Supply Chain Performance

COSC 643

Sungchul Hong

Competitive and Supply Chain Strategies
• A company’s competitive strategy defines the set of customer needs that is seeks to satisfy through its products and services. • Example
– Wal-Mart aims to provide high availability of a variety of reasonable quality products at low prices. – McMaster-Carr: It guarantees product availability and delivery within a day.

Competitive and Supply Chain Strategies • A product development strategy specifies the portfolio of new products that a company will try to develop. • A marketing strategy specifies how the market will be segmented and the product positioned. and promoted. . priced. • It also dictates whether the development effort will be made internally or outsourced.

transportation of materials to and from the company. . manufacture of the product or operation to provide the service. and distribution of the product to the customer.Competitive and Supply Chain Strategies • A supply chain strategy determines the nature of procurement of raw materials. along with any follow-service.

. operations strategy.Competitive and Supply Chain Strategies • Supply chain strategy includes what many traditionally call supplier strategy. and logistics strategy.

The Value Chain in a Company .

• Consistency between the customer priorities that the competitive strategy is designed to satisfy and the supply chain capabilities that the supply chain strategy aims to build .Achieving Strategic Fit • Strategic fit means that both the competitive and supply chain strategies have the same goal.

• Each functional strategy must support other functional strategies and help a firm reach its competitive strategy goal.Competitive Strategy • The competitive strategy and all functional strategies must fit together to form a coordinated overall strategy. .

Achieving Strategic Fit • The different functions in a company must appropriately structure their processes and resources to be able to execute these strategies successfully. .

How Is Strategic Fit Achieved? • Understanding the customer. • Achieving strategic fit. . • Understanding the supply chain.

The Implied Uncertainty Spectrum .

Understanding the Supply Chain Cost-Responsiveness Efficient Frontier .

.Achieving Strategic Fit • A company may fail either because of a lack of strategic fit or because its processes and resources do not provide the capabilities to support the desired strategic fit.

Finding the Zone of Strategic Fit .

• Somewhat responsive – Most automotive production • Highly responsive – Dell: Custom made PCs and servers in a few days.The Responsiveness Spectrum • Highly efficient – Integrated steel mills: Production scheduled weeks or months in advance with little variety or flexibility. • Somewhat efficient – A traditional make-to-stock manufacturer with production lead time of several weeks. .

How Is Strategic Fit Achieved? • Understanding the customer • Understanding the supply chain. • Achieving strategic fit. .

• The variety of products needed. • The price of the product. • The service level required. • The response time that customers are willing to tolerate.Understanding the Customer • The quantity of the product needed in each lot. • The desired rate of innovation in the product. .

• Handle a large variety of products. .Understanding the Supply Chain • Respond to wide range of quantities demanded • Meet short lead time. • Building highly innovative products • Meet a very high service level.

Achieving Strategic Fit • Ensure that what the supply chain does particularly well is consistent with the targeted customer’s needs.) pasta . reasonable price – c. PCs delivered within days.f. • Example – Customization.

the different products and segments have different implied demand uncertainty. • When devising supply chain strategy in these cases.Multiple Products and Customer Segments • In case a firm sells multiple products and serves customer segments with very different needs. . the key issue for a company is to create a supply chain that balances efficiency and responsiveness given its portfolio of products and customer segments.

Product Life Cycle • As products go through their life cycles. • Beginning stages • Commodity product stage . the demand characteristics and the needs of the customer segments being served change.

• Margins are often high. and time is crucial to gaining sales. • Product availability is crucial to capturing the market.Beginning stages • Demand is very uncertain. • Cost is often of secondary consideration .

• Price becomes a significant factor in customer choice.Commodity product stage • Demand has become more certain. • Margins are lower due to an increase in competitors and more competitive pressure. .

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