Chapter 2 - Supply Chain Performance: Achieving Strategic Fit and Scope

Step 1: Understanding the Customer and Supply Chain Uncertainty

-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

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

steps to achievin strategic fit,

1. Understanding the Customer and Supply Chain Uncertainty; 2. Understanding the Supply Chain Capabilities; 3. Achieving Strategic Fit

Step 3: Achieving Strategic Fit

Ensure that the degree of supply chain responsiveness is consistent with the implied uncertainty Assign roles to different stages of the supply chain that ensure the appropriate level of responsiveness Ensure that all functions maintain consistent strategies that support the competitive strategy

Step 2: Understanding Supply Chain Capabilities

How does the firm best meet demand? Supply chain responsiveness is the ability to 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

Scopes of strategic fit

Intraoperation -> intrafunctional -> interfunctional -> intercompany scope

intercompany scope

Maximize Supply Chain Surplus -Supplier and customer work together and share information to reduce total cost and increase supply chain surplus

To achieve strategic fit,

a company must ensure that its supply chain capabilities support its ability to satisfy the needs of the targeted customer segments. There are three basic steps

Supply Chain Responsiveness

ability to: - respond to wide ranges of quantities demanded - meet short lead times - handle a large variety of products - build highly innovative products - meet a very high service level

A company's competitive strategy

defines, relative to its competitors, the set of customer needs that it seeks to satisfy through its products and services.

Supply Chain Strategy

determines the nature of material procurement, transportation of materials, manufacture of product or creation of service, distribution of product

Strategic Fit

refers to consistency between the customer priorities that the competitive strategy hopes to satisfy and the supply chain capabilities that the supply chain strategy aims to build.

Implied demand uncertainty

resulting uncertainty for the supply chain given the portion of the demand the supply chain must handle and attributes the customer desires

the competitive strategy is defined based on how

the customer prioritizes product cost, delivery time, variety, and quality.

supply chain efficiency

the inverse to the cost of making and delivering the product to the customer