Influence of supply chain risks and interdependencies on the supply chain strategy implementation
Sustainability of supply chains is a primary concern of all the companies. It is important to consider many factors such as environmental impacts in supply chains, operational aspects, business models and strategies appropriate for every company, and social dimensions of sustainable supply chains (Bouchery 6). However, there is an aspect that is no less significant than sustainability. Supply chain risks and interdependencies are the issues that should be considered by a manager to provide the efficient functioning of a chain. The ability to model risk emergence is necessary for a supply chain manager (Khojasteh 44).
The company under analysis is McDonald’s. Operating more than 35,000 restaurants, the company does not make the necessary products (Jones). Thus, it needs a big and efficient supply chain to provide all restaurants with ingredients regularly. McDonald’s is known for a successful supply chain that manages many suppliers such as Coca-Cola, Tyson Foods, Golden State Foods, Fresh Express, General Mills, Dannon, Dean Foods, Kraft Foods, Sunny Fresh Farms, and others.
Consistency is one of the primary concerns of the company’s supply chain due to the necessity to serve about 70 million people every day (Jones). Thus, the prediction of supply chain risks is important for evaluating their impact on the organization’s supply chain strategy implementation. Moreover, interdependencies of supply chain components should be considered to plan actions in case of problems emergence. For McDonald’s, the major risks threatening its sustainability are such commodities as beef, chicken, coffee, and oils (McDonald’s. Prioritizing Resources and Concentrating Efforts). Thus, the supply chain of McDonald’s greatly depends on suppliers.
Moreover, its elements are interdependent because delays in delivering one product can cause problems with other processes. The secret of McDonald’s supply chain sustainability is in its intricate structure (Sharma 112). Its peculiarity is that in most countries with McDonald’s restaurants, the supply chain network is 100% outsourced. Moreover, the company’s supply chain is multi-layered. For example, in India, there are Tier-1 and Tier-2 suppliers that provide different types of products. Tier-I includes the major suppliers of processed products, while Tier-2 comprises growers and produces fresh ingredients.
Consequently, in case the risks for the supply chain are underestimated, the whole chain will suffer. As for interdependency, it can become a weak point of the supply chain. According to Sharma (118), McDonald’s does not sign legal agreements with suppliers and supports the “handshake relationship” model. The company “expects its suppliers to personally ensure the quality of their products to skirt the risk factor” (Sharma 118). Thus, if one of the suppliers provides a product of a lower quality or fails to supply it at all, the company’s supply chain strategy can be at risk. However, another feature of this strategy that follows the principle of one product from one supplier protects the company from significant losses in situations when the supply chain is broken because of an irresponsible partner.
Moreover, it should be mentioned that there is research proving that supply chain risk management has an impact on robustness and agility that are significant factors for overall performance improvement (Wieland and Wallenburg 888). It is proved that agility positively influences the supply chain’s customer value, while robustness is related to business performance. Thus, it is important to develop a supply chain that will comprise both aspects. The company’s supply chain under consideration is designed to empower successful risk management because it focuses equally on customer value and business performance.
On the whole, it can be concluded that McDonald’s has a supply chain that is resistant to various risks. Despite the high interdependence of the supply chain elements and their possible vulnerability, the company successfully manages its chain. The careful choice of suppliers, long-term partnerships, and relations based on trust and respect are aspects that provide the company’s successful performance and the sustainability of its supply chain.
Contribution of the strategic fit between competitive strategy and supply chain strategy to the improvement of customer value
Strategic fit demands coordinated goals from both the competitive and supply chain strategies developed by a company. It is related 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” (Chopra and Meindl 21). There are some components necessary for every company that desires to achieve a strategic fit. These components include a coordinated overall strategy formed by the competitive strategy and all functional strategies; the structured character of resources and processes that contribute to the execution of the company’s strategies; and the design of the global supply chain in a way that its every element could support its strategy.
The development process of Dell corporation and its supply chain from 1993 to present can be considered to review strategic fit. In the period between 1993 and 2006, Dell developed a competitive strategy that included providing a significant variety of “customizable products at a reasonable price” (Chopra and Meindl 22). The supply chain developed by Dell was responsive and focused on customization. The facilities that belonged to Dell were flexible and adjustable to meet the customers’ diverse needs requesting various configurations of products. The choice of this facility type was a proper decision because the facility providing product of the same configuration for a lower price would not have been suitable in those conditions.
The issue of strategic fit is also reflected in some other functions executed by Dell Corporation. Thus, the design of Dell’s personal computers was supposed to empower the rapid assembly process due to the use of common components (Chopra and Meindl 22). Since the company’s major goal was to assemble the customized PCs to satisfy the needs of customers, the selected strategy contributed to the achievement of this goal and, as a result, in customer satisfaction.
With this strategy, Dell had another challenge related to suppliers. Considering the fact that Dell was working to provide customized products “with low levels of inventory,” the company needed reliable and responsive suppliers that aligned with the company’s strategy. For example, the compatibility of Dell computers with monitors produced by Sony eliminated the necessity to carry monitors to inventory to make them merge with computers (Chopra and Meindl 22). This strategy existed till 2006 and provided the sustainable development of Dell corporation.
Nevertheless, the competitive strategy of the company changed in 2007. Consequently, it was necessary to alter the supply chain to make it suitable for the new strategy. This time, the customer focus on hardware customization reduced. Moreover, Dell started selling its personal computers through retail stores such as Walmart (Chopra and Meindl 22). At these retail stores, the company suggested a limited choice of desktops and laptops.
However, other essential parts and monitors and were also available in inventory not to make customers wait if they wanted to buy a computer at Walmart. Thus, the flexibility and responsiveness of the supply chain that “aligns well with customer needs for customization” can be not so useful in case the customers prefer lower prices to the advantages of customization (Chopra and Meindl 22). Consequently, Dell had to shift focus from production to a build-to-stock model to preserve its strategic fit.
At present, the competitors of Dell, such as contract manufacturers, concentrate on low cost now production and produce goods in advance. In the conditions of a competitive market, Dell changed its supply chain focus from “responsiveness to a greater focus on low cost” to preserve the strategic fit (Chopra and Meindl 22).
On the whole, there some steps the company has to take to reach a strategic fit between the supply chain and competitive strategies. It should be kept in mind that a competitive strategy will determine the target audience or the customer segment that a company can satisfy. Thus, to reach a strategic fit, a company should establish a supply chain able to satisfy the needs of the target audience.
The strategic fit can be achieved if a company passes three significant steps. First of all, the company should understand “the customer and supply chain uncertainty” (Chopra and Meindl 22). It means that any company entering the market and developing its supply chain strategy should realize the customers’ needs for every target audience. Moreover, the impact of the uncertainty of these needs on the supply chain should be evaluated.
This step and acknowledging the customers’ needs are helpful for the definition of the desired cost and planning of service requirements. It is also important to realize that the customers’ demands can be unpredictable and thus determine a necessity to prepare the supply chain to react to the customers’ unpredictability. Secondly, the company should able to understand the capabilities of the supply chain. It should be kept in mind that there are many types of supply chains created to fulfill various tasks. Moreover, the type of supply chain successful in one company can be inefficient in another business setting. Thirdly, in case of significant discrepancies between the strengths of the supply chain and the customer needs, there appears a necessity to change the supply chain structure to support the competitive strategy or change the strategy to achieve strategic fit (Chopra and Meindl 22).
Generally speaking, the strategic fit between competitive strategy and supply chain strategy is important for any company in the market. It is not easily achieved and needs careful consideration of priorities. The companies are to select between the high competitiveness due to the lower prices or focusing on customer value and customization of products to meet customers’ needs. Still, the proper balance between these aspects provides opportunities for the company’s successful performance. Moreover, the completive strategy and supply chain strategy should be flexible and adjustable to the changing market conditions, and uncertain customer demands to provide the sustainable development of any company.
Impact of network design on supply chain performance
Network design is significant for the performance of the supply chain. The choice of such design demands careful considerations to provide the network’s efficiency in the future (Ivanov et al. 141). Thus, it is important to select an appropriate location for the facilities that constitute the chain. In case the location was not chosen properly, there can be problems with logistics, which do not contribute to the successful performance of the supply chain. Consequently, it is necessary to analyze all the chain stages related to locations and select suitable ones (Ivanov et al. 142). Computing techniques can be necessary to provide appropriate solutions. For example, it is necessary to calculate the variants of settings for warehouses to make then easily available. Such an approach can help to reduce transportation costs in the future.
Hanne and Dornberger (121) also support the necessity of careful location planning for the successful supply chain performance. The authors stress the importance of considering the distances of the location to suppliers and customers, the availability of the resources and labor in the area, local legislation and taxes, general infrastructure, and many other factors. All those aspects are likely to influence supply chain performance in diverse ways. For example, a long-distance to suppliers or customers will increase the expenses on transportation. The lack of resources or qualified labor conditions the necessity of their delivery to the area also increases their costs. The peculiarities in taxation or other legislation in the area can become an obstacle for building or some industries.
The network design should be developed in a way to make the supply chain competitive in conditions of the contemporary dynamic marketplace (Farahani 92). Different supply chain network designs can be efficient in different settings. Thus, it is necessary to concentrate on the supply chain design to increase the whole chain’s effectiveness and thus contribute to its performance and competitiveness.
Some perspectives should be considered in the development of the network design. First of all, it is a theoretical perspective. The network design determines the nature of the supply chain and includes the decisions that impact the investment patterns. Moreover, these decisions influence the supply chain’s opportunities or the issues that can or cannot be addressed by this supply chain. Thus, it is necessary to consider such aspects as the network’s capacity, its information part, the major competencies, and material and human resources. The way from the material to the target customers passes through the supplier network, the enterprise itself, and the distributive network.
All those networks make a global supply chain that provides customers with the necessary goods or services. It is also crucial to provide a careful choice of the framework that will become a basis for the network design. It is good if this framework is based on some research. Such an approach can guarantee the successful performance of the supply chain grounded on the research-based network design. Research allows us to evaluate the possible benefits and challenges of different supply chain locations and predict its development.
Overall, it can be concluded that network design has a direct impact on supply chain performance. It determines the cost-efficiency of the supply chain and thus influences the competitive abilities of the final product. Thus, the choice of network design should be one of the major stages in supply chain development.
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