The supply chain Strategy

Definishions Refreshed
Supply chain:
A supply chain include all parties involved directly or indirectly
- in fulfilling customer request.
They are: suppliers, manufacturers, transporters, warehouses, retailers, and
customers.
And all functions within the organization like receiving and fulfilling
customer requests including -development of new products,
marketing operations, distribution, finance, human resources
-and customer services.

Supply chain management: is the supply chain process that

plans, implements, monitors and controls
the efficient and effective forward and reverse flow
and storage of goods, services and related information
between the point of origin and point of consumption
in order to meet customer requirement.
Supply chain Goal
make profit

Increasing supply chain surplus:

(make maximum profit)
reduce costs involved
Obtain larger market share: by
Winning over the competition and
Satisfying the target customer segment (Customer need)
To be leader in the segment of activity.
Growth and
Expansion

Organizational goals are achieved by

implementing strategies to counter
the challenges faced.
Supply chain profit
defined

Supply chain surplus =

customer value supply chain cost

Value of the final product to the customer Less

all the costs incurred by supply chain.
(SC surplus is the total profit generated by all the
combined supply chain operations together)
Challenges
to Supply chain in the market
Customer needs, Competitors, Market uncertainty, Industry norms,
Product Life Cycle, Technology ( obsolescence & adaption) and Global
environment
Customer needs: Low price, Reasonable/good quality, Wide variety,
Availability, Easy access, Fast response, Convenience, in time delivery,
Prompt after sale service, new products
Competition: Price wars, new products entry, fake products, discounts
Market:Uncertainties: of supply, process, operations, transportation,
fashion/ trend and demand Industry norms,PLC
Pricing:Monopoly pricing, competitive pricing , Market capturing,
PLC: Pricing through different stages, Inventory positioning, innovation
Government regulations: Safety (human & nature), Taxes & duties
Global Business environment: The challenges for globalisation
Strategy
in general

Strategy:
The road-map to conquer challenges
and win the set company goals.
Company goals:
1. Customer satisfaction,
2. Profit
3. Growth
Sc Strategy definition)

Deals with nature of procurement of raw materials,

transportation of material to and from the company,
manufacture of products/operations,
to provide services and
distribution of product to customer
along with any follow up services and
a specification of whether these processes
will be performed in house or out-sourced.
Strategic Fit
requires
company strategy, supply chain strategy and the competitive strategy,
to have aligned goals

Competitive Strategy (of the company) and

all functional strategies must fit together to form
a coordinated overall strategy

Different functions
appropriately structure process and resources
to achieve strategies successfully

The design of overall supply chain

and role of each stage must be aligned
to support the overall supply chain strategy
Fishers Strategy
proposes 2 Types of Products

Functional products:
Staple goods, consumer goods, FMCGs has a predictable and assured
demand.
(1-2% stock out in demand) into PLC maturity stage meet with efficient SC
strategy, low cost, inventory minimized throughout SC, supplier selection
based on quality, cost and reliability

Strategy: EOS production, Mass & slow transportation, low cost

Innovative products:
with high uncertainty of demand ( 10-40% demand variation) product in
its growth PLC;

Strategy: highly responsive delivery, high volume of inventory, stock close

to the market supply with speed, flexibility quality and reliability
Michael E.porter
proposes 3 Main Strategies in general

To face the challenges of:

1. customer expectations,
2. supply chain performance-
in fulfilling customer satisfaction.

Cost leadership
Product differentiation
Focus (market segmentation)
 To attain strategic fit
Define or specify one or more customer segments
that the company targets to satisfy
the company must ensure
that its supply chain capabilities support ability to satisfy
the needs of the targeted customer segments.

3 steps to achieve strategic fit:

Understand the customer needs ,

uncertainty the target customer segment faces and
uncertainty it poses to supply chain.
Unpredictability of demand, disruption and
delays that supply chain to be prepared for.

Understand supply chain capabilities.

What its supply chain is designed to do well;
(low cost, variety, responsiveness, service, etc)

Correct mismatch
to achieve strategic fit; If a mismatch exists in supply chain
in performance of desired function or desired customer need;

restructure supply chain to support competitive strategy or alter competitive strategy.

Examples

Seven Eleven
convenience of nearby store/not low price

Sams club
customer goes for low price - foregoing variety,
buy large quantities, Customer-demand varies
Emergency repair v/s setting up a new production line
Example:

for emergency repairs

emergency repair Service level requires availability immediately
Price of product in emergency prepared to pay higher
new production line
Quality product needed in each lot
Response time customer ready to wait
all parts needed to make sure even at higher price
Variety needed: new product line can wait for supply of products
from different source at right price
construction at reasonable/low price
Project can wait for delivery
Innovation in products:
apparel stores- high level innovation; Products are costly
Walmart cheaper products, no innovation expected
Supply Chain Capability

Creating strategic fit is all about

creating a Sc strategy that best meets
the demand of a company
that has targeted the given uncertainty it faces
Characteristics of different influences of
responsiveness and efficiency
SC responsiveness
includes a SCs ability to do the following:

Respond to wide range of quantity-demand

Meet short lead time
Handle a large variety of products
Build high innovative products
Meet high service level
Handle supply uncertainties
The competitive Strategy:
Strategies of existing companies in the global market:

Relative to its competitors,

the set of customer needs that it seeks to satisfy
through the products and services
ie.Low price, product availability, variety,
fast response etc.
Market Challenges

Michael. E Porter proposes

5 Competitive Forces in the market:

Buyers bargaining power

Suppliers bargaining power
Existing competitors rivalry
Substitutes products/ service entry threat
Threats of new entrant
Challenges resolved
-Buyers bargaining power can be over come by being the
cost leader as suggested.

-To counter suppliers bargaining power resort to supply-risk-

hedging by employing multiple sources of suppliers

-To counter substitute products entry: maintain sufficient

inventory in the market with cost leadership.

-New entrants can be blocked by releasing new products in to

the market frequently and product innovations.

-Existing competitors rivalry can be over come being a market

leader of specific market segment
A few examples
Walmart: Low price and reasonable quality; easy access

McMaster Carr: (maintenance repair and operations)

more than 5,00,000 products, convenience, availability ,
responsiveness, not on low price

Blue Nile Diamonds:

online selling - over 70,000stones,costs less, cannot touch or
feel, 30 day- return policy, order and wait to receive product.

Zales ( diamonds):
through retail stores - Fast response, personal care, limited
variety, can touch and feel, attended by sales person, readily
buy and walk-out
Examples continued
Dell Computers: (selling PCs)
in the beginning selling directly, then through re- sellers,
custom made PCs assembled by re-seller, parts supplied by Dell;
low cost manufacturers from low cost countries on contract
as PCs demand reduce and laptop demand increased
by stiff competition.

Cisco: (selling PCs)

totally depended on manufacturers,
company saving on warehouses, transportation;
company having re-sellers and stores out- sourced

Seven Eleven (Japanese Co): convenience store,

constant new product development and introduction,
very responsive, highly informative to customer,
responsiveness and fast replenishment