Part II: 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
1-1
2-1
The Value Chain

2-2
 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
2-3
 How is Strategic Fit
Achieved?
1. Understanding the customer and
supply chain uncertainty
2. Understanding the supply chain
capabilities
3. Achieving strategic fit

2-4
 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

2-5
 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
2-6
Cost-Responsiveness
Efficient Frontier

2-7
 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

2-8
Zone of Strategic Fit

2-9
 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

2-10
 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

2-11
 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

2-12
Different Scopes of Strategic Fit
Across a Supply Chain

2-13
 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

2-14
A
Framework
for
Structuring
SCM Drivers

2-15
 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