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Corporate Strategy and Its Connection To Supply Chain Management
Corporate Strategy and Its Connection To Supply Chain Management
Corporate Mission
The mission of the organization
defines its purpose, i.e., what it contributes to society states the rationale for its existence provides boundaries and focus defines the concept(s) around which the company can rally
Functional areas and business processes define their missions such that they support the overall corporate mission in a cooperative and synergistic manner.
Competitive Advantage through which the company market share is attracted Cost Leadership (Price; e.g., Wal-Mart, Southwest Airlines, Generic Drugs)
Differentiation (Quality; Uniqueness; e.g., Luxury cars, Fashion Industry, Brand Name Drugs)
The corporate strategy dictates the detailed strategies for each functional area (i.e., Operations, Finance, Marketing) but it is also affected by those areas.
Collectively, all these strategies seek to exploit (external) opportunities and (internal) strengths, neutralize (external) threats, and address (internal) weaknesses
Internal
Company politics and restructuring Modified relationships with customers and suppliers Product Life Cycle
Growth
Practical to change price or quality image Strengthen niche
Maturity
Poor time to change image, price or quality Competitive costs become critical Defend market position
Decline
Cost control critical
Sales Time
Frequent product and process changes Short production runs High production costs Limited models Attention to quality
Forecasting critical Products and process reliability Increase capacity Shift towards product focus Enhance distribution
Standardization minor product changes Optimum capacity Process stability Long production runs
Little product differentiation Overcapacity in the industry Reduce capacity and eventually prune line to eliminate items not returning good margin
Responsiveness Spectrum
Uncertain Demand
Implied Demand Uncertainty: The uncertainty that exists due to the portion of Demand that the supply chain is required to meet.
Cost Leadership
Differentiation
PC SUPPLY CHAINS
Customer Customer
PULL
Distribution Channels Virtual Integration
PULL
Dell
PUSH
Manufacturer
Suppliers
Suppliers
PUSH
Dell performance
The primary drivers for achieving strategic fit in Supply Chain Strategy (adapted from Chopra & Meindl)
Corporate Strategy
Facilities
Inventory
Transportation
Information
Market Segmentation
In general, centralization boosts efficiency, while decentralization boosts responsiveness (but not always) Primary decisions:
Location
Proximity to the customer Proximity to resources Access to markets (ability to circumvent quotas and tariffs) Infrastructure Operational costs and tax incentives
Capacity
Capital cost vs. responsiveness
Warehousing methodology
SKU-based storage Job lot storage Cross-docking
It exists because of the finiteness of the production and transportation rates (Littles Law: I=TH*T) Types of Inventory
Cycle Inventory: It is incurred in an effort to control the impact of fixed ordering and set-up costs. Safety Inventory: It is used to deal with the randomness in the experienced demand; it is set so that it meets the supply chain to meet some service level (i.e., control the probability that no stock-out will be experienced at any replenishment cycle). Seasonal Inventory: It is used to help the supply chain deal with predictable variability in demand. Opportunistic Inventory: Takes advantage of bargains.
Sourcing: Determine the set of suppliers / subcontractors to be used, and develop the contracts that will govern the relationship.
Production
Distribution
Consumption
Retrieval
Disposal
Disassembly/ Reprocessing