Presentation from Value Chain Supply Chain Innovations 2017. Explaining the link between strategy, supply chain and financial KPIs. With cases from Food Retail and High-Tech. Material for a book on 'Supply chain Strategy and financial metrics', based on the supply chain triangle.
3. Market leaders are
‘extremely disciplined
and focused’ on 1 of 3
strategic options
Treacy & Wiersema,
1995
Operational Excellence Product Leadership Customer Intimacy
• ‘Best price’ • ‘Best product’ • ‘Best total solution’
• Efficiency through process
thinking
• Zero-defect service
• Best product through
continuous product
innovation
• Clear innovation strategy:
where to place the bets?
• Understanding the broader
problem
• Having expertise about the
customer’s business
• Customers carefully selected
• The operations department
drives the company
• Attention is paid to process
speed and quality
• R&D is key: idea management
• Marketing is also key: educate
people with a missionary zeal
• Get engineers, designers, and
marketers systematically
together
• Demonstrate expertise and
experience
• Strengthen the relationship
• Build loyalty: focus on
customer retention
13. Supply Chain Triangle in 3 dimensions
service
inventory cost
Higher
turns
Lower
cost
Higher
service
14. Measuring Service by Gross Margin
service
inventory cost
Higher
turns
Higher service
As measured by
Gross Margin
Lower cost
(excl.COGS)
15. Mapping Treacy & Wiersema to Service
Product Leadership
highest spec driving highest margin
Customer intimacy
expertise in solutions drives a premium
Operational Excellence
excel in the basics
service
inventory cost
Higher
turns
Lower cost
(excl.COGS)
Higher service
As measured by
Gross Margin
16. Mapping Treacy & Wiersema to Cost
service
inventory cost
Higher
turns
Lower cost
(excl.COGS)
Higher service
As measured by
Gross Margin
Product Leadership
high cost in R&D and in sales
Customer intimacy
solution development is a cost of sales
Operational Excellence
cost leader in every fibre of the organization
17. Mapping Treacy & Wiersema to Inventory
service
inventory cost
Higher
turns
Lower cost
(excl.COGS)
Higher service
As measured by
Gross Margin
Product Leadership
highest complexity, highest risk
Customer intimacy
controlled complexity
Operational Excellence
simplicity drives efficiency
18. Mapping Treacy & Wiersema to the Supply Chain Triangle
Product Leadership
highest risk with highest potential payoff
Customer intimacy
an extra mile at an extra cost and premium
Operational Excellence
excel in cost and the service basics
service
inventory cost
Higher
turns
Higher service
As measured by
Gross Margin
Lower cost
(excl.COGS)
19. Mapping Treacy & Wiersema to the Supply Chain Triangle
Product Leadership
highest risk with highest potential payoff
Customer intimacy
an extra mile at an extra cost and premium
Operational Excellence
excel in cost and the service basics
service
Capital
employed
cost
Lower capital
employed
Higher service
As measured by
Gross Margin
Lower cost
(excl.COGS)
EBIT
ROCE
21. Market leaders are
‘extremely disciplined
and focused’ on 1 of 3
strategic options
Treacy & Wiersema,
1995
Operational Excellence Customer Intimacy Product Leadership
• Hard Discounters • Supermarkets • Fresh food markets
• Good quality at low cost • Mix of quality and price • The best, highest quality,
healthiest
• Lots of private label • Mix of A and B • Locally grown
• Limited Assortment • Everything you daily need • Quality over Quantity
33. Lessons Learned
1. The cost and the capital employed in your supply
chain, really depend on your strategy
2. Strategies that require a higher cost and capital
employed, can typically compensate this by
generating a higher gross margin
3. Different strategies are different ways to come to the
same return on capital employed, or ‘bang for the
buck’