Supply Chain Performance : Achieving Strategic Fit and Scope

Now market place is flooded with products of many companies trying to capture consumers. This competition has led companies to differentiate from rest by identifying and catering the needs of its targeted consumers.

Competitive Strategy 

It defines the set of needs that a company seeks to satisfy through its products and services. It depends on how customer prioritizes Product cost, delivery time ,variety and quality. Different customers have different order of priorities, based on this the companies orient themselves to cater those customers and thus maintaining their differentiation in market.

                             

Value chain

Value chain of a company is all the set of activities that adds value to the final customer using the goods\services of a company.

Each function has its own role to play. Some of the functions are below :

To achieve the competitive strategy set by a firm, the supply chain strategy needs to be aligned to give the desired results. Supply chain strategy defines a broad structure of supply chain. From here the the strategy of each function of supply chain is set and these are called as functional strategies. We need to ensure that these functional strategies are aligned with one another.  

Strategic Fit

Achieving consistency between target customer needs and supply chain capabilities is strategic fit.

To achieve a strategic fit, a company must accomplish the following :

• Competitive strategy and all functional strategies should fit to form coordinated overall strategy. Each functional strategy should support other functional strategy.
• Each function should develop its capabilities to meet its strategy goals.
• Design of overall supply chain should be aligned with supply chain strategy.

 

How is strategic fit achieved?

1. Understand the customer and supply chain Uncertainty

 Identify the priority combination of  needs of the target segment

1. Order Quanity
2. Response Time
3. Product Variety
4. Service Level
5. Channels
6. Rate of innovation
7. Price

Translate the needs of the target segment of a product into a metric called implied demand uncertainty.

Implied demand Uncertainty

Implied demand uncertainty in contrast to the demand uncertainty, is the uncertainty for only a portion of the demand that supply chain plans to satisfy based on the customer desires it seeks to satisfy.

Supply source capability on supply uncertainty

1. Breakdowns
2. Unpredictable low yields
3. Poor quality
4. Limited supply capacity
5. Inflexible supply capacity
6. Evolving production process

Understanding supply chain capabilities :

Implied uncertainty Spectrum 

2.Understand supply chain and map it on the responsiveness spectrum

Categorization of supply chains based on different characters and map it on

• Respond to wide ranges of quantities demanded
• Meet short lead times
• Handle a large variety of products
• Build highly innovative products
• Meet a high service level
• Handle supply uncertainty  

 

3.Achieving strategic fit

After mapping the implied demand uncertainty and responsiveness spectrum we need to fit them against one another . To do this we take each value on different axis and check if their fit lies in the zone of strategic fit.

  

Companies should try to move into zone of strategic fit by adjusting either of the factors.

Next step is to assign  the roles to the individual functions based on the supply chain responsiveness required. You can distribute the responsiveness across functions depending on the overall cost and capability. We try to find the best combination of efficiency and responsiveness across all functions.

Roles of different functions in different types of supply chain

Tailoring Supply chain for strategic Fit

Based on the stage of product life cycle, product varieties, customer segments a firm must tailor its supply chain to achieve strategic fi

Expanding strategic scope

Scope represents to the functions within the firm and stages across the supply chain where the strategic fit is applied. Below are different levels of strategy scopes.

• Inter operation Scope
• Intra functional Scope :Minimize functional scope
• Inter functional Scope : Maximize company profit
• Inter company Scope : Maximizing supply chain surplus

Inter company scope of strategic fit is relevant in current era as the competition has shifted from company vs company to Supply chain vs Supply chain.

Challenges to achieving and maintaining strategic fit

1. Increasing product variety and shrinking life cycles
2. Globalization and increasing Uncertainty
3. Fragmentation of Supply Chain Ownership
4. Changing Technology and Business Environment
5. The environment and sustainability