Basic Strategies

There are three basic capacity strategies used by different organizations when they consider increased demand: lead capacity strategy, lag capacity strategy, and the match capacity strategy.

As the name suggests, the lead capacity strategy adds capacity before the demand actually materialises?

Now, at Flipkart, in the East Zone, one of our major tasks in optimizing the Supply Chain was identify those PIN codes where someone ordering in the non-large category would witness an expected delivery time of say, 7 days. Why was that? Because we didn’t have in-house capacities.?And depending on 3PL (Third party logistics) service providers meant we would have to live with their long TATs. The net results – we could not deliver a WOW customer experience – for sure, the journey wasn’t exciting

Now, wearing the Business hat, one would think establish capacities. However, the demand wasn’t established. There would be significant idling costs if demand did not follow capacity. And, for the financial model, how would one predict the incremental demand. So, if one wore the Finance hat, the decision wasn’t easy.?

However, for me, the philosophy, as I articulated in one of my previous posts “Business before Finance”, has always been to be an enabler for business. If growth comes, economies of scale with anyways justify costs.?

We took a leap of faith, created these capacities – and Phew !! what a journey it has been. While I cannot divulge the actual data, our decision was validated by the demand that followed.?

Our core belief was proven correct by customers and taking a cue from this, we could go ahead and establish capacities all the more aggressively.?

What have been your experiences?

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