Supply Chain Performance: Achieving Strategic Fit

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Supply Chain Performance Achieving Strategic Fit

• Learning objectives
• Describe how a company achieves strategic fit
  between its supply chain strategy and its
  competitive strategy
• Outline the steps in achieving strategic fit
  within the supply chain
• Explain why achieving strategic fit is critical
  to a companys overall success

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Competitive and Supply Chain Strategies

• Competitive strategy
• Defines the set of customer needs that a company
  seeks to satisfy through its products and
  services
• Product development strategy
• Specifies the portfolio of new products that a
  company will try to develop
• Marketing and sales strategy
• Specifies how the market will be segmented and
  the product positioned, priced and promoted
• Supply chain strategy
• Involves inventory, transportation, operating
  facilities and information flow decisions

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The Value Chain Linking Supply Chain and
Business Strategy
Business Strategy
New Product Strategy
Marketing Strategy
Supply Chain Strategy
New Product Development
Marketing and Sales
Operations
Distribution
Service
Finance, Accounting, Information Technology,
Human Resources
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Achieving Strategic Fit

• The competitive strategy and all functional
  strategies must fit together to form a
  coordinated overall strategy, with each
  functional strategy supporting other functional
  strategies
• The different functions in a company must
  appropriately structure their processes and
  resources to execute these strategies successfully

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How is Strategic Fit Achieved?

• Understanding the customer
• Understanding the supply chain
• Achieving strategic fit

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Achieving Strategic Fit

• 1. Understanding the Customer
• Service level
• Product variety
• Price
• Innovation
• Lot/order size
• Response/lead time
• Implied demand uncertainty
• is the uncertainty that exists due to the portion
  of demand that the supply chain is required to
  meet and the attributes the customer desires

Implied Demand Uncertainty
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Levels of Implied Demand Uncertainty
Customer Need
Price
Responsiveness
Low
High
Implied Demand Uncertainty
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Achieving Strategic Fit

• 2. Understanding the supply chain
• Supply chain responsiveness
• Respond to a wide range of quantities demanded
• Meet short lead times
• Handle a large variety of products
• Build highly innovative products
• Meet a high service level requirement
• Supply chain efficiency
• Cost of making and delivering a product to the
  customer

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Understanding the Supply Chain
Cost-Responsiveness Efficient Frontier
Responsiveness
High
Low
Cost
High
Low
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Understanding the Supply Chain
Cost-Responsiveness Efficient Frontier
Responsiveness
High
Low
Cost
High
Low
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Achieving Strategic Fit
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Other Issues Affecting Strategic Fit

• Multiple products and customer segments
• Independent supply chains
• Tailor the supply chain to meet the needs of each
  products demand
• Product life cycle
• Introductory phase
• Mature phase
• Competitive changes over time