Chapter 2 - Achieving Strategic Fit and Scope

Facets of supply chain as product life cycle progresses from beginning stage?

- Demand is more certain, supply predictable - Margins are lower - Price is significant factor in customer choice - Level of implied demand uncertainty decreases, efficiency increases

Facets of supply chain during during beginning stage of product life cycle?

- Demand uncertain, supply unpredictable - Margins are high - Product availability is crucial to capturing market - Cost is often a secondary consideration

What is the scope of strategic fit?

- Refers to the functions within the firms and stages across the supply chain that devise an integrated strategy with an aligned objective

Three steps to attaining strategic fit?

1) Company strategies and functional strategies must fit together to form a coordinated overall strategy; each functional strategy must support other functional strategies 2) The different functions in a company must appropriately structure their processes and resources to be able to execute these strategies successfully 3) The design of the overall supply chain and the role of each stage must be aligned to support the supply chain strategy

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) Environment and Sustainability

List of five different scopes?

1) Intraoperation 2) Intrafunctional 3) Interfunctional 4) Intercompany 5) Agile Intercompany

Strategic fit needs to consider levels of what?

1) Levels of implied uncertainty 2) Levels of responsiveness Match responsiveness with implied uncertainty form demand and supply

How is strategic fit achieved?

1) Understanding customer and supply chain uncertainty 2) Understanding supply chain capabilities -> related to responsiveness, efficiency 3) Achieving strategic fit ... wut

Agile Intercompany scope?

A firm's ability to achieve strategic fit (alignment of competitive and supply chain strategies) when partnering with supply chain stages that change over time Focus on agility and ability to keep up with times; the level of agility becomes more important as competitive environment becomes more dynamic

Interfunctional scope?

All functional strategies are developed to align with one another and with the competitive strategy Goal: Maximizing company profits But, different firms in your supply chain act in conflicting ways to maximize their own profits

Cost-Responsiveness Efficient Frontier?

Curve showing the lowest possible cost for a given level of responsiveness: Lowest cost = Lowest responsiveness Highest cost = Highest responsiveness

Info about understanding customer and supply chain uncertainty?

Customer demand from different segments varies along several attributes: - Quantity of the product needed in each lot - Response time that customers are willing to tolerate - Variety of product needed - Service level required - Price - Desired rate of innovation

Difference between demand uncertainty and implied demand uncertainty?

Demand uncertainty = uncertainty of customer demand of a product Implied demand uncertainty = uncertainty for only the portion of the demand that the supply chain plans to satisfy Ex: A firm supplying only emergency orders will face higher implied demand uncertainty than firm that supplies the same product with a long lead time

What is implied demand uncertainty?

Demand uncertainty imposed on the supply chain because of the customer needs it seeks to satisfy

Supply chain strategy?

Determines the nature of procurement of raw materials, transportation of materials to and from the company, distribution of the product to the customer Specifies what the operations, distributions, and service functions (whether performed in-house or outsourced) should do particularly well

Briefly explain the idea of differing responsiveness and efficiency in an entire supply chain. Hint: absorption of uncertainty

Different parts of the supply chain can be responsiveness-focused while others parts can be efficiency-focused Making one stage more responsive can make another more efficient (absorption of uncertainty)

Intraoperation scope?

Each stage of the supply chain devises its strategy independently; strategies typically do not align resulting in conflict, done in 50s and 60s when each stage tried to minimize its own cost Goal: Minimizing Local Cost

Efficiency vs. responsiveness spectrum?

Efficiency = Longer Lead time because costs are lower Responsiveness = Shorter lead times but costs are higher Efficient Not efficient 0 Somewhat responsive Responsive Not being responsive isn't bad if you are efficient Sometimes responsiveness isn't necessary Example: orders placed to be completed over months (custom car) are efficient and can still meet customer needs

Intercompany scope?

Every company in the supply chain works together to maximize supply chain surplus Goal: Maximizing supply chain surplus Ex: Walmart and P&G work together closely to benefit each other Requires company to evaluate every action in the context of the entire supply chain

What departments support the Value Chain?

Finance, Accounting, IT, HR

Intrafunctional scope?

Firms attempted to align all operations with a function: sourcing, manufacturing, warehousing and transportation Goal: Minimizing Functional Cost But, different functions may have conflicting objectives

Stages of the value chain?

New product development, Marketing and sales, Operations, Distribution, Service

Examples of product with low implied demand uncertainty vs. high.

Product's placement on implied demand uncertainty spectrum depends on combination of customer and supply chain uncertainty Ex: Low - SALT: customer uncertainty and supply chain uncertainty is low Medium - ORANGES: customer uncertainty is low and supply chain uncertainty can be high

What is strategic fit?

Requires both the competitive and supply chain strategies of a company to have aligned goals Ex: competitive strategy -> quick delivery supply chain strategy -> have a lot of DCs

'Service Stage' of value chain functions?

Responds to customer requests during or after the sale

Marketing and sales strategy?

Specifies how the market will be segmented and how product will be priced, positioned and promoted.

Product development strategy?

Specifies the portfolio of new products that a company will try to develop Dictates whether the development effort will be made internally or outsourced

Absorption of uncertainty?

Stage 1 "Absorbs" uncertainty from Stage 2; Making Stage 1 more responsive and Stage 2 more efficient

What is supply chain responsiveness?

Supply chain's ability to: - Respond to wide ranges of quantity demands - Meet short lead times - Handle a large variety of products - Build highly innovative products - Meet a high service level - Handle supply uncertainty

'Distributions Stage' of value chain functions?

Takes product to consumer or brings consumer to product

Supply chain efficiency?

The inverse of the cost of making and delivering a product to the customer Decrease in costs increase efficiency and vic versa

Relationship between responsiveness and implied demand uncertainty?

The more implied demand uncertainty, the more responsive a company needs to be The less implied demand uncertainty, the more efficient a company needs to be *Move towards zone of strategic fit*

What is a company's competitive strategy?

The set of customer needs that it seeks to satisfy through its products and services. Depends on how the consumer prioritizes product cost, delivery time, variety and quality. Competitive strategy is based on customer's priorities.

'Operations Stage' of value chain functions?

Transforms inputs into outputs to create product

T or F: Increased implied demand uncertainty leads to increased difficulty in matching supply with demand?

True

T or F: Forecasting is more accurate when demand has less uncertainty.

True, duh

What is 'strategy' of the value chain?

What each function or process of the Value Chain will try to do particularly well

Relationship between customer needs and implied demand uncertainty?

Whenever customer needs increase in some aspect, ex: better cost, more variety, range of quantity, implied demand uncertainty increases