Introduction and Overview

Abstract

The structure of a supply chain is fundamentally a reflection of a firm’s business model. For example, in the personal computer (PC) industry, the supply chain often takes a hybrid form: the components — processor, memory, hard disk, monitors, and other peripherals — are built to stock, whereas the end product, the “box”, is assembled to order. In such a system, the time it takes to assemble the end product is quite negligible (provided all the components are available), while the production / procurement leadtime for each component is more substantial. Hence, by keeping inventory at the component level, customer orders can be filled quickly. On the other hand, postponing the final assembly until order arrival provides a high level of flexibility, in terms of both product variety and risk pooling. Indeed, this hybrid of make-to-stock and assemble-to-order appears to be an ideal business model in providing both mass customization and quick response to order fulfillment.