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Gaining Competitive Advantages    Through Supply Chain  Management:Success Storie
TABLE OF CONTENTS1.     INTRODUCTION ........................................................................................
1. INTRODUCTION    The business environment has been suffering fromfierce competitionsince theescalation of technology evo...
competitors, companies used a combination of factors including quality, price, customerservice, product features, and avai...
reduction, companies that use SCM strive for waste reduction at all levels within thesupply chain, through minimizing dupl...
Logistics is the critical element in supply chain management. The main taskoflogistics facilitatesis managing material and...
procurementalso prevents building up excess inventories. There are broad and diversecollections of styles that customers a...
4.2. Dell    Dell is one of the biggest and most well-known PC makers in the world. They couldalso gain competitive advant...
clearer. The company focused on excelling in information availability as a competitiveadvantage. That required increasing ...
captures data relevant to stock holding and sales patterns. That contributed not only inbetter inventory management, but a...
6. REFERENCESLiterature Sources:Christopher, M. G. (1992). Logistics and Supply Chain Management, PitmanPublishing,London,...
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Gaining Competitive ‎Advantages Through ‎Supply Chain ‎Management: Success ‎Stories

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Success stories of business leaders are discussed for how they took the lead using Supply Chain Management.

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Gaining Competitive ‎Advantages Through ‎Supply Chain ‎Management: Success ‎Stories

  1. 1. Gaining Competitive Advantages Through Supply Chain Management:Success Storie
  2. 2. TABLE OF CONTENTS1. INTRODUCTION ......................................................................................................... - 1 -2. BACKGROUND ........................................................................................................... - 1 -3. THEORY ....................................................................................................................... - 2 -4. DISCUSSION AND ANALYSIS .................................................................................. - 4 - 4.1. ZARA ..................................................................................................................... - 4 - 4.2. Dell ......................................................................................................................... - 6 - 4.3. FedEx ...................................................................................................................... - 6 - 4.4. Wal-Mart ................................................................................................................ - 7 -5. CONCLUSIONS............................................................................................................ - 8 -6. REFERENCES .............................................................................................................. - 9 - I
  3. 3. 1. INTRODUCTION The business environment has been suffering fromfierce competitionsince theescalation of technology evolution and internet growth had become wildlyincreasing.To survive in today’s market; the business should be characterizedbyfasterproduction pace, shorter product life cycles, moreinnovative and sophisticated,and well-organized. Thatadds much pressure to the supply chain usability. It shouldreact rapidly, efficiently, and effectively in order to respond to changes happening in themarketplace so as to sustain, and, most importantly, to create competitive advantage. According to Towill and Christopher (2002) the key success of a supply chain isbasically determined by the end customer. Delivering the right goods to the rightcustomers at the right price and time is not a guarantee for companies to staycompetitive in the market, but it is an inevitable key to survive. As a result, competitionbetween supply chains has become more important rather than competition betweenindividual companies (Christopher, 1992). In B2B, an effective supply chain can create a strong competitive advantage for thefirms involved within it. A competitive advantage is defined by the capabilities that anorganization can develop for defensible position over its competitors (Li et al., 2006).This goal can be reached in several ways, starting by creating a strong collaborationwith companies by working together to make the whole supply chain competitive. Thebackbone of this strategy requires wide use of information technology in order to shareinformation, and also generate future demand. The primary idea in SCM is that theentire process must be viewed as a one united system. The core competencies ofindividual organizations are determined and invested for to create supported competitiveadvantage for the supply chain.This report discusses how a supply chain can create a strong competitive advantage fororganizations. In order to give the reader a clear idea about that, several successstoriesrelated to some of the most well-known organizationsarereviewed.2. BACKGROUND The transformation that accompanied the industrial revolution had also a directimpact on supply chains, which forced the latter to apply some changes in order to keepthe business updated and adapted. In the past, and to differentiate themselves from their -1-
  4. 4. competitors, companies used a combination of factors including quality, price, customerservice, product features, and availability.The new nature of competition is driven bycritical factors, such as rapid shrinkage of product lifecycles,in which products areplaced and replaced on the market faster. High technology and apparel industriescouldbe evident examples of that shrinkage, where new products introduced are quicklyreplaced by new ones less than within six months. Anotherdriving factor is the growthof internetnetworks. Selling goods through via webspositively affectsale growthforcompanies because of the possibility to be connected directly to their end customers. E-business dramatically changed the way companies produce, sell, and distributeproducts, and even the way they share information with their suppliers and partners.Previously, companies considered information as confidential that need to be protectedinstead of being shared. The nature of competition has been shifted from company-based to supply-chain-based competition, which encouraged sharing information alonga supply chain.Havingefficient information systems, companies have not to own all thepieces of a supply chain network, instead, they may consider working as a cooperativesupply chain that functions as a single entity. A supply chain that assures secure andsmooth flow of information can react faster to fulfill the customer’s needs and beadapted to the market changes. Coordination and information exchange betweenpartners within a supply chain is the key to stay competitive. Such change requires setof business processes including planning, ability to receive regular feedbacks, and usageof information technology.3. THEORY A supply chain is a network of organizations performing various processes andactivities to produce value in the form of products and services for the end customer(Christopher, 1992). In other words, and according to (Stapleton et al., 2006), supplychain management is the integration of all network activities which manufacturers,suppliers, , retailers and distributers are involved to improve products, services, andinformation flow throughout the chain from suppliers to the end customers, withoutignoring the need forcost reduction while maintaining target service level. Supply chain management is undertaken to achieve four major goals includingtimecompression, waste reduction, and unit cost reduction,flexible response. For waste -2-
  5. 5. reduction, companies that use SCM strive for waste reduction at all levels within thesupply chain, through minimizing duplication by keeping inventories maintained andmanaged efficiently, and seeking to achieve uniformity of operations and systemsamong supply chain actors. Another important goal of SCM is time compression oforder-to-delivery cycle time, since it helps in reducing inventories, and therefore, allentities in the supply chain become able to operate in more efficient way.Thatalsoallowsa quick response whenever problems occur, and speeds up the cash flow andfinancial performance connected to the system. The third goal of SCM is to developflexible response to meet customer’s needs in cost effective manners that may includeorder size, configuration, and product variety. The fourth goal of SCM is reducing costper unit to end users (Hutt &Speh, 2004). According to (Day, 1994),the competitive advantage has traditionally been gainedthrough focusing on price and product performance attributes to conserve the marketshare of the current customer. However, competition is considered as a war ofmovement that relays on quick responding to market needs by creating superiorcompetencies required to add a customer value and achieve cost efficiency andprofitability (Stalk et al., 1992). Competitive advantages are built up on five maindimensions. The first dimension is price/cost,which is the ability to compete with lowestpossible prices (Li et al., 2006). The second dimension isprovidingcustomers withappropriate productqualities (Koufteros, 1995). The third dimension is deliverydependability, which means providing the clients with their right products, at the rightquantity, and on time (Li et al., 2006). The fourth dimension is product innovation,which could be seen as thereintroduction of product features to the market place(Koufteros, 1995). The fifth dimension is time to market, which is the time required toreact (Li et al., 2006). SCM efficiency andeffectivenessareenhancedby three important drivers includingpowerful information systems. The most important driver is internet, which is regardedas essentialfor managing all types of integrated supply chain systems. The use ofinternet helped business marketers to achieve several benefits such as reducingcustomer support costs, minimizing channel inventory, and targeting new customers.The third driver is the SCM software applicationsthat supportmanaging the flow ofinformation and material throughout the network (Hutt &Speh, 2004). -3-
  6. 6. Logistics is the critical element in supply chain management. The main taskoflogistics facilitatesis managing material and information flows. This task is a key partof the overall task of SCM. SCM is concerned with managing the entire chain ofprocesses from raw material supply to the end-customer (Hutt &Speh, 2004).4. DISCUSSION AND ANALYSIS Since integrating supply chain management requires a comprehensive view throughthe business chains, driving success factors that could bring competitive advantagesmay be reflected by enormous ways. Besides, there are too many relevant models andtools that could be considered and make supply chain management very wideperspective in today’s business. Therefore, our insight for this report is to show somesuccess stories of business leaders who could manage to gain competitive advantageusing effective supply chain management. Among global companies, we find thesuccess stories of Zara, Dell, FedEx and Wal-Mart quite interesting to discuss in thisreport. The main discussion is mainly built on the role of powerful information systems,internet technology and supply chain software as drivers for SCM to gain competitiveadvantages to achieve SCM goals including time compression, waste reduction,unit costreduction, andflexible response.4.1. ZARA ZARA is a Spanish company regarded as the most dynamic and successfulapparelbusiness in the world. Even though their manufacturing system is similar with the othercompetitors, they could manage to surpass them by uniquely integrating SCM. Theyinspired many aspects of that benefiting from experience of Toyota in lean enterprise.Additionally, ZARA continuously dedicate innovation relevant to the overall process.The stores of ZARA are globally linked to headquarters, where employees can easilyadd the daily change of customer demand across countries. That plays a very significantrole in keeping designers and trends trackers updated with which styles are morefavourable from economic perspective. This kind of data transparency enables gettingcloser to the real customer needs and reduces the waste of efforts dedicated to styles thatmay not achieve significant sails in a certain area. Furthermore, design-led procurementimproves the responsiveness to the market by observing the drawn trends soon they cangive helpful indications to what should be focused on in the near future. Design-led -4-
  7. 7. procurementalso prevents building up excess inventories. There are broad and diversecollections of styles that customers at the level of B2B have to pull. That alsocontributed in waste reduction, since stocks are constantly kept refreshed and updated.Once the order is left, there are two times weekly ZARA deliver their products in, andfew products are available for more than month. ZARA could not be able to take the advantage of time compression until they adoptappropriate sourcing policy to their industry. Some items supplied with a good qualityby Asian suppliers are imported to Spain, while the rest of items are available with aquick responsiveness. The main policy that ZARA follow for sourcing is having a broadsuppliers’ base that offers the most featured selections of fabrics at very low prices.Additionally, they do not seem to be attracted to depend on certain groups of suppliers.We think that this policy is specifically dependant on the type of industry. That makessense if the dynamic aspect of apparel industry that requires high customization isconsidered. On the other hand, more than 50% of the materials are purchased locallyfrom the gray market. All items are dyed and printed by a Galician subsidiary, while thelocal workshops are employed to conduct final sewing or assembly and quality control.Therefore, although many operations are conducted outside, they still keep their qualitystandards controllable. Moreover, they could be able to design a SC able to postpone notonly colour but also final design changes. Thus, they only pay for the completedgarments, which limits the business risk. Speaking of numbers, ZARA produce their products to a couple of distributioncentres. They are both fed twice a week. The delivery processes are done within 24hours, and the overall lead-time is 4-5 weeks, while it is several months for thecompetitors.Generally, the driving strategy involves employing a smart sourcing policy,while only keeping locally the operations that enhance cost efficiency including dying,cutting, labelling and packaging. The centralization could help ZARA to support rapidproduction of new collections in a coordinated and consistent manner. ZARA aligndesign with the SC to reduce the potentials of supply chain failure and ensure theaccuracy of supplies. That shows a unique example of how to integrate lean enterprise,while showing agile performance. -5-
  8. 8. 4.2. Dell Dell is one of the biggest and most well-known PC makers in the world. They couldalso gain competitive advantages over other competitor, such as IBM, through applyingsignificant changes in the supply chain. Dell reengineered its processes andrelationships with suppliers and logistics providers so that the overall processes ofbuilding, customizing, and shipping PCs does not take longer than eight hours. Unlikewhat ZARA follow, Dell created long-term relationships. However, competitors as IBMand Toshiba had the same aspect of long-term relationships. Dell reduced the number oflogistics providers from 130 to 60, and suppliers from 204 to 30 companies. Thisreduction of connections had the aim of cost reduction and time compression. Delldedicated VMI (Vendor Managed Inventory), where components are never ordered. Theactors are selected so that they have warehouses with no more than 8-10 days capacities,which are as maximum located 15 minutes away from Dell’s factories. Moreover, Dellrely on very capable information system that enables suppliers to reschedule theiroperations every two hours. All actors have accessibility to extranet that provides themwith updated forecasting records. They could also access hub-level inventory holdings,where all relevant information about shelves and stock are available. That all resulted inreducing the inventory to only four days, while it is 20-30 days for the competitors. Dellcould be able to improve inventory turns to 24 hours, while the competitors had to waitfor 35 days for payments through primary dealers. Furthermore, the internet contributedsignificantly through e-commerce in the sales growth. Through internet, Dell gainaverage sales accounts for 1 million dollar per day(McWilliaims&White, 1999).4.3. FedEx As business leader in courier and logistics industry, FedEx passed throughhistorical stages to bring competitive advantages through network improvements. Suchimprovements could be redefined as SC practices. FedEx started differentiatingthemselves by providing better services to their B2B customers in terms of dataavailability. What would make B2B market relies on FedEx services is being able totrack their packages, and thus, better control their businesses. This reality was not thatclear for FedEx in the beginning (Huttenlocher, 2004). But after integrating reliableinformation system, and internet-based access, the form of value proposition became -6-
  9. 9. clearer. The company focused on excelling in information availability as a competitiveadvantage. That required increasing the transparency of data by integrating innovativetechnology. The FedEx Institute of Technology at the University of Memphis isassigned to develop and support the dependency on technology innovation through 150researchers. The mailrooms are designed so that the operations such as tracking aresophistically automated. Moreover, the dedicated client/server network is one of theworld’s largest ones (FedEx, 2013). The most recently “3D wizardry” and Wi-Finetworks systems have been incorporated as fundamental elements of the overallstructure. FedEx exceeded the technological limits that others are stuck to. Thecompany introduced a 3D globe with use of a webcam that could analyse data andproduce statistics on the business world and update information on current economicsituations, in the all countries FedEx are located. The number of website visitorsrecorded then successive significant increases. Moreover, for integrating easy socialconnectivity to smaller businesses, FedEx use social media to allow companies to tracktheir packages. All these practices have been integrated to the SC of FedEx not only tooffer very transparent and featured way of sharing information, but also to let their B2Bcustomers survive and thrive, as that account to the overall return on investment.4.4. Wal-Mart Using efficient supply chain practices to win competitive advantages could not bereflected more perfectly without showing some respect to the experience of Wal-Mart inAmerica. Wal-Mart is undoubtedly the cost and market leader in American retailing.They could overcome competitors, such as Kmart, and leave a large difference later on.No competitor could get even close. We do not know even if the term “competition” isrelevant in their case. But focusing on the historical review of Wal-Mart is for surehelpful. Wal-Mart invested generously in integrating innovation and informationtechnology systems in retailing. They constantly considered re-engineering in processes,waste elimination, and performance efficiency. They are the first who dedicated Bar-codes technology in their operations, especially, inventory management system. Theyalso deployed all possible technologies, such as EDI (Electronic Data Interchange), tofacilitate the best possible communication atmosphere. They adoption of technologycontinued through employing wireless scanning guns and supporting software that -7-
  10. 10. captures data relevant to stock holding and sales patterns. That contributed not only inbetter inventory management, but also in significant cost savings. The result wasintroducing available final product at low prices, which accounted for improvedcustomer satisfaction.Wal-Mart took the lead of adopting models that had not beenregarded as efficient ones. They depended on centralized distribution network withcross-docking warehousing method, which also reduced the holding cost extremely.5. CONCLUSIONS There are three main competitive advantage drivers dedicated through supply chainmanagement including information system, internet, and supply chain software. Themain goals of supply chain management are time compression, waste reduction,unit costreduction, andflexible response. The SCM strategies may gain competitive advantagesin many different ways. The type of industry and the geographical distribution mayaffect the driving strategies of SCM. The success stories of ZARA, Dell, FedEx, andWal-Mart reflect many different aspects of how supply chain can come up withcompetitive advantage. Each case shows different improvements built up within thesupply chain. For instance, ZARA depended on short-term relationship for sourcing,while the type of Dell’s industry enforces them to adopt long-term relationship. Thecustomer value proposition may impact the type of relationship, as clearly shown in thecase of FedEx, where data sharing is a crucial customer value. Generally, all stories arecharacterized by many similarities, though they are introduced in different manners. Allcompanies rely on powerful information system characterized by high connectivity ofsupply chain actors. Re-engineering of processes and waste inventory reduction areessential practices they adopt. Smart integration of relevant technologies could also becrucial especially for Wal-Mart and FedEx cases, while internet became morefundamental necessity than an optional feature to offer. However, behind such successstories, there are many more supply chain failures. That could be due to integratinginappropriate techniques, misestimating relevant customer value proposition, applyingparts of supply chain management tools and leaving collateral parts, or any similarreasons. -8-
  11. 11. 6. REFERENCESLiterature Sources:Christopher, M. G. (1992). Logistics and Supply Chain Management, PitmanPublishing,London, UK.Day, G. S. (1994). The Capabilities of Market-Driven Organizations, Journal ofMarketing.Huttenlocher, D. (2004). “Differentiating IT” Department of Computer Science, CornellUniversity. URL: Ketchen, D.J. &Giunipero, L.C. (2004).The intersection of strategicmanagement and supply chain management, Industrial marketing management, Vol. 33,pp. 51-56.Hutt, M.D. and Speh, T.W. (2004).Business Marketing Management: A Strategic Viewof Industrial and Organizational Markets, 8th edition, Fort Worth TX: Dryden.Koufteros, X. A. (1995), “Time-Based Manufacturing: Developing aNomologicalNetwork of Constructs and Instrument Developmen”t, DoctoralDissertation, University ofToledo, Toledo, OH.Li, S., Ragu-Nathan, B., Ragu-Nathan, T. S., and Rao, S. (2006). The Impact ofSupplyChain Management Practices on Competitive Advantage andOrganizationalPerformance.McWiliams, G., and White, J. (1999). Dell to derail: Get into gear online. WallStreet Journal, December 1, Bl.Stalk, G., Evans, P. Shulman, L. E. (1992). “Competing on Capabilities: The NewRulesof Corporate Strategy”, Harvard Business Review.Stapleton D., Hanna J. B., and Ross, J. B. (2006). “Enhancing Supply ChainSolutionswith the Application of Chaos Theory”, Supply Chain Management.Towill, D. and Christopher, M. (2002).The Supply Chain Strategy Conundrum: To beLean Or Agile or To be Lean And Agile?, International Journal of Logistics: Research&Applications.Electronic Sources:FedEx (2013).FedEx Strategy, mission, and values. Available:http://about.van.fedex.com/mission-strategy-values [2013-02-23].FedEx (2013).Overview and facts. Available: http://about.van.fedex.com/fedex-overview [2013-02-23]. -9-

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