STRATEGIC FIT

Strategic Fit Means that Both the Competitive

strategies and supply chain strategies have aligned goals.

It refers to the consistency between the customer

priorities that the competitive Strategy hope to satisfy and
the supply chain capabilities that the supply chain strategy
aims to build.
The Value Chain: Linking
Supply Chain and
Business Strategy
New Product Marketing
Strategy Strategy
Supply Chain Strategy

New Marketing
Product and Operations Distribution Service
Development Sales

Finance, Accounting, Information Technology, Human Resources

How to achieve Strategic Fit

 Understanding the customer and supply

chain uncertainty.
 Understanding the supply chain capabilities.
 Achieving Strategic Fit.
 Understanding the customer and supply chain
uncertainty
 The quantity of the product needed in each lot.
 The response time that the consumers are willing to
tolerate.
 The variety of products needed.
 The service level required.
 The price of the product.
 The desired rate of innovation in the product.

Implied demand uncertainty

 SUPPLY CHAINS
EFFICIENT VS. RESPONSIVE

• GOAL: LOWEST COST • QUICK RESPONSE

• PRODUCT:MAX. PERF. AT MIN
COST
• PRICING: LOWER PRICE AND
MARGIN
• MANU: HIGH EFFICIENCY
• INVENT: MIN. INVENTORY
• LEADTIME: REDUCE LEADTIME
• SUPPLIERS: COST/QUALITY
• TRANSPORTATION: COST
• ASSEMBE TO ORDER
• HIGHER PRICE AND
MARGINS
• FLEX. CAPACITY
• MAINTAIN BUFFER
• REDUCE EVEN WITH
HIGHER PRICE
• SPEED, FLEX., QUALITY
• QUICK& RESPONSIVIE
Understanding the supply chain
capabilities.

 There is a cost to achieving responsiveness

 Supply chain efficiency: cost of making and
delivering the product to the customer
 Increasing responsiveness results in higher
costs that lower efficiency
 Second step to achieving strategic fit is to
map the supply chain on the responsiveness
spectrum
Understanding the Supply Chain: Cost-
Responsiveness Efficient Frontier
Responsiveness

High
BOSE RADIO
DELL

WAL-MART
Low BARILLA
Cost
High Low
Achieving Strategic Fit

 All functions in the value chain must support the

competitive strategy to achieve strategic fit .
 Two extremes: Efficient supply chains (Barilla)
and responsive supply chains (Dell)
 Two key points
 there is no right supply chain strategy independent of
competitive strategy
 there is a right supply chain strategy for a given
competitive strategy
 Achieving Strategic Fit
Responsive
supply chain

Responsivenes e of it
n F
s spectrum Zo egic
t rat
S

Efficient supply
chain

Certain Implied Uncertain

demand uncertainty demand
spectrum
 Achieving Strategic Fit
Product Life Cycle Progresses/Competition
Responsive
supply chain
INTRODUCTION

Responsivenes e of it
n F
s spectrum Zo egic
t rat
S

MATURING COMMODITY

Efficient supply
chain

Certain Implied Uncertain

demand uncertainty demand
spectrum
Intracompany
Interfunctional Scope
 All functional strategies within a company are
developed to support each other and the company’s
competitive strategy
 Strategic fit is expanded to include all functions in a
firm
 Goal is to maximize company profit
Intercompany
Interfunctional Scope
 The only positive cash flow for the supply chain
occurs when the customer pays for the product –
all other cash flows are resettling of accounts
within the chain and add to total supply chain cost
 Supply chain surplus
– Difference between what the customer pays and total
supply chain cost
– Total profit to be shared among all members of the
supply chain
Intercompany
Interfunctional Scope
 Increasing supply chain surplus increases the amount
to be shared.
 All stages coordinate strategy across all functions to
ensure that they best meet the customer’s needs and
maximize supply chain surplus.
 Also provides more speed by managing the
interfaces between supply chain stages.
 Each company must evaluate its actions in the
context of the entire supply chain.
Thank you