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What is strategic fit


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What is strategic fit

  1. 1. Achieving Strategic Fit  Strategic fit: – Consistency between customer priorities of competitive strategy and supply chain capabilities specified by the supply chain strategy – Competitive and supply chain strategies have the same goals© 2004 Prentice-Hall, Inc. 2-1
  2. 2. Step 1: Understanding the Customer and Supply Chain Uncertainty  Identify the needs of the customer segment being served by the following attributes: – Quantity of product needed in each lot – Response time customers will tolerate – Variety of products needed – Service level required – Price of the product – Desired rate of innovation in the product© 2004 Prentice-Hall, Inc. 2-2
  3. 3. 1. Understanding the Customer andSupply Chain Uncertainty• Understanding customer (demand) uncertainty – Demand varies along certain attributes • Quantity in each lot, response time, variety of products needed, service, price, innovation, etc – Implied demand uncertainty • Demand uncertainty due to the portion of demand that the supply chain is targeting, not the entire demand Customer need Causes implied demand uncertainty to… Range of quantity increases Increase Response time decreases Increase Variety of products increases Increase Number of channels through which Increase product may be aquired increases Rate of innovation increases Increase Required service level increases Increase
  4. 4. 1. Understanding the Customer andSupply Chain Uncertainty• Understanding supply uncertainty – Supply uncertainty is strongly affected by the life-cycle position of the product. New products being introduced have higher supply uncertainty than mature products Supply source capability Causes supply uncertainty to… Frequent breakdowns Increase Unpredictable and low yields Increase Poor quality Increase Limited suppy capacity Increase Infexible supply capacity Increase Evolving production process Increase
  5. 5. 2. Understanding the Supply ChainCapabilities• Supply chain capabilities – Supply chain responsiveness • Respond to wide ranges of quantity demanded, meet short lead times, large variety, innovative products, high service level, etc – Supply chain efficiency (low cost) Highly Somewhat Somewhat Highly efficient efficient responsive responsive Integrated steel Hanes apparel Most automotive Seven-Eleven mills production Japan
  6. 6. Achieving Strategic Fit• Strategic fit – Given a competitive strategy, what should a company’s supply chain do particularly well? • Wal-Mart – Everyday low prices (low cost retailer for a wide variety of products) – Buys from low cost producers, owns its infrastructure and distribution network • Coors – The coldest tasting beer in the world, brewed with Rocky Mountain spring water – Refrigerated transport, main facility near Rocky Mountains • Dell – Custom-made computer systems at a reasonable cost – Online ordering, no middle-man
  7. 7. Achieving Strategic Fit What is the right supply chain for your product? Responsive supply chain Cost-effective supply chain Implied demand uncertainty Low High (functional products) (innovative products)
  8. 8. The Value Chain: Linking Supply Chain and Business Strategy Competitive Strategy New Product Marketing Strategy Strategy Supply Chain Strategy New Marketing Product and Operations Distribution Service Development Sales Finance, Accounting, Information Technology, Human Resources© 2004 Prentice-Hall, Inc. 2-8