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Supply Chain Strategy - Organizational philosophy and strategic planning

Supply Chain Strategy - Organizational philosophy and strategic planning   To make supply chain strategies work, those charged with... thumbnail 1 summary

Supply Chain Strategy - Organizational philosophy and strategic planning

To make supply chain strategies work, those charged with implementing them need to establish a strategic plan and get answers to such questions as,

Ø  "Who are my critical customers,
Ø   where are my customers,
Ø   where are their customers, and
Ø   where in the process is each most important?"

Final customers need to be able to relate to specific suppliers that are critical to fulfilling their requirements. At the same time buying and supply  operations need to be able to look up and down the supply chain--often two or three levels in each direction. But to do this requires integration of such key information and processes as:

Ø  final customer needs determination,
Ø  product/service development,
Ø  demand planning
Ø  information sharing,
Ø  cost information for both development and reduction,
Ø  performance target setting, and
Ø  timing milestones

Early in developing the organizational strategy firms will need to make shared investments and share joint targets. They will need to start sharing more information more quickly in order to gain competitive advantage-- especially in such areas as design where shared resources can result in moving competition from single part design to system design. This will require leadership on the part of not only procurement and supply executives, but general management executives as well. In addition, there will be issues involving multiple customers and suppliers who also may be competitors. In many cases there probably will be greater need for separation of the work being done on behalf of one company for another. Decisions may also have to be made on who will work on what customers, and what suppliers' products or services. That could increase the need to establish confidentiality, nondisclosure, and business agreements.

In order to look to the next source of competitiveness, beyond what the individual firm does, it's necessary to look out at the customer base and seek to capitalize on those resources by getting important information earlier about the customer's future product and service requirements. Not to mention --performance, volume  requirements, and demand patterns. By utilizing technology and business planning, firms can leverage resources with better and earlier information. The earlier the visibility to customer and supplier information, the more opportunity for competitive advantage.

In many ways integrated supply chain management presents an entire culture change. Information exchange gets formalized into strategy rather than used in sets of distinctive tasks or decisions. Typically, such questions as these can be asked: "If we have resources in our suppliers, do we need duplicate resources in our facilities? Or, is it possible to add value by combining some manufacturing operations?"
Another sensitive factor involves parity. In order to have organizations work together, they need to be operating at similar knowledge and skill levels. It is difficult to have one firm working at a very high level of know-how and expect to pass off work to another firm that is not at a comparable level of technical or business development.

"If I'm pushing new technology, then I've got to pull suppliers along on the technology curve both in terms of product and process development, or ensure that my product development is using leading technology development at advanced suppliers."

Collaborative Questions.

•  Has the supplier signaled a commitment to a relationship and a willingness to commit resources?
•  Can supplier’s capabilities grow along with the buying companies capabilities?
•  Is supplier’s senior management willing to commit to a longer-term relationship?
•  Will the supplier share information about future product/technology plans?
•  How much of the supplier’s business will be committed to the buyer’s purchasing?
•  What is the supplier’s financial condition?

The strategic planning task of the integrated supply chain also will require highly focused analysis. specifically, supply managers will need to work across the different supply chains by product categories for sources of competitive advantage. These may stem from strengths in such areas as buying, technology, manufacturing/operations, and marketing or distribution flexibility. For many firms competitiveness hinges on flexibility to react to demand changes. Developing a supplier that is highly flexible in manufacturing high components, for example, may lessen the need to hold large inventories. A key to success is to implement early-on, the changes to philosophies necessary to support an atmosphere of “partnership”. This is a partnership based upon perceived equals in the supply/value chain necessary to capture and sustain competitive advantage.

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