ßUS \ N ESS ST RATE G I ES

Particularly at the end of this chapter, the students should be able to:
discuss the components of supply chain management;
define and explain the importance of inventory managemen t;
contrast manufacturing from assembly;
examine the interrelationships of the sequential processes of the logistics circle;
assess the different popular competitive strategies;
distinguish the role of innovation as a competitive strategy; and
explain why companies opt to implement stability or retrenchment strategies.

Because of the volatility of the environment, business survival has become more challengirl
than ever.There is a greater demand for an honest review of functional activities and
developmentą a proactive mindset through various strategic modes of growth and
competitiveness. Realignment
enhancement, reinventing, strategizing, and refocusing have become more imperative to al)
organization. In this chapter, we will discuss value’ćhain analysis and the diÈerent types of
busines\
strategies. These include growth strategies, competitive strategies, life cycle strategies,
strategies, and turnaround strategies. stabiliy

Value Chain Analysis

As global
come markets widen,
from, how businesses
they have tohowpay finished
closer aßention to where their raw
are produced, products arța stored and
materiali
their end products users are really asking for.
transported, and whtt The main business
definition of any organization is tt
produce goods or render services,
and to achieve these set goals and objectives,
it engages in a
seîie
of activities. If an organization rofitable, it has to sell value to its b
be Watts to
worth aying for.ThU z the whole
concept of value chain
und
analysis
a general term that refers to a
sequence of interlinked
 uyers—value thatï
comes to the picture. Value chairit
in a specifi c indUstry engag i n. l ertakíngs that an
es t
io••k or procuremer!
of raw materials to th
s eventual end users or
n supply cha ïn consumers.The value ch6İf
gement. Here, value creation
is greatly emphasized.
•
Suppg Chain Management
Supp$ choinmonogement is a broad continuum of speclhc activltI»s rm/›loyed fry* * *^P^^Y'
h consists of the Allowing:
• purchasing or supply management which includes the sourcing, ordering, and inventory
storing of raw materials, parts, and servlces;
• production and operations, also known as manufacturing and assembly;
• logistics which is the efhcient warehousing, inventory tracking, crder entry,
managemenpdistd buGon and deiverytocutomev; and
• marketing and sales which includes promoting and selling to customers.

•Warehousing
Scheduling
Supply Management
Transportation
Delivery
Inventory Management

Promotion
Production/Operations
Manufacturing
Assembly

Figure 4.1 Supply Chain Management

Supply Mana9ement
5upPIy management is now a popular term used for purchasing which was formerly
termed as procurement. It is a key business function that is responsible for: (1) identifying
material and service needs; (2) locating and selecting suppliers; negotiating and closing
contracts; (3) acquiring the needed materials, services, and equipme.nt; (4) monitoring inventory
stock keeping units; and (5)
tracking supplier performance.

Inthis stage,itis importanttocreate”value”byestablishingand managing supplier

relationships, identifying strategic sources, accurately forecasting demand requirements, and
understanding inventory management. Thus, the goal of supply management is to obtain the
right materials by meeting quality requirements in the right quantity, for delivery at the right
time and the right place, from the right source, with the right service,’and at the right price. In
addition, supply management objectives include improving the organization‘s competitive
position, providing uninterrupted flow of materials, supplies, and services, keeping inventory
and loss at a minimum, maintaining and improving quality, finding best-in-class suppliers,
purchasing at lowest total costs, and achieving harmonious relations with suppliers.

Sourcing and Ordering

Following are the steps to take when an organization needs to source out raw materials or
parts.
1. Specify the need c\ear\y by writing down the details. Normally, the stock keeping unit
(SKU) is coded with brief but complete details like date, identification number, the
originating department, the account to be charged, complete description of the
raw
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