223 Reading: Supply Chain and Channel Strategy
Let’s look at an example in which the supply chain is key to a successful channel strategy that delivers the right value to customers.
Elli.com is an online retailer that sells customized wedding materials to brides. Elli specializes in paper products that are unique and beautifully designed, and it coordinates a complete look for a bride from her first wedding announcement to her final thank-you note.
In crafting its channel strategy, Elli focused on what it does best: providing a beautiful product to brides with an exceptional service experience. Elli is also a small company that did not want to use its funding to build capability in areas that others could do better and less expensively.
The table below shows the components of the channel strategy and the supply chain decisions the company made to provide unique value to its customers.
| Channel Strategy | Supply Chain Decision | |
|---|---|---|
| Channel Structure | Sell direct to consumer. Brides are nervous about making every detail perfect. If Elli manages all interactions with the brides, the team can provide meticulous, reassuring service, reducing risk to customer relationships. | Do not engage wholesale or retail partners. |
| Sourcing | Elli does not create designs. The company works with a network of designers who submit design concepts. The Elli creative team reviews the designs and offers to resell those they believe Elli brides will love. | Outsource design work. The network of designers must be large enough to ensure a continual stream of designs that match Elli’s quality standards. Designers provide designs to Elli for marketing and fulfillment. |
| Order Fulfillment | Every Elli order is a custom product that is printed or created for an individual bride. When a bride places an order, an Elli staff member personally confirms that order and creates a digital proof of the print item for the bride’s approval. | Elli does not outsource any communication with brides. |
| Manufacturing | Once the proof is approved, the staff member sends the order to an external print service that prints, packages, and ships the order to the bride. The Elli staff member monitors the timeline for printing and shipping and addresses questions from the printer. | Elli has contracted with a local printer. The print partner was carefully selected to ensure that the printing time, quality, and attention to detail matches Elli’s expectations for its customers. By using a local provider, the company can regularly check the quality of orders. |
| Shipping | Elli determined that a national shipping partner could get the orders to brides most quickly and efficiently. | Elli uses a single national shipper. The shipping information is integrated into Elli’s customer database to provide the staff with real-time tracking information on each order. |
| Issue Resolution | Because Elli owns the relationships with brides, designers, printers, and shippers, the company can resolve all issues from a single point of contact. | Elli team members own different supply chain relationships. The team regularly reviews the supply chain performance and shares perspectives on how the partnerships and performance can be improved. |
The Elli approach seems to be using a range of internal capabilities and external channel partners to create a customer experience that leaves brides happy. As you look at Elli’s approach, where is there risk in the distribution strategy? In which areas might issues arise as Elli grows?