The effective operation of a firm is dependent on the effectiveness with which the management team has formulated and implemented business strategy. UPS (2005,p.1) asserts that a firm’s business strategy is aimed at enabling a firm to attain its business objectives. A firm’s supply chain is one of the elements that can contribute towards the firm attaining the set objectives (Frazelle, 2002, p. 4). According to UPS (2005, p. 1), business strategy and supply chain strategy are related. Business strategy stipulates the overall direction that the firm intends to take. On the other hand, supply chain strategy involves all the operations undertaken in order to attain supply chain objectives. Most businesses have formulated business strategies but lack supply chain strategies (Simchi-Levi, Kaminsky & Simchi-Levi, 2004, p. 6). In order for a firm to succeed in the long term as ongoing entity, it is paramount for it to formulate and implement a supply chain strategy. This arises from the fact that the supply chain strategy enhances business strategy.
Fulfilling customer demand is a challenging task for a firm considering the change in consumer complexity and increase in competition in the local and international markets. However, a firm can be able to cope with these challenges via the development of a supply chain strategy. The initial step in developing the supply chain strategy is determining how the firm intends to compete. This can be attained by determining how the firm intends to differentiate itself via the supply chain strategy. In addition, the firm should assess the firm to determine its capabilities and competencies. The result is that the firm will be able to determine whether its assets will support the intended supply chain strategy. An implementation plan should be developed to ensure that the supply chain strategy is well executed.
The core objective of this report is to give a concrete definition in relation to supply chain strategy. In addition, the report analyzes how a firm’s supply chain strategy can enable the firm to attain a competitive advantage during the economic downturn. The reasons why different markets should have different supply chain strategies are also analyzed.
The report is organized into a number of sections. The first section entails a definition of supply chain strategy. The second part relates to how a firm’s competitive advantage can be improved during an economic downturn via the incorporation of a supply chain strategy. Some of the issues discussed relate to customer focus, interaction with other business partners and ensuring cost-effectiveness in the operation of the firm.
Supply chain strategy
Hines (2004, p. 5) defines a supply chain to include all activities which enable the flow of products from the design phase to the final consumer. The associated cash flow and information also constitute supply chain activities. Therefore supply chain strategies are aimed at managing and integrating the various activities by improving and developing supply chain relationships. The resultant effect is that the firm is able to create and sustain a high competitive advantage.
For a firm’s supply chain strategy to be effective, it must synchronize various external stakeholders. Some of the stakeholders to be considered include suppliers, consumers, distributors and manufacturers.
A firm can attain a high competitive advantage via its supply chain strategy. Through the supply chain strategy, manufacturers are able to develop a competitive advantage by integrating the concept of customer focus in its operation. This means that all the operations of the firm in relation to developing the product are aimed at meeting the customers’ product and service requirements. In an effort to attain a strong competitive position, firms should develop products aimed at meeting global customer product requirements. For example, in its manufacturing process, International Business Machine Incorporation which deals with manufacture of computer and computer accessories ensures that all its products are of high quality. This is attained through the incorporation of quality control. As a result, the firm has been able to attain a high market position.
In addition, a firm may decide to integrate technology into its supply chain strategy. Some of the technologies which should be considered include emerging electronic commerce technologies. Through these technologies, a firm will be able to reduce product lifecycle (Ayers, 1999, p. 3). The resultant effect is that customers attain a high level of customer satisfaction which culminates in the development of customer loyalty which further leads to an improvement in the firm’s level of profitability. Ensuring a short lifecycle also contributes towards cost-effectiveness in the firm’s operation. This arises from the fact that minimal capital is incurred in maintaining the stock. Through the incorporation of customer focus, the firm is able to undertake value chain transformation in its operation even in times of economic downturns which enhances its competitive advantage (International Business Machine, 2007, para, 1).
Interaction with business partners
Supply chain strategy enables a firm to integrate with various business partners. This arises from the fact that the supply chain entails a network of firms whose operation is integrated (Omollo, 2009, p. 7). One of the ways through which this is ensured is by the development of a good communication link with the various stakeholders. In order for the firm to be effective in attaining its business strategy, the management team should ensure that there is a similarity between the firm’s goal and those of its business partners such as the distributors and suppliers. In addition, the supply chain goals between the various parties should be implemented at the same speed. If the firm moves at a high speed compared to that of its business partners, there may be misalignment which may result in inefficiencies.
Effective communication enables a firm to attain supply chain integration. The internet can enable a firm to attain a high rate of business interaction via real-time sharing of information (Lee & Whang, 2001, p. 2). This enhances the firm’s product development, procurement, inventory management, and supporting marketing activities such as after-sale services and improving the business model.
Cost-effectiveness in its operation
Supply chain strategy enables a firm to be cost-effective in its operation. This arises from the fact that supply chain strategy integrates the concept of cost-benefit analysis. As a result, the firm’s management team is able to determine whether its goals and objectives formulated in its business strategy are being attained. In addition, supply chain strategy enables a firm to evaluate changes within the entire industry. For example, the manufacturer is able to identify new business practices, changes in technology; new competitors venturing the industry and products being developed. By evaluating these components, the firm’s management team is able to determine the necessary changes that should be made in its supply chain and the most effective method of implementing these changes. In addition, cost-benefit analysis enables the firm to identify opportunities that it can utilize in order to position itself effectively. For the supply chain to be effective, the firm should ensure that it develops and monitors its supply chain. Effective positioning in the market acts as a shield against competitive forces (Ayers, 1999, p. 4).
Different operation costs are incurred by firms in different economic sectors. This means that different supply chain strategies should be incorporated to ensure that cost-effectiveness is attained. However, customer focus should be a common element in all firms despite their economic sectors. Their supply chain strategy should revolve around product quality and availability.
The global business environment has undergone a significant transformation. This makes it vital for the firm’s management team to formulate strategies aimed at ensuring that the firm survives in the long-term as a going concern entity. In an effort to attain this, firms in different economic sectors have developed comprehensive business strategies. However, they have failed in implementing supply chain strategies. Supply chain strategies serve in enhancing the firm’s business strategy thus enabling the firms to attain the set objectives. Supply chain strategies play a significant role in the process of the firm attaining competitive advantages. One of the ways through which this is attained is the incorporation of customer focus. As a result, the firm is able to develop products that are in line with market demand thus increasing their sales volume. This can play a significant role in developing the firm’s competitive advantage during economic downturns.
Supply chain strategies enable firms to develop competitive advantage via the development of supply chain integration. As a result, firms are able to interact with their business partners more effectively. One of the ways through which this can be attained is by ensuring effective communication between the business partners such as suppliers. This will result in the minimization of possible misalignment that might arise in their operation. Supply chain strategies enable firms to attain efficiency and cost-effectiveness in their operation. This can be attained via the integration of the concept of cost-benefit analysis.
There are some challenges that are experienced in implementing supply chain strategies. In order to cope with this, firm’s in manufacturing industries should consider the following recommendations:
- The firm’s management team should develop strategies aimed at improving value, velocity, variety, volatility and virtuality. Virtuality entails the most effective way of coordinating tangible and intangible assets in relation to the supply chain.
- In order to attain this, the firm’s management team should consider the most effective way to develop customer focus. This will enable the firm to deal with these challenges from the customers’ perspective. This means that the supply chain strategies implemented must address the customer’s product requirement if the firm is committed to attaining sustainable development.
- In order to ensure effective supply chain integration which is core in the execution of a firm’s supply chain strategy, the firm’s management teams should consider Information Communication Technology. ICT will contribute towards the development of effective communication thus improving business partners’ relationships and customers’ confidence.
- In order to reduce stock holding costs and at the same time improve customer product accessibility, manufacturers should incorporate the concept of cross-docking in their supply chain strategies (O’Byrne, 2007, para. 25). This strategy entails the movement of goods from the manufacturer via their warehouses to the final consumer delivery system without delays.
- Ayers, J. 1999. Supply chain strategies. New York: CRC Press LLC.
- Frazelle, E. 2002. Supply chain strategy: the logistics of supply chain management. Washington: McGraw-Hill Professional.
- Hines, T.2004. Supply chain strategies: customer-driven and customer-focused. New Jersey: Butterworth- Heinemann.
- International Business Machines. 2007. Supply chain strategy. [Online].
- Lee, H.L. & Whang, S. 2001. E-business and supply chain integration. New York: Stanford University.
- O’Byrne, R. 2007. Supply chain strategy, logistic strategy and distribution strategy. South East Asia: Logistic Bureau Pty Limited.
- Omollo, J. 2009. Supply chain management best practices. [Online].
- Simchi-Levi, D, Kaminsky, P. & Simchi-Levi, E. 2004. Managing the supply chain: the definitive guide for the business professional. New York: McGraw-Hill Professional.
- UPS. 2005. Supply chain strategy: the importance of aligning your strategies. New York: United Parcel Service of America.