Supply Chain Management
Week 2
Strategy & Supply Management
Today’s agenda
• Supply Chain Strategy
• Sourcing & Procurement
• Preparing for The Fresh Connection (cont.)
Supply Chain Strategy
Afbeelding invoegen
Strategy
The positioning and actions taken by an enterprise, in
response to or in anticipation of changes in the external
environment, intended to increase its competitive
advantage.
(Bozarth & Handfield, 2019)
Differentiating from competitors by selecting
the best corporate strategy
• Cost Leadership/ Operational Excellence*
• Focus on low costs and efficiency
• Product leadership*
• Focus on cutting-edge, high-performance products
• Customer Intimacy*
• Tailor products/services to meet specific customer needs
• Experience**
• Create memorable and engaging customer experiences
• Community Building***
• Foster a sense of community around the brand
* Treacy and Wiersema: The Discipline of Market leaders
** Pine and Gilmore: Welcome to the experience economy
*** Witte, de & Jonker: De kunst van het veranderen
Company logo’s sources from each company’s website.
Differentiating from competitors by selecting
the best corporate strategy
• Cost Leadership/ Operational Excellence*
• Focus on low costs and efficiency
• Product leadership*
• Focus on cutting-edge, high-performance products
• Customer Intimacy*
• Tailor products/services to meet specific customer needs
• Experience**
• Create memorable and engaging customer experiences
• Community Building***
• Foster a sense of community around the brand
* Treacy and Wiersema: The Discipline of Market leaders
** Pine and Gilmore: Welcome to the experience economy
*** Witte, de & Jonker: De kunst van het veranderen
Company logo’s sources from each company’s website.
Strategy
The positioning and actions taken by an enterprise, in
response to or in anticipation of changes in the external
environment, intended to increase its competitive
advantage.
Supply Chain Strategy
The design and execution of sourcing, production, and
distribution decisions and actions across an enterprise, in
response to or in anticipation of changes in the external
environment, market demands, and customer needs. This
is intended to optimize operations, manage risks, and
maximize competitive advantage through cost efficiency,
quality enhancement, speed to market, and sustainability.
(Bozarth & Handfield, 2019)
A Top-Down Model of Strategy
Business Strategy
Functional Strategies
(Bozarth & Handfield, 2019)
Structural & Infrastructural elements
Structural & Infrastructural elements
(Bozarth & Handfield, 2019)
Strategic What you need to think of.
Tactical What you will do (decisions).
Operational Simulation: the consequences of
your decisions.
Closing the Loop
core competencies
Between Business
Strategy
and Functional
Area Strategies
(Bozarth & Handfield, 2019)
Approaches & Alignment
Efficient Responsive
Minimizing cost and optimizing processes, suitable for
predictable, stable demand. Flexible and responsive to market demands, suitable for
• High emphasis on forecasting, bulk production, and inventory unpredictable, variable demand.
management to achieve economies of scale. • Prioritizes agility, shorter lead times, and the ability to respond
• Typically used for products with long life cycles and low demand quickly to market changes.
variability. • Often used for products with short life cycles, high demand
variability, or high innovation rates.
Push Pull
Production and distribution are driven by forecasts and
anticipated demand. Production and distribution are driven by actual demand and
• Inventory is produced and distributed based on expected customer orders.
demand. • Production and inventory are aligned with real-time sales data
• Less responsive to immediate market changes, leading to and customer orders.
potential overstock or shortages. • More agile and responsive to market changes.
Image source: [Link]
Differentiating from competitors by selecting
the best corporate strategy
• Cost Leadership/ Operational Excellence*
• Focus on low costs and efficiency
• Product leadership*
• Focus on cutting-edge, high-performance products
• Customer Intimacy*
• Tailor products/services to meet specific customer needs
• Experience**
• Create memorable and engaging customer experiences
• Community Building***
• Foster a sense of community around the brand
* Treacy and Wiersema: The Discipline of Market leaders
** Pine and Gilmore: Welcome to the experience economy
*** Witte, de & Jonker: De kunst van het veranderen
Company logo’s sources from each company’s website.
Approaches & Alignment
Efficient Responsive
Minimizing cost and optimizing processes, suitable for
predictable, stable demand. Flexible and responsive to market demands, suitable for
• High emphasis on forecasting, bulk production, and inventory unpredictable, variable demand.
management to achieve economies of scale. • Prioritizes agility, shorter lead times, and the ability to respond
• Typically used for products with long life cycles and low demand quickly to market changes.
variability. • Often used for products with short life cycles, high demand
variability, or high innovation rates.
Push Pull
Production and distribution are driven by forecasts and
anticipated demand. Production and distribution are driven by actual demand and
• Inventory is produced and distributed based on expected customer orders.
demand. • Production and inventory are aligned with real-time sales data
• Less responsive to immediate market changes, leading to and customer orders.
potential overstock or shortages. • More agile and responsive to market changes.
Business strategy: Cost leadership
SC strategy: Efficient / Push
HOW?
• Cost Minimization: Limited product variety and bulk
buying.
• Standardization: Simple, uniform store layouts reduce
operational costs.
• Predictable Demand: Focus on staple products with
steady demand.
Outcome: Low prices for customers through a
streamlined, efficient supply chain.
Image source: [Link]
Image source: [Link]
Differentiating from competitors by selecting
the best corporate strategy
• Cost Leadership/ Operational Excellence*
• Focus on low costs and efficiency
• Product leadership*
• Focus on cutting-edge, high-performance products
• Customer Intimacy*
• Tailor products/services to meet specific customer needs
• Experience**
• Create memorable and engaging customer experiences
• Community Building***
• Foster a sense of community around the brand
* Treacy and Wiersema: The Discipline of Market leaders
** Pine and Gilmore: Welcome to the experience economy
*** Witte, de & Jonker: De kunst van het veranderen
Company logo’s sources from each company’s website.
Approaches & Alignment
Efficient Responsive
Minimizing cost and optimizing processes, suitable for
predictable, stable demand. Flexible and responsive to market demands, suitable for
• High emphasis on forecasting, bulk production, and inventory unpredictable, variable demand.
management to achieve economies of scale. • Prioritizes agility, shorter lead times, and the ability to respond
• Typically used for products with long life cycles and low demand quickly to market changes.
variability. • Often used for products with short life cycles, high demand
variability, or high innovation rates.
Push Pull
Production and distribution are driven by forecasts and
anticipated demand. Production and distribution are driven by actual demand and
• Inventory is produced and distributed based on expected customer orders.
demand. • Production and inventory are aligned with real-time sales data
• Less responsive to immediate market changes, leading to and customer orders.
potential overstock or shortages. • More agile and responsive to market changes.
Business strategy: Customer intimacy
SC strategy: Responsive / Pull
HOW?
• Agility: Adapts to changing fashion trends in real-time.
• Quick turnaround: New designs produced in two
weeks.
• Customer-centric: Uses real-time data on preferences
and sales (“pull”).
Outcome: High responsiveness to fashion trends,
minimal overstock.
Image source: [Link]
Image source: [Link]
Differentiating from competitors by selecting
the best corporate strategy
• Cost Leadership/ Operational Excellence*
• Focus on low costs and efficiency
• Product leadership*
• Focus on cutting-edge, high-performance products
• Customer Intimacy*
• Tailor products/services to meet specific customer needs
• Experience**
• Create memorable and engaging customer experiences
• Community Building***
• Foster a sense of community around the brand
* Treacy and Wiersema: The Discipline of Market leaders
** Pine and Gilmore: Welcome to the experience economy
*** Witte, de & Jonker: De kunst van het veranderen
Company logo’s sources from each company’s website.
Approaches & Alignment
Efficient Responsive
Minimizing cost and optimizing processes, suitable for
predictable, stable demand. Flexible and responsive to market demands, suitable for
• High emphasis on forecasting, bulk production, and inventory unpredictable, variable demand.
management to achieve economies of scale. • Prioritizes agility, shorter lead times, and the ability to respond
• Typically used for products with long life cycles and low demand quickly to market changes.
variability. • Often used for products with short life cycles, high demand
variability, or high innovation rates.
Push Pull
Production and distribution are driven by forecasts and
anticipated demand. Production and distribution are driven by actual demand and
• Inventory is produced and distributed based on expected customer orders.
demand. • Production and inventory are aligned with real-time sales data
• Less responsive to immediate market changes, leading to and customer orders.
potential overstock or shortages. • More agile and responsive to market changes.
Business strategy: HYBRID
Operational excellence + Customer intimacy
SC strategy: HYBRID
Combining Efficient and Responsive/Pull
HOW?
• Made-to-Order: Only builds computers once an order is
placed (pull)
• Customization: Products tailored to specific customer
requirements (customer intimacy)
• Inventory Efficiency: Minimal stock, reduced holding
costs (efficient, operational excellence)
Outcome: High customer satisfaction, lower inventory
expenses.
Image source: [Link]
Push-Pull
Customer order decoupling point
• Make-to-stock (MTS)
products
• Assemble-to-order (ATO)
or finish-to-order products
• Make-to-order (MTO)
products
• Engineer-to-order (ETO)
products
(Bozarth & Handfield, 2019)
Strategic fit
Responsive supply
chain
Responsiveness
spectrum
Efficient supply chain
Implied uncertainty
Certain demand spectrum Uncertain demand
(Bozarth & Handfield, 2019)
Procurement, Sourcing & Purchasing
Afbeelding invoegen
Supply Management – The broad set of activities carried out by
organizations to analyze sourcing opportunities, develop sourcing
strategies, select suppliers, and carry out all the activities
required to procure goods and services.
• Procurement
• Purchasing
• Sourcing
Procurement: The broader process that includes
sourcing, negotiating terms and contracts,
and managing supplier relationships.
Sourcing: Identifying and selecting suppliers based
on various criteria like cost, quality, and
reliability.
Purchasing: The actual transactional process of buying
goods and services, typically a part of
procurement.
Financial impact of sourcing
▪ Every Euro saved in purchasing lowers COGS by €1 and increases pretax profit by
€1.
▪ Every Euro saved in purchasing lowers the total inventory – and as a result, total
assets – by €1. ➔ higher ROA (Return on Assets).
• Profit leverage effect – A term used to describe the effect of € 1 in cost savings
increasing pretax profits by €1, while a €1 increase in sales increases pretax
profits only by €1 multiplied by the pretax profit margin. E.g. in case of a 10%
profit margin, you would need €10 in additional sales to achieve the same profit
increase.
Performance Impact of sourcing
Sourcing dialysis machine valves
Effect of defective dialysis machine:
• Interruption in patient treatment
• Rescheduling difficulties
• Reduction in the effective capacity
for dialysis
• Possible medical emergencies
Estimated cost of a failed valve = $1,000
(Bozarth & Handfield, 2019)
Performance Impact of sourcing
Sourcing 50 dialysis machine valves (Total Costs)
(Bozarth & Handfield, 2019)
The Strategic Sourcing Process
(Bozarth & Handfield, 2019)
Developing the sourcing strategy
Insourcing Outsourcing Make-or-buy decision
The use of resources within the The use of supply chain partners A high-level, often strategic,
firm to provide products or to provide products or services. decision regarding which products
services. or services will be provided
internally and which will be
provided by external supply chain
partners.
Reasons for Outsourcing
Reducing fixed costs and recurrent costs
Allowing the organization to focus on its core business
Accessing skills and technologies, improve quality
Providing flexibility
Accountability: transfer risks to specialized external providers
Sourcing Strategies: Kraljic Matrix
High
Ensure supply
continuity Bottleneck Critical/ Form
partnerships
Complexity or Strategic
Risk Impact
Simplify acquisition Routine Leverage Max. commercial
process (or tactical) advantage
Low
Low High
Value Potential
Image source: [Link]
High
Ensure supply
continuity Bottleneck Critical/ Form
partnerships
Complexity or Strategic
Risk Impact
Simplify acquisition Routine Leverage Max. commercial
process (or tactical) advantage
Low
Low High
Value Potential
Image sources: [Link]; [Link]; [Link].
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Any questions?
References
Lambert, D. M., & Cooper, M. C. (2000). Issues in supply chain management. Industrial marketing
management, 29(1), 65-83.
Bozarth, C.C., & Handfield, R.B. (2016). Introduction to Operations & Supply Chain Management (global 4th
ed.). Pearson Education Limited.
Weenk, E. (2019). Mastering the Supply Chain. Kogan Page Limited.
Chopra, S. (2019). Supply Chain Management. Strategy Planning, and Operation (global 7th ed.). Pearson
Education Limited.
All materials regarding The Fresh Connection are provided to Avans by Inchainge B.V.
Unless otherwise specified, images are sourced from Office 365 stock images.
