The Supply

Chain and
Competitive
Strategy
LEARNING OBJECTIVES:

● Supply chain management is a wider concept than logistics

● Competitive advantage
● The supply chain becomes the value chain
● The mission of logistics management
● The supply chain and competitive performance
● The changing competitive environment
Logistics is the process of strategically managing
the procurement, movement and
storage of materials, parts and finished inventory
(and the related information flows)
through the organization and its marketing
channels in such a way that current
and future profitability are maximized through the
cost-effective fulfilment of orders
Supply chain management builds upon
this framework and seeks to achieve
linkage and co-ordination between the
processes of other entities in the
pipeline, i.e. suppliers and customers,
and the organization itself. Thus, for
example, one goal of supply chain
management might be to reduce or
eliminate the buffers of inventory that
exist between organizations in a chain
through the sharing of information
regarding demand and current stock
levels.
The source of competitive
advantage is found firstly in the
ability of the organization to
differentiate itself positively, in
the eyes of the customer, from
its competition,
and secondly by operating at a
lower cost and hence at greater
profit
One thing is certain: there is no middle ground
between cost leadership and service excellence.
Indeed, the challenge to management is to
identify appropriate logistics and supply chain
strategies to take the organization to the top
right-hand corner of the matrix. Companies
which occupy that position have offers that are
distinctive in the value they deliver and are also
cost competitive. Clearly it is a position of some
strength, occupying ‘high ground’ that is
extremely difficult for competitors to attack.
Figure 1.5 presents the challenge: to seek out
strategies that will take the business away from
the ‘commodity’ end of the market towards a
more secure position of strength based upon
differentiation and cost advantage
THE UNDERLYING PHILOSOPHY BEHIND THE
LOGISTICS AND SUPPLY CHAIN CONCEPT IS
THAT
OF PLANNING AND COORDINATING THE
MATERIALS FLOW FROM SOURCE TO USER
AS AN INTEGRATED SYSTEM RATHER THAN,
AS WAS SO OFTEN THE CASE IN THE PAST,
MANAGING THE GOODS FLOW AS A SERIES
OF INDEPENDENT ACTIVITIES. THUS, UNDER
THIS APPROACH THE GOAL IS TO LINK THE
MARKETPLACE, THE DISTRIBUTION
NETWORK, THE MANUFACTURING PROCESS
AND THE PROCUREMENT ACTIVITY IN SUCH
A WAY THAT CUSTOMERS ARE SERVICED AT
HIGHER LEVELS
AND YET AT LOWER COST. IN OTHER WORDS,
THE GOAL IS TO ACHIEVE COMPETITIVE
ADVANTAGE THROUGH BOTH COST
REDUCTION AND SERVICE ENHANCEMENT
 LOGISTICS & SUPPLY CHAIN MANAGEMENT10
THE PROCUREMENT ACTIVITY IN SUCH A WAY
THAT CUSTOMERS ARE SERVICED AT HIGHER
LEVELS
AND YET AT LOWER COST. IN OTHER WORDS, THE
GOAL IS TO ACHIEVE COMPETITIVE ADVANTAGE
THROUGH BOTH COST REDUCTION AND SERVICE
ENHANCEMENT.
THE SUPPLY CHAIN BECOMES THE VALUE CHAIN
OF THE MANY CHANGES THAT HAVE TAKEN PLACE
IN MANAGEMENT THINKING OVER THE LAST
30 YEARS OR SO, PERHAPS THE MOST SIGNIFICANT
HAS BEEN THE EMPHASIS PLACED UPON
THE SEARCH FOR STRATEGIES THAT WILL PROVIDE
SUPERIOR VALUE IN THE EYES OF THE CUSTOMER.
TO A LARGE EXTENT THE CREDIT FOR THIS MUST
GO TO MICHAEL PORTER, THE HARVARD BUSINESS
SCHOOL PROFESSOR WHO, THROUGH HIS
RESEARCH AND WRITING, HAS ALERTED
MANAGERS AND
STRATEGISTS TO THE CENTRAL IMPORTANCE OF
COMPETITIVE RELATIVITY IN ACHIEVING SUCCESS
IN THE MARKETPLACE.
MANAGING
OF 4R’S
01 RESPONSIVENESS

02 RELIABILITY

03 RESILIENCE
04 RELATIONSHIPS
Delivering Customer
Value
• ● The marketing and logistics interface
• ● Delivering customer value
• ● What is customer service?
• ● The impact of out-of-stock
• ● Customer service and customer retention
• ● Market-driven supply chains
• ● Defining customer service objectives
• ● Setting customer service priorities
• ● Setting service standards
 The Marketing and Logistics Interface

Refers to the point where a company's marketing activities

intersect with its logistics or supply chain operations. It involves
the coordination and integration of these two critical functions to
ensure that products or services are efficiently delivered to
customers while meeting their expectations and maximizing
profitability.
• Inventory Management
• Order Fulfillment
• Distribution Network
• Transportation
• Information Flow
• Customer Service
• Cost Optimization
• Demand Forecasting
• Customer Experience
 Delivery of Customer Value

Customer value can be defined quite simply as the difference between the perceived benefits that
flow from a purchase or a relationship and the total costs incurred. Another way of expressing
the idea is as follows:
Perceptions of benefits
Customer value = ––––––––––––––––––––––––
Total cost of ownership

“Total cost of ownership” rather than ‘price’ is used here because in most transactions there will
be costs other than the purchase price involved.
 Quality X Service
Customer value = ---------------------------------
Cost X Time

Each of the four constituent elements can briefly be defined as follows:

Quality : The functionality, performance and technical specification of the offer.
Service : The availability, support and commitment provided to the customer.
Cost : The customer’s transaction costs including price and life cycle costs.
Time : The time taken to respond to customer requirements, e.g. delivery lead-times
 What is Customer Service ?

It has been suggested that the role of customer service is to provide ‘time and
place utility’ in the transfer of goods and services between buyer and seller.
LaLonde and Zinszer in a major study of customer service practices,
suggested that customer service could be examined under three headings:
1. Pre-transaction elements
2. Transaction elements
3. Post-transaction elements
 The impact of out-of-stock
Consequences for a business:
• Lost sales = Loss of potential revenue
• Customer Dissatisfaction = Potential loss of customer loyalty
• Brand Reputation = Potential harm to company’s reputation
out-of-stock situations can have a detrimental impact on sales, customer
satisfaction, and a company's overall performance. Effective inventory
management and supply chain optimization are crucial to mitigate these
effects.
 Customer Service and Customer Retention
Customer Service: refers to the range of activities and interactions that a business
provides to assist and support its customers before, during, and after a purchase. It
involves addressing customer inquiries, resolving issues, and ensuring a positive
customer experience. Effective customer service can lead to customer satisfaction
and loyalty.
Customer Retention: is the strategy and effort a company employs to keep existing
customers engaged and coming back for repeat purchases. It focuses on building
long-term relationships with customers to ensure they continue to choose the
company's products or services over competitors. Customer retention is crucial
because it is often more cost-effective to retain existing customers than to acquire
new ones.
Customer retention is of paramount importance for
businesses for several key reasons:
1. Stable Revenue Streams
2. Cost Efficiency
3. Loyalty and Advocacy
4. Competitive Advantage
5. Reduced Marketing Pressure
DELIVERING CUSTOMER VALUE

MARKET-DRIVEN SUPPLY CHAINS

Changes to the production and inventory plan in

order to match the forecast: Cost added due to
bringing forward / postponing production. Also, in
terms of removing already planned capacity.
• As Baker has suggested:

“Managing demand chains is … fundamentally

different to managing supply chains. It requires turning
the supply chain on its head, and taking the end user as
the organization’s point of departure and not its final
destination.”
Figure 1. Linking customer value to supply chain strategy
 Identifying customers’ service needs
• The approach to service segmentation suggested here
follows a three-stage process:
1. Identify the key components of customer service as seen
by customers themselves.
2. Establish the relative importance of those service
components to customers.
3. Identify ‘clusters’ of customers according to similarity of
service preferences.
 Defining customer service objectives
• The whole purpose of supply chain management and
logistics is to provide customers with the level and
quality of service that they require and to do so at less
cost to the total supply chain.

The definition of appropriate service objectives is made

if the concept “PERFECT ORDER” was adopt
 Defining customer service objectives
• For example, if the actual performance across all orders
for the last 12 months was as follows:
On-time : 90%
In-full : 80%
Error-free: 70%

the actual perfect order achievement would be:

90% * 80% * 70% = 50.4%
 The cost benefit of customer service

• Pareto Law “80/20 Rule”

- 80 percent of the revenue of the business
come from 20 percent of the customers
 The cost benefit of customer service
• Challenge to customer service management
1. Identify the real profitability of customer
2. develop strategies for service that will improve the
profitability of all customers.
 Setting customer service priorities

is a strategy where a customer request queue is based on

a scale of need or urgency. This strategy emphasizes
issue resolution when customers cannot use a product or
service due to a problem they’re experiencing.
 Setting service standards
To be effective these standards must be defined by the
customers themselves.
Customer service standards are a company’s rules or
guidelines that inform and shape the customer’s
relationship with the business at every step throughout the
customer experience.
 Setting service standards
key areas where standards are essential:
●● Order cycle time
●● Stock availability
●● Order-size constraints
●● Ordering convenience
●● Frequency of delivery
●● Delivery reliability
●● Documentation quality
●● Claims procedure
●● Order completeness
●● Technical support
●● Order status information
 Key Message

Customer service is one of the most powerful elements

available to the organization in its search for competitive
advantage and yet it is often the least well managed. The key
message of this chapter has been that the quality of customer
service performance depends in the main upon the skill with
which the logistics system is designed and managed. Put very
simply, the output of all logistics activity is customer service.
Here is where this template begins
 Distribution channels can be short or long, and depends on the
number of intermediaries required to deliver a product or service.

Distribution
Supplier Channel Customer
Producers of Goods and Services that
Customers Needs and Wants The End Users
 Key Players in theDistribution Channels

Producers Agents Wholesaler Retailers

Combines Labor and Acts on behalf of the Person or Company that Person or Company that
Capital to Produce Goods Producer to collect sells large quantities at a directly sells goods to
and Service payment and transfer title low price consumers
of Goods and Services
 Types of Distribution Channels

A B C

Direct Indirect Hybrid

Shortest Way – Consumers purchase Goods sold at a Brick and Mortar Store Uses both Direct and Indirect to sell
goods direct from suppliers goods to consumers
 Distribution Channels Level

Direct to Consumer / Shortest

Level 0 Distribution Channel possible

Producers sells directly to a retailer

Level 1 who sells the product to the end
consumer

Producers sells to a Wholesaler then to

Level 2 a Retailer –end User Consumer

This level add the Jobber or Middle

Level 3 Man – in between the Producer and
Wholesaler
 Choosing the RightDistribution Channels

Align with Mission and Speed of Delivery

Vision
Multiple Distribution
Channels
Brick and Mortar Set-
up

Direct Interaction with

Customer

Sales Representatives
 Distribution Channels are Value Delivery
System
● Choose the Value
Go-to-Market Strategy
Customer Insights, Capability Assestment
Product – ● Provide the Value

Co-create solutions to buying problems

Market Size
Use value-adding partners
● Communicate the Value
Target Customers
Proclaim the value proposition
Market Competition Develop a shared vision
● Capture the Value

Understand the cost-to-serve

What is the channel margin and who receives it?
 Examples of Value Propositions

1. Uber – The Smartest Way to Get Around

2. Apple iPhone – The Experience IS the Product

Values in Distribution Channer
Wholesalers
They buy large number of products and sell them at low
mark-up. They usually have multiple products that are
complementary.
Middleman - Intermediaries

Creates a win-win to the manufacturers and Consumers

Middlemen can be classified as merchants

and agents. Merchants buy goods and
resell them to make a profit.
Retailers

They provide SERVICE, EXPERTISE,

EXCLUSIVITY,CONVENIENCE and
EXPERIENCE
The Omni-channel
Revolution
 Omni-channel Retail

• A business model in which all existing channels become completely

integrated to offer a seamless shopping experience
• It is empowered by centralized data management
• Customers can simultaneously use different channels in their shopping
process

Presentation Title 9/3/20XX 55

 Omni-channel retailing
Customer centricity is the main
core of omnichannel retail, it
means that retailers must “think
like customers think” to optimize
customer experience. It focuses
more on improving customer
profitability instead of only sales
growth.

Presentation Title 9/3/20XX 56

 The way to get started is
to quit talking and begin
doing.
Walt Disney

Presentation Title 9/3/20XX 57

Matching Supply
and Demand
L O G I S T I C S , O P E R A T I O N S , A N D S U P P L Y
C H A I N M A N A G E M E N T

D A R W I N L . N A C I O N , L P T
 Matching Supply and Demand

 Matching supply and demand is one of the core

challenges of logistics and supply chain management.

 It is essential to ensure that customers have the

products and services they need, when and where
they need them, without overstocking or
understocking inventory.
The Importance of
Matching Supply &
Demand

 Reduces costs

 Improves customer service

 Improves overall effi ciency

and eff ectiveness of the supply
chain
Challenges of Matching
Supply & Demand
 Uncertainty

 Lead Times

 Complexity
Strategies of Matching
Supply & Demand
 Demand Forecasting

 Inventory Management

 Collaboration
Local Companies – Examples | Application

JOLLIBEE FOODS CORPORATION

LAZADA PHILIPPINES
(JFC)

Challenge: Uncertainty in Challenge: Lead Times

Demand
Strategy: Demand Forecasting &
Strategy: Demand Forecasting & Inventory Management
Inventory Management
Local Companies – Examples | Application

SM GROUP

Challenge: Complexity

Strategy: Collaboration and

Technology
Conclusion

 Matching supply and demand is a complex challenge,

but it is essential for the success of any business.

 By using the strategies discussed above, companies

can improve their ability to meet the needs of their
customers and achieve their business goals.
References:
 C h r i s t o p h e r, M . ( 2 0 1 6 ) . L o g i s t i c s a n d s u p p l y c h a i n
management: Creating value in competitive
ecosystems (5 th e d .) . Pearson Education
Limited.Lead Times

 Wa t e r s , D. ( 2 0 1 1 ) . S u p p l y c h a i n m a n a g e m e n t : A n
i n t r o d u c t i o n ( 2 n d e d .) . P e a r s o n E d u c a t i o n L i m i t e d .

 Chopra, S ., & Meindl, P. (2016). Supply chain

management: S t r a t e g y, planning, and operation
( 6 t h e d .) . P e a r s o n E d u c a t i o n L i m i t e d .
THANK
YOU