The notion that organisations have supply chains that require active management to
maximise efficiency is well recognised. Indeed across a number of industries, including
the retail sector, supply chain efficiency has become a dominant corporate paradigm,
driving business models and at least in the short term delivering improved
profitability.
Waller (1998) discusses “customer driven” logistics as an increasingly accepted
concept, by suggesting that a customer approach will ensure supply chain efficiencies.
He cites Marks and Spencer in the UK as having “long been regarded as leaders in
this”. Recent events would suggest this as a fraught strategy. The notion that an
effective supply chain alone will ensure adequate customer satisfaction by reducing
costs and therefore prices is not necessarily an adequate model by itself (Childerhouse
and Towill, 2000). Sainsbury (the former UK market leader in food retailing) noted in
the late 1990s in an annual report the positive impact on overall profitability of its
increased logistics productivity and saw this as a key corporate strategy. This reflected
a business model dominated by a downstream-oriented supply chain, assuming a
relatively “steady state” amongst its customers. The problems that Marks and Spencer,
and to a degree Sainsbury, experienced during the 1990s were not because they
mismanaged the operational effectiveness of the business, but rather because they
missed the shift in customer expectations and did not appear to respond to those
expectations.
Recent (June, 2004) industry analyst comments suggest Marks and Spencer
continue to be supply chain driven, arguing that they have not responded to
competitive threats to core merchandise groups by new entrants and certainly have
ignored customer expectations for quality. It is also suggested that their response to
competition has been cost-led – by “looking at ways to buy products more cheaply”
Demand chain
effectiveness
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resulting in “taking away from the quality of the product and that takes away the
reason people used to buy from M&S”