Strategy & Strategy into Action

Maturity scan: Strategy Stage of evolution Characteristics Stage I: Ad hoc Ad hoc decisions, fire fighting problems, no clear strategy Stage II: Functional Functional organization with each function making separate decisions in its own silo, based on a functional vision and policy Stage III: Integral Shared cross functional strategy and vision, translation to all functional areas not yet implemented on tactical level Stage IV: Visionary Shared cross functional strategy and vision, clear translation to all functional areas, guideline for all tactical measures

A Supply Chain and its traditional conflicts High inventory turns Maximum flexibility VP Supply Chain Components Finished product Supply Production Distribution VP Purchasing VP Operations VP Sales Lowest purchase price Full truckloads High utilization % Long runs – minimize changeovers Low unit costs High service level Safety stocks

Competitive strategy What must your supply chain excel at? Benefit driven by customer value Flexibility customization variety volume Time delivery speed on-time delivery development speed Cost: low cost Quality : top quality consistent quality

Companies should know their Order Winners (and Order Qualifiers) Competitive factors: If customers value these Performance objectives: Then we need to excel at these Low price Cost High quality Quality Fast delivery Speed Reliable delivery Dependability Innovative products and services Flexibility (product/service) Wide range of products and services Flexibility (mix) The ability to change the timing or quantity of products and services Flexibility (volume and/or delivery) An order winner is a characteristic that will win the bid or customer's purchase. To provide order winners, firms must be better than their competitors. An order qualifier is a characteristic that is required for a product or service to be considered by a customer. Firms must provide the qualifiers to get into or stay in a market. To provide qualifiers, they need only to be as good as their competitors. Source: Hill, 2000

The relation between competitive strategy and supply chain strategy Copyright 2007 J. A. Van Mieghem. All rights reserved. For permissions, contact permissions@vanmieghem.us The relation between competitive strategy and supply chain strategy 4/15/2017 Value is created through a chain of value adding processes/functions that must be performed for a successful sale. Other process/functions support and facilitate Supply chain strategy: determines the nature of material procurement, transportation of materials, manufacture of product or creation of service, distribution of product Consistency and support between supply chain strategy, competitive strategy, and other functional strategies is important Finance, Accounting, IT and HR New product development Marketing and Sales Operations Distribution Service Supply Chain Value Chain Source: Sunil Chopra, Peter Meindl, ‘Supply Chain Management’, 3rd ed., 2007 Do no copy nor poste on the Internet.

Supply Chain strategy Supply chain strategy must fit with competitive strategy Cost Flexibility Quality Time Competitive Strategy Supply Chain Strategy Resources Processes Competencies Source: Sunil Chopra, Peter Meindl, ‘Supply Chain Management’, 3rd ed., 2007

Achieving strategic fit Step 1: Understanding the customer and the company’s value proposition Step 2: Understanding the supply chain capabilities Step 3: Achieving strategic fit Source: Sunil Chopra, Peter Meindl, ‘Supply Chain Management’, 3rd ed., 2007

A one-dimensional world Functional products Stable, predictable demand Innovative products Dynamic, unpredictable demand responsiveness efficiency Fisher (1997) distinguishes two product types … and just two relevant supply chain strategies Source: Marshall L. Fischer ‘What is the right supply chain for your product?’, HBR 1997

Avg. forced season-end markdown Differences in demand Functional products Innovative products Product life cycle More than 2 years 3 months to 1 year Contribution margin 5% to 20% 20% to 60% Product variety Low High Avg. forecast error 10% 40% to100% Avg. stockout rate 1% to 2% 10% to 40% Avg. forced season-end markdown 0% 10% to 25% Source: Marshall L. Fischer ‘What is the right supply chain for your product?’, HBR 1997

Different supply chains Physically efficient supply Chain Market responsive supply chain Primary goal Supply efficiently a lowest possible cost Quickest possible response Manufacturing focus High utilization Capacity flexibility Inventory strategy High inventory turns, minimize inventory Buffer stocks Lead time focus Reduce but not at expense of higher costs Invest aggressively to reduce lead time Supplier selection Cost and quality Speed, flexibility and quality Source: Marshall L. Fischer ‘What is the right supply chain for your product?’, HBR 1997

Match products and supply chain G4 Planning en besturing - Logistieke doelstellingen Match products and supply chain product   responsiveness innovative efficiency functional Strategy standardize innovate refocus on efficiency refocus on responsiveness Source: Marshall L. Fischer ‘What is the right supply chain for your product?’, HBR 1997

Achieving a strategic fit: Choose your ‘right’ supply chain Demand uncertainty spectrum Responsive supply chain Efficient supply chain Functional products Innovative products Responsiveness spectrum Zone of Strategic Fit High shelflife % Low shelflife % Source: Sunil Chopra, Peter Meindl, ‘Supply Chain Management’, 3rd ed., 2007

Supply Chain Performance Two key points there is no right supply chain strategy independent of competitive strategy there is a right supply chain strategy for a given competitive strategy All functions in the value chain must support the competitive strategy to achieve strategic fit Source: Sunil Chopra, Peter Meindl, ‘Supply Chain Management’, 3rd ed., 2007

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