Supply Chain Management

Competitive and Supply Chain Strategies

Learning Objectives
• Explain why achieving strategic fit is critical to a company’s overall
success
• Describe how a company achieves strategic fit between its supply
chain strategy and its competitive strategy
• Scope of strategic fit across the supply chain
• Major challenges to manage a supply chain successfully
• Introduction to SCOR Model
Competitive and Supply Chain Strategies
• A company’s competitive strategy defines, relative to its competitors,
the set of customer needs that it seeks to satisfy through its products
and services
• Example- Imtiaz Retail Power
• Blue Nile, with its online retailing model for diamonds
• Zales, with its retail stores for diamonds
Value Chain
• A value chain is a business model that describes the full range of
activities needed to create a product or service
• The purpose of a value-chain analysis is to increase production
efficiency so that a company can deliver maximum value for the least
possible cost
Key Points- Value Chain
• A value chain is a step-by-step business model for transforming a
product or service from idea to reality.
• Value chains help increase a business's efficiency so the business can
deliver the most value for the least possible cost.
• The end goal of a value chain is to create a competitive advantage for
a company by increasing productivity while keeping costs reasonable.
• The value-chain theory analyzes a firm's five primary activities and
four support activities.
Elements in Porter's Value Chain
Strategic Fit
• Strategic fit requires that both the competitive and supply chain
strategies of a company have aligned goals
• It refers to consistency between the customer priorities that the
competitive strategy hopes to satisfy and the supply chain capabilities
that the supply chain strategy aims to build
Achieving Strategic Fit
• The competitive strategy and all functional strategies must fit together
to form a coordinated overall strategy (Vertical Alignment)
• Each functional strategy must support other functional strategies and
help a firm reach its competitive strategy goal (Horizontal Alignment)
• The different functions in a company must appropriately structure
their processes and resources to be able to execute these strategies
successfully
• The design of the overall supply chain and the role of each stage must
be aligned to support the supply chain strategy
3-basic Steps To Achieving This Strategic Fit
Understanding the customer and supply chain uncertainty
• First, a company must understand the customer needs for each
targeted segment and the uncertainty these needs impose on the
supply chain. These needs help the company define the desired cost
and service requirements
• The supply chain uncertainty helps the company identify the extent of
the unpredictability of demand and supply that the supply chain must
be prepared for
3-basic Steps To Achieving This Strategic Fit
Understanding the supply chain capabilities
• A company must understand what its supply chain is designed to do
well
Achieving strategic fit
• If a mismatch exists between what the supply chain does particularly
well and the desired customer needs, the company will either need to
restructure the supply chain to support the competitive strategy or
alter its competitive strategy
Implied Demand Uncertainty
• Demand uncertainty reflects the uncertainty of customer demand for
a product
• Implied demand uncertainty, in contrast, is the resulting uncertainty
for only the portion of the demand that the supply chain plans to
satisfy based on the attributes the customer desires
Fisher- Correlation Matrix
Supply Chain Strategies
• Efficient Supply Chains
• Risk Hedging Supply Chains
• Responsive Supply Chain
• Agile Supply Chains
The Uncertainty Framework
Supply Uncertainty Demand Uncertainty Demand Uncertainty
Low (Functional Products) High (Innovative Products)

Low (Stable Process) Efficient SCM Responsive Supply Chain

• Focus on producing highest cost • Flexibility to respond to shift in
efficiencies demand
• Fashion industry

High (Evolving Process) Risk-Hedging SCM Agile SCM

• Focus on sharing resources like • Responsiveness + risk hedging
resource pooling • Globalization / mergers
THE SCOR Model
Plan
• Demand and supply planning and management are included in this first step
• Elements include balancing resources with requirements and determining communication
along the entire chain
• The plan also includes determining business rules to improve and measure supply chain
efficiency
Sourcing
• This step describes sourcing infrastructure and material acquisition
• It describes how to manage inventory, the supplier network, supplier agreements, and
supplier performance
• It discusses how to handle supplier payments and when to receive, verify, and transfer
product
THE SCOR Model
Make
• Manufacturing and production are the emphasis of this step. Is the
manufacturing process make-to-order, make-to-stock, or engineer-to-
order
• The make step includes, production activities, packaging, staging product,
and releasing
Deliver
• Delivery includes order management, warehousing, and transportation
• It also includes receiving orders from customers and invoicing them once
product has been received
THE SCOR Model
Return
• Companies must be prepared to handle the return of containers,
packaging, or defective product
• The return involves the management of business rules, return
inventory, assets, transportation, and regulatory requirements