Strategic Supply Chain

Management

Chapter One

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 Basic Concepts of Strategic Supply Chain
Management

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 Organization : Definition

 A social unit of people systematically structured and managed to

meet a need or to pursue collective goals on a continuing basis.

 All organizations have a management structure that determines

relationships between functions and positions, and subdivides
and delegates roles, responsibilities, and authority to carry out
defined tasks.

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 What is Strategy
 At first, the word was used in terms of Military Science to mean
what a manager does to offset actual or potential actions of
competitor.

 Originally, the word strategy has been derived from Greek

‘Strategos’, which means military general.

 When the term strategy is used in military sense, it refers to

action that can be taken in the light of action taken by opposite
party

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 Cont’d
 Glueck defined strategy precisely as: ”A unified,
comprehensive and integrated plan designed to assure that the
basic objectives of the enterprise are achieved”.

 ‘Unified’ means that the plan joins all the parts of an enterprise
together; ‘comprehensive’ means it covers all the major aspects
of the enterprise, and ‘integrated’ means that all parts of the plan
are compatible with each other

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 Strategic Management Definition
 Strategic Management: a set of managerial decisions and
actions that determines the long-run performance of a
corporation.
 The strategic-management process consists of three stages:
strategy formulation, strategy implementation, and strategy
evaluation.

Includes:
 Internal and external environment scanning

 Strategy formulation

 Strategy implementation

 Evaluation and control

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 Strategic Management ….
 Emphasizes the monitoring and evaluating of external
opportunities and threats in light of a corporation’s
strengths and weaknesses.

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 Benefits of Strategic Management
 Clearer sense of strategic vision for the firm

 Sharper focus on what is strategically important

 Improved understanding of a changing environment

 Improved organizational performance

 Achieves a match between the organization’s environment and

its strategy, structure and processes

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Elements of Strategic Management

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 SUPPLY CHAIN STRATEGY – DEFINITION
AND MEANING
 Supply chain management [SCM] can be defined as a set of
approaches that efficiently integrate and coordinate the
materials, information and financial flows across the supply
chain so that merchandise is supplied, produced and distributed
in the right quantities, to the right locations, and at the right
time, in the most cost-efficient way, while satisfying customer
requirements.

 Management (SCM) is the integration of key business

processes from end user through original suppliers that provides
products, services, and information that add value for customers
and other stakeholders.’

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 SUPPLY CHAIN STRATEGY – DEFINITION
AND MEANING
 Supply chain strategy describes in which areas a
company wants to succeed with the SC and how it
supports the achievement of the company’s goals.

 Supply chain strategy is also defined as the patterns of

decisions related to supply chain activities, in
accordance with the overall corporate competitive
strategy.

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 SUPPLY CHAIN STRATEGY – DEFINITION
AND MEANING

 Supply chain strategy has been also defined as the

sequence of decisions that shape the long-term
capabilities of the company’s supply chain functions and
their contribution to overall strategy through the ongoing
reconciliation of market requirements and supply chain
resources.

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 SUPPLY CHAIN STRATEGY – DEFINITION
AND MEANING
 Supply chain strategies need to focus on customer demand
patterns to ensure capacity to plan, source, make and
deliver superior performance compared with
competitors.

 SC strategies may be designed to do existing things better

(through more efficiency in current operations) and/or to
do better things (through designing more effective systems,
processes, policies, facilities)

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  Strategic Supply Chain Thinking

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 Cont’d
Aligning supply capabilities with the characteristics of demand
ensures that the end customer is put first in supply chain
thinking.

But aligning capabilities with customer needs is about more than

meeting demand characteristics, and should engage the firm as a
whole - together with its competitive position.

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 Cont’d
 Customer alignment is define as the process of making supply
chain strategy compatible with marketing strategy. This
involves alignment of strategy both within and between partners
in a supply chain, and delivers customer value.

 Customer value is the customer-perceived benefits gained from

a product/service compared to the cost of purchase.

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 Cont’d
 ......shareholder alignment defined as: the process of making
business strategy compatible with functional strategies and the
business processes used to deliver them.

 This involves alignment of strategies and processes both within

and between partners in a supply chain, and delivers
shareholder value.

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 Cont’d

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 Essence and Evolution of Strategic
Management
 Strategic management is not new.

 Due to the competitive threats, demanding customers,

and an uncertain business world have increased the
need for good strategic decision making.

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Contingency Theory...
 Modern strategic thinking emerged when contingency
theory conceptualized the relationship between a changing
environment, managerial decision making, and
performance.

 Managers need to recognized the implications of the

changing environment and use company resources to
respond effectively.

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 Industrial Organizational Theory (IOT)
 The IOT claims that market forces should drive decision making.
 Harvard’s Micheal Porter noted that a company’s power to influence
the market is determined by power held by five entities- suppliers,
buyers, existing rivals, potential rivals, and providers of substitute
products.
 IOT core questions are:
a) Where does market power exist?
b) What are the sources of this power? By analyzing these five forces,
managers can understand their company’s operating environment
and make decision to leverage their company’s power and thereby its
competitiveness in the market.

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Resource Based Theory

 Resource based strategic management focuses on building

organizational skills and processes that enable a company
to deliver distinctive products and services.

 When a company develops unique skills and processes that

lead to competitive advantage, it is said to possess a core
competence.

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The Influence of SC Thinking on
Strategy
 Since the down of the industrial age, companies have
participated as members of one or more supply chains-
buying inputs, making products, and selling these
products to customers.
 Until recently, the interdependencies among these
diverse companies have been largely ignored-except, of
course, when a break down occurs in the chain.

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Cont’d..
 Even today many companies develop their strategies
independently. They don’t consider:
1. how the capacities and capabilities of other chain
members might be used to create a hard-to-replicate
competencies, or
2. how their strategy affects other members of the chain.
SCM changes this tradition, inward-looking approach
to strategic formulation and execution.

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Cont’d...
 SC thinking requires that managers look at the world
differently-through a new pair of eyes. When they do:
they see opportunities to build unique SC-enabled
business models.

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SC thinking and Strategic Business
model Design.
 Strategy’s most important role is to define a company’s
business model. A valid business model must answer two
questions:
1. What is our business?
2. How can we do it better than any one else?
The first question “what is our business?”...is answered by
evaluating two related questions: who are our customers?
...and what is the real value that we offer them?
Peter Druker empahized that “there is only one valid
definition of business purpose: to create a customer.

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Cont’d...
 The second question, “how can we do it better than
any one else?”...defines how a company should use its
resources to meet customers’ needs.
 Managers must learn how to use basic resources
including people, technology, and infrastructure to
build unique organizational capabilities.

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Cont’d...
 When managers look though SC lenses, they see these
questions differently. Instead of asking , “what is our
business?”the SC strategies inquires:
a) What is the overall supply chain’s value propositions?
b) How does our company uniquely help chain deliver on
its value propositions?
Instead of asking, “how can we do it better than any one
else?” the SC strategist explores such issues as:...

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Cont’d...
a) What valued capabilities do other members of the chain
possess?
b) How can we bring these complementary competencies
together in a way customer value?
c) What types of relationships should we maintain with
other members of the supply chain?
d) Are any customer-valued competencies missing? If so,
who is best positioned to develop them?
e) How much of the value-added process should we
control?

As managers explore these questions, they realize that a

SC vision affects the entire strategy formulation process.
They also see that new skill are needed to execute a SC-
enabled business model.

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SC Thinking and the Four Decision areas of
Strategy
 SC managers must also explicitly look at the four
decision areas of strategy through their new SC lenses.
1. Environment: starting with environment, SC
managers see that today’s global competitive
environment pits SC teams against each other.
2. Resources: one of the most important jobs of a SC
manager is to see how the resources of different SC
members can be shared to improve the over all
chain’s performance. This requires that managers be
able to accurately assess the capabilities of both
suppliers and customers.

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Cont’d...
 Equally important, SC mangers must develop the skills-
communication, training, and trust building-to motivate
other members of the chain to share the know-how and
resources willingly.
3. Objectives: strategy defines competitive objectives. When
looking through SC lenses, mangers see that the only
person who really puts money in to the chain is end
customer. Therefore, SC strategy emphasizes fulfilling the
needs of the end or final customer. Satisfying the
immediate customer is till critical; however, each company
in the chain must understand who the final customer is
and what it needs to do to fulfil this end customer’s
expectation.

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Cont’d....
4. Feedback: Finally, SC mangers see that the chain only
works if everyone is working from the same playbook.
Collaboration requires intensive feedback across the
chain. Consistent performance measurement, good
information systems, and frequent, honest
information sharing are vital components of a SC
feedback across the chain.

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….

 The Process of Strategic Supply Chain Management

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Cont’d...

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 LEVELS OF STRATEGY

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  Strategic management theory distinguishes
different levels of strategy where strategy-making
process occurs and competitive advantage is
contributed.

 The four generic degrees of firm strategy belong to

the network, corporate, business and
functional level:

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Cont’d
 Corporate strategy is concerned with the overall
scope or direction of an organization and how
value will be added to the different parts (business
units) of the organization.
 Some key tasks of corporate strategies are to identify the
industries within which the business units of the
organization will compete and to allocate corporate
resources to these divisions.
 Corporate-level strategy typically fit within the three
main categories of stability, growth, and
retrenchment

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Cont’d
 The second level is business-level strategy, which is
about how the various businesses included in the
corporate strategy should compete in their particular
markets to achieve competitive advantage (for this
reason, business-level strategy is sometimes called
‘competitive strategy’).

 Yet, other authors claim that business strategies may

fit within the two overall categories, competitive and
cooperative strategies.

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Cont’d
 The third level of strategy is at the operating end of an
organization. Here there are functional strategies,
which are concerned with how the component parts of
an organization deliver effectively the corporate- and
business level strategies in terms of resources,
processes and people.

 In most businesses, successful business strategies

depend to a large extent on decisions that are taken, or
activities that occur, at the functional level.

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Cont’d
 The fourth type of strategy, concerns the inter-
organizational dimension (or Network level) at which
the firm interacts with other companies.

 Network Strategy consists of structural (defining

relationship contents, forming network structures and
evaluating goal matching with the network) as well as
dynamic components (combining resources in
interacting via inter-organizational routines and joint
projects).

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STAKEHOLDERS AND THE CORPORATE MISSION

 Stakeholders are those groups without whose support t

he organization can not exist.

 A stakeholder is a person who holds the stake (an

interest or concern in something) or stakes in a bet.

 Any group or individual who can affect or is affected by,

the achievement of a corporation’s purpose.
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 Stakeholder analysis
 Who matters, how much
 Customers, suppliers, owners, workers, community
groups, government
 What matters, why and when
 What is at stake for the stakeholders? Why do they care?
When and how might they act?
 What is at stake for the firm? What are the likely impacts
on the firm? Why? When?
 Response options
 Cooperate, compete, coopt, cut out...

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Why stakeholder analysis?
Among the major reasons:
 Empirically to discover existing patterns of
interaction,
 Analytically to improve interactions,
 As a management tool in policy-making, and
 As a tool to predict conflict.

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Stakeholders of the Organization

Customers
Owners Employees

Unions Suppliers

Organization

Government Local
Community
Strategic
Partners Society

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The Stakeholder Map or Power/Interest Matrix

People with high power need to be kept satisfied, while people with high interest
need to be kept informed. When a stakeholder has both, make sure you manage
his or her expectations very closely.

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 Classification: Three
Stakeholder Groups

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