response upon a LEAN platform by seeking to fallow LEAN principles up to the de-coupling point and agile practices after that point.” (Christopher, 2005) p.120.
A strategy type for unpredictable market with long lead time is ”Hybrid”. For this strategy type, MTO-based production can be used, offering company’s customers a wide variety of products. Hence in the same time in is approach to have a long lead time, what is most appropriate with current situation in Riga Wood. The current lead time is established from 8 till 12 weeks; hence lead time can change during the seasonality and customer demand variation. During the high customer’s demand and buffer capacity of production availability in Lignums factory, in other words demand overtakes production capability.
In other hand a strategy type for unpredictable market with short supplier lead time is ”Agile”. Also here MTO production can be applied. Thus this type of production required the ability of changing and adjusting very fast to market changes – in other words seen as quick response.
The area of MTO production requires fast changeover times; products are being specified and adjusted to customer needs and wants. Hence the entire production has to be agile as possible when dealing with MTO production. When considering Riga Wood position and situation in the market constrained by company values, one can therefore conclude that Riga Wood currently could stand into ”Hybrid” strategy as market could be unpredictable and lead time quit long, hence company could striving towards ”Agile”, to achieve reduced lead time and faster response to customer demand.
Lean and Kanban, an approach for predictable behavior
For predictable demand characteristics ”LEAN” and ”Kanban” strategies might apply. Lead time represents the main different between these forms of demand characteristics based supply chain strategies. This intuitively has a direct impact on inventory-levels, due to covering time when ordering, leading to increased possibility of efficiency.
Riga Wood in currently from other side is dealing with LEAN production. Furthermore doing continuous planning and optimizing, for their production, Riga Wood is trying to increase the efficiency in production and transportation. This strategy suits best for predictable markets and long supply lead time
Contrary with MTO production, MTS manufacturing are with few, short- striving, changeovers, this the changeover costs are staying in the same level or even being reduced. MTS production is based on producing the goods for future sale, leading to high volume sets and among the most commons production strategies. When increasing volume sets, it will reduce the production costs per item. Therefore there is no need for Riga Wood determined towards MTS bases production.
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