Competitive and Supply Chain Strategies

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Give arguments to support the statement that Wal-Mart has achieved very good strategic fit between its competitive and supply chain strategies. Wal-Mart’s competitive strategy is based on three dimensions: high product availability, a wide variety of goods, and everyday low pricing. Consistently providing a wide variety of goods at low prices presents a challenge to many retailers due to the costs required in managing transportation, inventory, facilities, and information. Their pioneering use of “crossdocking” and internal distribution system management allows for decreased transportation costs for a wide variety of goods while cutting inventory needs, i.e., it allows them to strike a balance between high product availability (responsiveness) and cost (efficiency) that meets their customers expectations. Their supply chain strategy also capitalizes on the relatively stable demand for their products, which is a function of their infrequent usage of product promotions and their everyday low pricing strategy. Finally, Wal-Mart recognizes its suppliers capabilities and has partnered with key suppliers to allow these suppliers to manage replenishments through vendor managed inventory (VMI) enabled by information sharing agreements. In summary, Wal-Mart’s supply chain was constructed and is managed to enable providing a wide variety of stable-demand items at consistently low prices, which is their competitive strategy.

What are some industries in which products have proliferated and life cycles have shortened? How have the supply chains in these industries adapted? Product proliferation (wider variety) and shortened life cycles are apparent in more and more industries over time as consumers become increasingly demanding for items that fit their unique desires. The most obvious industries in which the combination of increased product variety and short life cycles can be found is in the high-tech industries such as PCs, cellular phones, and multimedia products. Some of the supply chains in these industries have adapted well while others have not. Many successful companies have moved towards a factory direct, make to order model, such as that implemented at Dell. Dell’s assemble to order strategy and factory direct ordering enable them to customize products to meet the customers individual needs, while reducing the high costs of inventory typically associated with wide variety. Another mechanism for providing high variety in these industries has been the trend towards increased component commonality in different end items, allowing input components to be pooled against different product demands. The issue of short life cycles has been a bit more of a problem, resulting in a high risk for inventory obsolescence. Firms have addressed this problem somewhat in the product design phase by planning for upgradeable and reusable components, and for finding new ways to salvage the old inventory. In addition to the high-tech industries, nearly all industries have seen a trend towards increased variety, including the automobile industry and many of the service industries (e.g., UPS, FEDEX) who are increasing their service offerings.

Tactics Support StrategiesBut why would I insist that this is a tactic and not a strategy? Simply put scale is one answer. But another is this is an enabling tactic that supports even grander strategies than simple “control, so control becomes nothing but a mere tactic.I learned some time ago, perhaps from reading Peter Drucker, that every tactic deployed should support as many strategic goals as possible. A tactic that supports only one strategic outcome is not a very effective tactic. A tactic that supports 5 strategic goals is a fabulous tactic.In the case of WalMart's recent decision and initiative to convert a majority of its inbound freight volume from prepaid to collect freight terms, the lines between strategy and tactics become a little blurred in so many people’s minds. So let us work on...
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