Sourcing & Supply Chain Coordination
Big idea
If strategy decides which supply chain to build, coordination is the work of making the chosen chain actually behave that way. Most chains underperform not because any single link is broken but because the links optimise locally and lose globally — distributors hoard inventory on promotions, manufacturers run long batches for unit-cost gains, retailers play shortage games. The Barilla case is the canonical illustration that Just-in-Time Distribution (JITD / VMI) plus information sharing is the structural fix — but it succeeds only when incentives, contracts and information flows are redesigned together. Prof. Hasmukh Gajjar's frame extends this to push vs pull, service supply chains (Ola/Uber/Zomato as platform aggregators that pull on demand), and the Zara integrated store-and-online model as the modern omnichannel reference.
Key concepts
- Why coordination fails. Misaligned incentives (sales-rep canvass-period targets), batch ordering, forward buying on promotions, shortage gaming. Every cause is a contract design choice, not a forecasting failure.
- Supply-chain coordination contracts. Buy-back / returns, revenue-sharing, quantity-flexibility, sales-rebate. They realign payoffs so each party's local optimum matches the chain's global optimum.
- Push vs pull vs push-pull boundary. Push = forecast-driven (manufacturing assembly lines), pull = demand-triggered (services, custom Dell laptops). The boundary location is a strategic choice that determines where inventory sits.
- JITD / VMI in practice. Supplier replenishes using downstream POS data. Success requires data sharing + trust + redesigned sales incentives — Barilla's Florence and Milan depot pilots proved it works, but two years of internal resistance proved it isn't easy.
- Service supply chains. Inherently pull (no inventory possible). Platform aggregators (Ola, Uber, Zomato, Swiggy) coordinate supply and demand dynamically; suppliers can multi-home across competing platforms, weakening platform lock-in.
- The Zara omnichannel model. Integrated store-and-online inventory pool, store-based fulfilment of online orders, twice-weekly replenishment — the operational expression of an agile, responsive chain.
- Service-level metrics. Fill rate (% of demand met from stock) vs cycle service level (% of cycles without stockout). They are not the same — know which one your contract specifies.
Self-check
A supplier offers a 5% volume discount on full-truckload orders. The retailer needs only half a truckload of working stock. The retailer orders a full truck anyway. Which classic bullwhip cause is this and what is the coordination fix?
- A. Order batching — fix is to change pricing structure (per-unit discount, not per-truck) so retailers order to actual need
- B. Demand-signal processing — fix is better forecasting software
- C. Shortage gaming — fix is rationing rules
- D. No bullwhip cause — the retailer captured a legitimate discount
Click the card to flip
Continue learning
- Pick one supplier or distributor relationship. Which incentive in the current contract is producing local-but-not-global optimisation?
- Calculate (or estimate) your fill rate vs cycle service level for one critical SKU. Are you contracting on the right one for your customer's actual experience?
- If you adopted VMI with one large customer, what data would you need to share, and which sales-incentive change would have to come with it?
📝 Going deeper. Cachon & Lariviere, "Supply Chain Coordination with Revenue-Sharing Contracts" (Management Science, 2005) is the classic on contract design. For omnichannel coordination, the Zara case (HBS 620-073) and Chopra's Designing the Distribution Network chapter (in Supply Chain Management, 7th ed.) are the working references.