Unit III: Strategic sourcing

Supply management and commodity strategy development

1. Explain Integrative Strategy Development and discuss its components

The process of aligning supply management goals with corporate objectives is especially important
for supply management and supply chain managers. These managers often face some very broad
directives from corporate management—for example, to reduce costs or to improve quality. The
strategy development process takes place on four levels:

• Corporate Strategies: These strategies are concerned with (1) the definition of businesses in which
the corporation wishes to participate and (2) the acquisition and allocation of resources to these
business units.

• Business Unit Strategies: These strategies are concerned with (1) the scope or boundaries of each
business and the links with corporate strategy and (2) the basis on which the business unit will
achieve and maintain a competitive advantage within an industry.

• Supply Management Strategies: These strategies, which are part of a level of strategy development
called functional strategies, specify how supply management will (1) support the desired competitive
business-level strategy and (2) complement other functional strategies (such as marketing and
operations).

• Commodity Strategies: These strategies specify how a group tasked with developing the strategy
for the specific commodity being purchased will achieve goals that in turn will support the supply
management–, business unit–, and ultimately corporate-level strategies.

Components of Integrative Strategy Development

Companies that are successful in deploying supply chain strategies do so because the strategy
development process is integrative. This means that the strategy is drafted by (or has significant
input from) those people responsible for implementation.

Integrative supply chain strategies occur when corporate strategic plans are effectively “cascaded”
into specific supply management and commodity goals, through a series of iterative planning stages
(shown in Exhibit). Corporate strategy evolves from corporate objectives, which effectively evolve
from a corporate mission statement drafted by the chief executive officer (CEO), functional
executives, and the board of directors. Corporate strategies are crafted by the CEO, taking into
consideration the organization’s competitive strengths, business unit and functional capabilities,
market objectives, competitive pressures and customer requirements, and macroeconomic trends.
What distinguishes an integrative strategy development process is that business unit executives, as
well as corporate supply management executives, provide direct input during the development of
corporate strategy