1.3 Supply Chain Performance Flashcards
Competitive Strategy
- defines the set of customer needs a firm seeks to satisfy through its products and services.
→ Customer needs regarding costs, lead time, range of products or quality
Product Development Strategy
Specification of the portfolio of new products to develop.
Marketing and Sales Strategy
Specification of market position, pricing and promotion of the product
Supply Chain Strategy
determines:
- the nature of material procurement
- transportation of materials
- manufacture of product (the framework of the supply chain) or creation of service
- distribution of product
Supply Chain Strategy
determines:
- the nature of material procurement
- transportation of materials
- manufacture of product (the framework of the supply chain) or creation of service
- distribution of product.
Strategic Fit
Competitive and supply chain strategies have aligned goals
→ Adjusting the SC to meet the customer needs
→ Structure all processes and resources within the company as well as the SC to be able to execute strategies successfully
steps to achieve strategic fit
- Understanding the customer and supply chain uncertainty
- Understanding the supply chain capabilities
- Achieving strategic fit
Achieving strategic fit
▪ Align supply chain responsiveness and implied uncertainty (demand and supply capability)
▪ There is a SC strategy for every competitive situation. However, there is no universal solution.
▪ Possible need for a differentiated strategy depending on different
– Customer segments
– Product lifecycles
– Changes in the competitive situation
Understanding the customer and supply chain uncertainty
- Analysis of Potential Customer Needs
▪ Quantity of product needed in each lot
▪ Response time customers will tolerate
▪ Variety of products needed
▪ Required service level
▪ Price of the product
▪ Desired rate of innovation in the product
→ Homogenous customer needs are often the base for identifying different (demand) segments
Understanding the customer and supply chain uncertainty
- Implied Demand Uncertainty
Demand uncertainty to which the SC is exposed in order to meet customer needs.
Understanding the customer and supply chain uncertainty
- Correlation between Implied Demand Uncertainty and Other Attributes
Understanding the supply chain capabilities
- Supply Chain Responsiveness
Supply chain responsiveness is the ability to:
▪ Respond to wide ranges of quantities demanded
▪ Meet short lead times
▪ Handle a large variety of products
▪ Build highly innovative products
▪ Meet a very high service level
Understanding the supply chain capabilities
- Supply Chain Efficiency
Minimize a product’s manufacturing and transport costs
Understanding the supply chain capabilities
- Fig. Cost-Responsiveness Efficient Frontier
Achieving Strategic Fit
- Fig. Zone of strategic fit
Achieving strategic fit
- Comparison of Efficient and Responsive Supply Chains
Adjusting the Supply Chain for Strategic Fit
- Considering various customer segments
▪ Designing different supply chains (e.g., serving private and business customers)
▪ Compromise solution (e.g., service differentiation)
Adjusting the Supply Chain for Strategic Fit
- Accounting for the product life cycle
▪ Introduction and growth:
High uncertainty and variating demand, high contribution margin
→ Prioritizing product availability
▪ Maturity and Decline:
Predictable demand, low contribution margin
→ Prioritizing the price
Challenges in Achieving and Maintaining Strategic Fit
▪ Increasing product variety and shorter product lifecycles
▪ Globalization and increasing uncertainty
▪ Fragmentation of supply chain ownership
▪ Changing technology and business environment
▪ Increasing uncertainty within the political environment (trade, taxes, Brexit, COVID19,…)
▪ Environment and sustainability
→ Achieving and maintaining the strategic fit is increasingly difficult
→ However, overcoming these challenges potentially offers a competitive advantage
