INSTITUTE –University School of

Business
DEPARTMENT -AIT
M.B.A
Introduction to Supply Chain Management- 21MST603
Faculty Name : Rubel
Supply chain Overview

Lecture on : Supply Chain Performance

DISCOVER . LEARN . EMPOWER

UNIT-1: Supply chain
Overview
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 Supply Chain Performance

Course Objective Course Outcome

CO Title Level
Number CO Title Level
CO1 Explain why achieving strategic fit is Understand Number
critical to a company’s overall   CO1 Design supply chain performance: Understand
success.
competitive and supply chain  
strategies, achieving strategic fit,
CO2 Describe how a company achieves Apply expanding strategic scope;
strategic fit between its supply chain  
strategy and its competitive strategy. CO2 Apply
 

CO3 Discuss the importance of expanding Analyze CO3 Analyze

the scope of strategic fit across the
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supply chain. And Describe the major
challenges that must be overcome to
manage a supply chain successfully.
Supply Chain
Performance
Supply Chain Performance: Achieving Strategic Fit and Scope

Competitive and Supply Chain Strategies

• Competitive strategy: defines the set of customer needs a firm seeks to satisfy through its
products and services
• Product development strategy: specifies the portfolio of new products that the company
will try to develop
• Marketing and sales strategy: specifies how the market will be segmented and product
positioned, priced and promoted
• Supply Chain strategy:
• determine the nature of material procurement, transportation of materials, manufacture
of product or creation of service, distribution of product
• Consistency and support between supply chain strategy, competitive strategy, and other
functional strategies is important

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The Value Chain: Linking Supply Chain and Business Strategy

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The Value Chain: Linking Supply Chain and Business Strategy

• To see the relationship between competitive and supply chain strategies, we start with the
value chain for a typical organization, as shown in Figure
• The value chain begins with new product development, which creates specifications for the
product. Marketing and sales generate demand by publicizing the customer priorities that
the products and services will satisfy. Marketing also brings customer input back to new
product development. Operations transforms inputs to outputs to create the product
according to new product specifications. Distribution either takes the product to the
customer or brings the customer to the product. Service responds to customer requests
during or after the sale. These are core processes or functions that must be performed for
a successful sale. Finance, accounting, information technology, and human resources
support and facilitate the functioning of the value chain.

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Achieving Strategic Fit

• Strategic fit requires that both the competitive and supply chain strategies of a company
have aligned goals. It 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. For a company to achieve strategic fit, it must accomplish the
following:
• 1. The competitive strategy and all functional strategies must fit together to form a
coordinated overall strategy. Each functional strategy must support other functional
strategies and help a firm reach its competitive strategy goal.
• 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.

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Achieving Strategic Fit

• Introduction
• How is strategic fit achieved?
• Other issues affecting 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
• A company may fails because of a lack of strategic fit or because its processes and
resources do not provide the capabilities to execute the desired strategy

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How is strategic fit achieved?

• Step 1: Understanding the customer and supply chain uncertainty

• Step 2: Understanding the supply chain
• Step 3: Achieving strategic fit

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Step 1: Understanding the customer and supply chain
uncertainty

• 1. Understanding the customer and supply chain uncertainty: First, a company must
understand the customer needs for each targeted segment and the uncertainty these
needs impose on the supply chain. These needs help the company define the desired cost
and service requirements. The supply chain uncertainty helps the company identify the
extent of the unpredictability of demand and supply that the supply chain must be
prepared for
• Identify the needs of the customer segment being served:
• 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 min the product
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Step 1: Understanding the customer and supply chain
uncertainty
• Understanding the customer: Lot size, response time, service level, product variety, price,
innovation=Implied demand uncertainty
• Overall attributes of customer demand is a combination of
• Demand uncertainty: uncertainty of customer demand for a product
• 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
• Implied demand uncertainty is related to customer needs, product attributes , and supply
chain capability as illustrated by the following tables:
• Impact of customer needs table
• Correlation to other attributes table
• Supply source capability table

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Impact of Customer Needs on Implied Demand Uncertainty

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Impact of Supply Source Capability on Supply Uncertainty
Supply Source Capability Causes Supply Uncertainty to

Frequent breakdowns Increase

Unpredictable and low yields Increase

Poor quality increase

increase
Limited supply capacity

Inflexible supply capacity increase

Evolving production process increase

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Step 1: Understanding the customer and supply chain
uncertainty
• First step to strategic fit is to map customer needs , product attributes, and supply chain
capabilities on the implied uncertainty spectrum.

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Step 2: Understanding the Supply Chain

• 2. Understanding the supply chain capabilities: Each of the many types of supply chains
is designed to perform different tasks well. A company must understand what its supply
chain is designed to do well.
• How does the firm best meet demand?
• Dimension describing the supply chain is supply chain responsiveness
• 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
• Met a very high service level

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Step 2: Understanding the Supply Chain
• There is a cost to achieving responsiveness
• Supply chain efficiency: cost of making and delivering to the customer
• Increasing responsiveness results in higher costs that lower efficiency
• Supply chain responsiveness spectrum:
• Second step to achieving strategic fit is to map the supply chain on the responsiveness spectrum

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Step 3: Achieving Strategic Fit
• Achieving strategic fit: If a mismatch exists between what the supply chain does particularly well and the desired
customer needs, the company will either need to restructure the supply chain to support the competitive strategy or
alter its competitive strategy.
• This step is to ensure that what the supply chain does well is consistent with target customer’s needs
• Zone of strategic fit: Achieving strategic fit shown on the uncertainty/responsive ness map

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Step 3: Achieving Strategic Fit

• All functions in the value chain must support the comparative strategy to achieve strategic
fit
• Two extremes: efficient supply chains and responsive supply chains
• Two key points :
• There is no supply chain strategy that is always right
• There is a right supply chain strategy for a given competitive strategy

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 Resources

1. T1. Supply Chain Management: Strategy, Planning and

Operation by Sunil Chopra and Peter Meindl, Pearson
Education Inc., 2014.

2. R1. Designing and Managing the Supply Chain –

Concepts, Strategies and Case Studies – by David
Simchi-Levi, Phillip Kaminsky, Edith Simchi-Levi and Ravi
Shankar, Third Edition, Tata McGraw-Hill Edition, Third
Reprint 2009.
3. R2. Sunil Chopra, "Supply Chain Management",
Pearson Publications, New Delhi, 2014
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THANK YOU

For queries
Email: rubel.e10668@cumail.in

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