What is strategic fit

1. 2- 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

2. 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

3. 1. Understanding the Customer and Supply 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

4. 1. Understanding the Customer and Supply 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

5. 2. Understanding the Supply Chain Capabilities 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 efficient Highly responsive Somewhat responsive Somewhat efficient Integrated steel mills Hanes apparel Most automotive production Seven-Eleven Japan

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. Achieving Strategic Fit Responsive supply chain Implied demand uncertainty Cost-effective supply chain Low (functional products) High (innovative products) Zone of strategic fit What is the right supply chain for your product?

8. 2- 8 The Value Chain: Linking Supply Chain and Business Strategy New Product Development Marketing and Sales Operations Distribution Service Finance, Accounting, Information Technology, Human Resources Competitive Strategy New Product Strategy Marketing Strategy Supply Chain Strategy