Untitled Quiz

Supply Chain Management

• These slides are for learning purposes only in the Global Supply Chain Management course.
• Slides are not a substitute for textbook readings and complement them.
• Do not distribute the slides.

Achieving Strategic Fit and Scope

• Strategic fit is crucial for a company's success.
• A company's failure can be due to a lack of strategic fit.

Competitive and Supply Chain Strategies

• Competitive strategy defines a firm's customer needs.
• Product development specifies the portfolio of new products.
• Marketing and sales specify how the market will be segmented.
• This includes product placement, pricing, and promotion.
• Supply chain strategy determines material procurement, transportation, manufacturing, and distribution of products.
• Consistency between supply chain, competitive, and other functional strategies is important.

The Value Chain: Linking Supply Chain and Business Strategy

• New Product Development, Marketing and Sales, Operations, Distribution, and Service are parts of the value chain.
• Finance, Accounting, Information Technology, and Human Resources support these sections.

Achieving Strategic Fit

• Strategic fit is the match between customer priorities and supply chain capabilities.
• Competitive and supply chain strategies share common goals.

How is Strategic Fit Achieved?

• Step 1: Understanding the customer and supply chain uncertainty
• Step 2: Understanding the supply chain
• Step 3: Achieving strategic fit.

Step 1: Understanding the Customer and Supply Chain Uncertainty

• Identifying customer segment needs is critical.
• Factors like quantity ordered and response time are important.
• Variety, service level, price, and desired rate of innovation are elements to consider
• Overall and implied uncertainty of customer demand impacts the supply chain.

Levles of Implied Demand Uncertainty

• Predictable and uncertain supply and demand characteristics need to be understood
• The level of uncertainty varies based on how much unpredictability exists in customer demand and supply characteristics.
• Examples include salt at a supermarket and a new communication device

Correlation Between Implied Demand Uncertainty and Other Attributes

• For products with low implied demand uncertainty, there is low product margin, 10% average forecast error rate, and 1-2% average stockout rate
• For products with high implied demand uncertainty, there is high product margin, 40 to 100% average forecast error, and 10-40% average stockout rate.

Step 2: Understanding the Supply Chain

• Firms must understand how they best meet demand.
• Supply chain responsiveness defines the ability to respond to various demands and handle large product varieties and innovative products, as well as meet high service levels.

Step 2: Understanding the Supply Chain - Continued

• There are costs involved in supply chain responsiveness.
• Supply chain efficiency: the cost of making and delivering a product to a customer
• Increasing responsiveness will result in higher costs, which decrease efficiency.
• Cost-responsiveness efficient frontier shows the spectrum of responsiveness and costs.

Step 3: Achieving Strategic Fit

• Supply chain strengths must align with customer preferences and needs.
• Uncertainty/Responsiveness maps identify the correct balance between various strategies.
• There is a zone of strategic fit demonstrating the alignment between responsiveness and uncertainty
• All functions in the value chain must support the competitive strategy for strategic fit.
• Examples include efficient supply chains/Barilla and responsive supply chains/ Dell.

Step 3: Achieving Strategic Fit - Continued

• There is no right supply chain strategy independent of competitive strategy.
• The firm needs a right supply chain strategy contingent on competitive strategy which varies according to factors like products/functional and products/innovative.

Hau Lee's Supply Chain Uncertainty Framework

• Hau Lee's model for various supply chain strategies for low and high demand uncertainty and supply uncertainty.
• The model demonstrates 4 distinct strategies (Efficient SC, Responsive SC, Risk-Hedging SC, and Agile SC)
• The model defines the various types of supply chain strategies including:
• Examples of strategies include: Toothpaste, Fashion clothing, Oil reserve, and Hi-Tech components

Comparison of Efficient and Responsive Supply Chains

• Different aspects of efficient and responsive supply chain strategies are presented.
• Primary goals, product/design strategies, pricing strategies, manufacturing strategies, inventory strategies, lead time strategies, supplier selection strategies, and transportation strategies are outlined as differing characteristics between the two strategies.

Other Issues Affecting Strategic Fit

• Multiple products and customer segments
• Product life cycle
• Competitive changes over time
• Growing supply chain uncertainty

Multiple Products and Customer Segments

• Firms must balance efficiency and responsiveness between different customer segments and their products
• Two approaches are differentiated supply chains and tailor supply chains to the needs of each product

Multiple Products and Customer Segments - Continued

• Examples of firms balancing different types of products and customer segments are shown.
• Examples of multiple products and customer segments include a departmental store carrying seasonal items with high uncertainty (ski jackets) and low uncertainty (T-shirts).

Tailoring the Supply Chain

• Balancing efficiency and responsiveness is critical to effective supply chain strategies.
• Using different delivery methods is one way that firms tailor their supply chains.

Product Life Cycle

• Products undergo predictable stages in their lifecycles.
• During the beginning stages of a product, responsiveness and high product availability are crucial factors
• Later stages of product life cycle may require the adoption of efficiency to decrease costs

Changes in Supply Chain Strategy (over the PLC)

• As products mature, the supply chain strategy should shift from responsive to efficient.

Key Point

• Strategic fit is achieved by tailoring the supply chain to meet the needs of different customer segments.
• Adapting supply chain strategy is critical to maintaining strategic fit over the life cycle of a product and in response to competitive landscape changes.
• Companies must consider factors of competitive changes and the need for adaptability in supply chain strategies.

Competitive Changes Over Time

• Competitive pressures can change over time
• Increased emphasis on variety and reasonable pricing may result from more competitors.
• The internet and e-commerce make offering a wider variety of products easier

Supply Chain Levers to Deal with Uncertainty

• Capacity, Inventory, Time, Information, and Price levers are used in making supply chains more responsive to uncertain conditions

Expanding Strategic Scope

• Strategic fit includes all functions and stages in the supply chain with shared objectives.
• All functions in each stage can develop their individual strategies
• Five categories of strategies exist : Intracompany intraoperation, intracompany intrafunctional, intracompany interfunctional, intercompany interfunctional, flexible interfunctional
• Firms must evaluate all supply chain actions to maximize company surplus

Expanding Strategic Scope - Continued

• The intra-company intraoperation strategy has the goal of minimizing local costs.
• The intra-company intrafunctional strategy prioritizes minimizing functional departmental costs.
• The intra-company interfunctional strategy focuses on maximizing company profits.
• Intercompany interfunctional aims to maximize supply chain surplus.