SUPPLY CHAIN MANAGEMENT

STRATEGIES

COMPETITIVE STRATEGY
Set of customer needs a firm seeks to satisfy through its products and services in order to gain competitive advantage - A set of needs not addressed by the competitors - Customer segmentation

Competitive strategy targets one or more customer segments to satisfy their needs.

COMPETITIVE STRATEGY OF WAL-MART

A variety of products of reasonable quality at low price Products (like grocery, clothing, home appliances etc.) available at many places. Low price & product availability A discount store Compare with a convenience store (Seveneleven)

COMPETITIVE STRATEGY OF DELL

Customized product at a reasonable price Customer has to wait for a few days to get delivery Competitors sell through retail

ORGANIZATION

Finance, Accounting, Information Technology, Human Resources New Product Development Marketing and Operations Sales

Distribution

Service

PRODUCT DEVELOPMENT STRATEGY

Specifies the portfolio of new products that the company will try to develop

Outsource ?

MARKETING &SALES STRATEGY

Specifies how the market will be segmented Product positioning Pricing Promotion

SUPPLY CHAIN STRATEGY

Supply chain strategy:
Material procurement Transportation of materials Manufacture of product or creation of service Distribution of product Follow up service In house or outsource Defines roles of all members in the supply chain

SUPPLY CHAIN STRATEGY

Broad structure of the chain Supplier strategy Operations strategy Logistics strategy Information flow

STRTEGIC FIT
Consistency and support between - Competitive strategy, - Supply chain strategy, -Other Functional strategies

The competitive strategy & functional strategies must be aligned

The design of the supply chain & role of each member must support the supply chain strategy.

STRTEGIC FIT
Lack of strategic fit due to - Supply chain design - Processes & resources do not support a fit - Conflict in goals(Target different priorities) Perfect fit : Dell

ACHIEVE STRATEGIC FIT

Understanding the customer needs & supply chain uncertainty Understanding the supply chain capabilities Achieving strategic fit

CUSTOMER NEEDS
Needs of the customer segment being served varies in the following attributes Quantity of product needed in each lot Response time customers will tolerate Variety of products needed Service level required Price of the product Desired rate of innovation in the product

SUPPLY CHAIN UNCERTAINTY

Overall attribute of customer demand Demand uncertainty: uncertainty of customer demand for a product Implied demand uncertainty: resulting uncertainty for the supply chain given the portion of the demand the supply chain must handle and attributes the customer desires - Increase in service level increases IDU

CUSTOMER NEEDS & IMPLIED DEMAND UNCERTAINTY

Customer Need Range of quantity increases Lead time decreases Implied demand uncertainty increases because Greater variance in demand Less time to react to orders

Variety of products required increases Demand per product becomes more disaggregated Number of channels increases Rate of innovation increases Required service level increases Total customer demand is now disaggregated over more channels New products tend to have more uncertain demand Handle unusual surges in demand

IMPLIED DEMAND UNCERTAINTY SPECTRUM

Predictable supply and demand Predictable supply and uncertain demand or uncertain supply and predictable demand or somewhat uncertain supply and demand Highly uncertain supply and demand

Salt at a supermarket

An existing automobile model

A new communication device

SUPPLY UNCERTAINITY
Agricultural products Weather Disruptions Quality problems

LOW IMPLIED DEMAND UNCERTAINITY

Low margin Accurate demand forecast Low stock outs Low obsolete inventory

HIGH IMPLIED DEMAND UNCERTAINITY

High margin Inaccurate demand forecast High stock out High cost of obsolescence

IMPLIED UNCERTAINTY SPECTRUM

Component supplier to Dell Same component supplier to HP

SUPPLY CHAIN CAPABILITIES

The supply chain is expected to meet demand in this environment

Supply chain responsiveness -- ability to

respond to wide ranges of quantities demanded meet short lead times handle a large variety of products build highly innovative products meet a very high service level

RESPONSIVENESS SPECTRUM

Highly efficient

Somewhat efficient

Somewhat responsive

Highly responsive

Integrated steel mill No variety/flexi bility

Standardized apparel

Most automotive production

Dell/ Seasonal garments

COST-RESPONSIVENESS
Responsiveness
High

Low High Low

Cost

STRATEGIC FIT
High implied uncertainty - High responsiveness Low implied uncertainty - Efficiency
No right supply chain strategy independent of competitive strategy Right supply chain strategy for a given competitive strategy

DELL
Customized PC : variety Delivery within days Innovation High demand uncertainty Supply uncertainty for new components

Responsive supply chain

SALT
Stable customer demand No variety, no innovation Low implied uncertainty No supply uncertainty Efficient supply chain

STRATEGIC FIT
Responsive supply chain

Responsiveness spectrum

Efficient supply chain Certain demand Implied uncertainty spectrum Uncertain demand