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Aligning the Supply Chain with Business Strategy

A company’s supply chain is an integral part of its approach to the markets it serves. The supply chain needs to respond to market requireme... thumbnail 1 summary
A company’s supply chain is an integral part of its approach to the markets it serves. The supply chain needs to respond to market requirements and do so in a way that supports the company’s business strategy. The business strategy a company employs starts with the needs of the customers that the company serves or will serve. Depending on the needs of its customers, a company’s supply chain must deliver the appropriate mix of responsiveness and efficiency. A company whose supply chain allows it to more efficiently meet the needs of its customers will gain market share at the expense of other companies in that market and
also will be more profitable.

For example, let’s consider two companies and the needs that their supply chains must respond to. The two companies are 7-Eleven and Sam’s Club, which is a part of Wal-Mart. The customers who shop at convenience stores like 7-Eleven have a different set of needs and preferences from those who shop at a discount warehouse like Sam’s Club.

The 7-Eleven customer is looking for convenience and not the lowest price. That customer is often in a hurry and prefers that the store be close by and have enough variety of products so that they can pick up small amounts of common household or food items that they need
immediately. Sam’s Club customers are looking for the lowest price.

They are not in a hurry and are willing to drive some distance and buy large quantities of limited numbers of items in order to get the lowest price possible. Clearly the supply chain for 7-Eleven needs to emphasize responsiveness. That group of customers expects convenience and will pay for it. On the other hand, the Sam’s Club supply chain needs to focus tightly on efficiency. The Sam’s Club customer is very price conscious and the
supply chain needs to find every opportunity to reduce costs so that these savings can be passed on to the customers. Both of these companies’ supply chains are well aligned with their business strategies and because of this they are each successful in their markets.
There are three steps to use in aligning your supply chain with your business strategy. The first step is to understand the markets that your company serves. The second step is to define the strengths or core competencies of your company and the role the company can or could
play in serving its markets. The last step is to develop the needed supply chain capabilities to support the roles your company has chosen.