Competitive Advantage Using Supply Chain Management

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1.0 Introduction Christopher (2005, p.5) describes supply chain management as follows: “The management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole” Until recently, supply chain management has been largely viewed as a necessary evil and the focus has been strictly on cost reductions. Today however, many are coming to the realization that supply chain management can be much more strategic, affording a company the opportunity to out-perform competitors. With supply chains becoming more elongated as they become more global, the pace of demand changes increasing and product lifecycles shrinking, the responsiveness of a company’s supply and fulfillment networks to change is becoming a more substantial determinant of company success. As such, companies must view their supply networks as a competitive weapon that can not only deliver low costs but impact top-line growth through superior responsiveness and best-in-class customer service. If these and other similar strategies as will be described in this write-up are available for only one company at the markets, this company has competitive advantage over its competitors (Barney, 1991; ketchen, 2004; Rungtusanatham et al., 2003). Another way to gain competitive advantage is to optimize one or several activities. However, a consideration has to be taken so that optimization does not end in optimizing one function at the expense of the others (Lumsden, 1998; Porter, 1985). Porter (1985) argues that competitive advantage is gained by being the lowest costcompetitor or by differentiating. However, within the supply chain domain, competitive advantage is gained by two facts: reducing costs and increasing responsiveness (agility) to customers’ needs (Martin & Grbac, 2003). If the company strives to meaningful cost reductions, more efforts on cross-firm co-operation, coordination, collaboration and integration are required (Flint,2004). The basic recognized supply chain practices that a few companies described in our cases leveraged on to gain competitive advantage include: Strategic supplier relationship, Customer relationship, Information Technology, Utilization of 3PL/4PL providers, Co-operation with competitors, Postponement and VMI, Performance measuring. 2.0 Dell DELL one of the world’s giant Personal Computer (PC) makers shut to the top and gained a unique advantage over established PC makers like IBM by selling directly to customers. Dell assembled and sold every PC to order which enables it to maintain its cost advantage over conventional rivals as inventory management costs as well as component keeping cost were virtually eliminated. This made it possible for Dell to receive payment within 24 hours of order placement, while its competitors had to wait for 35 days for payments through primary dealers.

With the advent of the internet, Dell invested in elctronic commerce and began to make sales of $1m per day via the internet [McWillaims et al 1997]. Dell also reengineered its processes and relationship with Logistics providers and suppliers such that every Dell order is built, customized and shipped within eight hours. Dell continued to re-engineer its logistics operations until the total number of interventions involved in the manufacture of a Dell PC was reduced to 60, against an industry average of 130. The drive for this reduction also instigated Dell to go into a long term relationships with her suppliers including competitors such as IBM and Toshiba. Dell also imbibed vendor managed inventory (VMI) strategy where components are never ordered from suppliers until orders are received from Dell customers. In line with this Dell reduced the number of suppliers from 204 to about 30 companies in 2003. Dell entered into strategic relationship with the suppliers such that they are expected to maintain...
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