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Supply Chain
Performance:
Achieving
Strategic Fit
and Scope
PowerPoint presentation to accompany
Chopra and Meindl Supply Chain Management, 5e
Global Edition
Copyright 2013 Pearson Education.
2012 Prentice Hall Inc. 1
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The Value Chain

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Competitive and Supply
Chain Strategies
Competitive strategy defines the set of customer needs a
firm seeks to satisfy through its products and services
Product development strategy specifies the portfolio of
new products that the company will try to develop
Marketing and sales strategy specifies how the market
will be segmented and product positioned, priced, and
promoted
Supply chain strategy determines the nature of material
procurement, transportation of materials, manufacture of
product or creation of service, distribution of product
All functional strategies must support one another and
the competitive strategy
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How is Strategic Fit
Achieved?
1. Understanding the customer and
supply chain uncertainty
2. Understanding the supply chain
capabilities
3. Achieving strategic fit

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Step 1: Understanding the
Customer and Supply Chain
Uncertainty
Quantity of product needed in each lot
Response time customers are willing to
tolerate
Variety of products needed
Service level required
Price of the product
Desired rate of innovation in the product

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Customer Needs and
Implied Demand Uncertainty
Customer Need Causes Implied Demand Uncertainty to
Range of quantity required Increase because a wider range of the quantity
increases required implies greater variance in demand
Lead time decreases Increase because there is less time in which to
react to orders
Variety of products required Increase because demand per product becomes
increases more disaggregate
Number of channels through Increase because the total customer demand is
which product may be acquired now disaggregated over more channels
increases
Rate of innovation increases Increase because new products tend to have more
uncertain demand
Required service level increases Increase because the firm now has to handle
unusual surges in demand

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Levels of Implied Demand
Uncertainty

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Step 2: Understanding Supply
Chain Capabilities
How does the firm best meet demand?
Supply chain responsiveness is the 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
Handle supply uncertainty
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Cost-Responsiveness
Efficient Frontier

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Responsiveness Spectrum

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Step 3: Achieving Strategic
Fit
Ensure that the degree of supply chain
responsiveness is consistent with the
implied uncertainty
Assign roles to different stages of the
supply chain that ensure the appropriate
level of responsiveness
Ensure that all functions maintain
consistent strategies that support the
competitive strategy

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Zone of Strategic Fit

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Roles and Allocations

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Efficient and Responsive Supply
Chains
Efficient Supply Chains Responsive Supply Chains
Supply demand at the lowest
Primary goal Respond quickly to demand
cost
Create modularity to allow
Product design Maximize performance at a
postponement of product
strategy minimum product cost
differentiation
Lower margins because price is Higher margins because price is
Pricing strategy
a prime customer driver not a prime customer driver
Maintain capacity flexibility to
Manufacturing Lower costs through high
buffer against demand/supply
strategy utilization
uncertainty
Inventory Maintain buffer inventory to deal
Minimize inventory to lower cost
strategy with demand/supply uncertainty
Lead-time Reduce, but not at the expense Reduce aggressively, even if the
strategy of costs costs are significant
Supplier Select based on speed,
Select based on cost and quality
strategy flexibility, reliability, and quality

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Changes Over Product
Life Cycle

Beginning stages
1. Demand is very uncertain, and supply may
be unpredictable
2. Margins are often high, and time is crucial to
gaining sales
3. Product availability is crucial to capturing
the market
4. Cost is often a secondary consideration

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Changes Over Product
Life Cycle

Later stages
1. Demand has become more certain, and
supply is predictable
2. Margins are lower as a result of an increase
in competitive pressure
3. Price becomes a significant factor in
customer choice

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Different Scopes of Strategic Fit
Across a Supply Chain

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Drivers of Supply Chain
Performance
1. Facilities
The physical locations in the supply chain
network where product is stored,
assembled, or fabricated

2. Inventory
All raw materials, work in process, and
finished goods within a supply chain

3. Transportation
Moving inventory from point to point in the
supply chain

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Drivers of Supply Chain
Performance
4. Information
Data and analysis concerning facilities,
inventory, transportation, costs, prices, and
customers throughout the supply chain

5. Sourcing
In-house or outsource, Supplier selection,
Procurement

6. Pricing
How much a firm will charge for the goods and
services that it makes available in the supply
chain

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A
Framework
for
Structuring
SCM
Drivers

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Challenges
Increasing product variety and shrinking
life cycles
Globalization and increasing uncertainty
Fragmentation of supply chain ownership
Changing technology and business
environment
The environment and sustainability

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