Competitive Advantage Using Supply Chain Management
GAINING COMPETITIVE ADVANTAGE USING EFFECTIVE SUPPLY CHAIN MANAGEMENT
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
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
References: Barney, J.B. (1991) Firm Resources and Sustained competitive Advantage, Journal of management, Vol. 17, No. 1, pp. 99-120 Bocij, Paul, Chaffey, David, Greasley Andrew and Hickie, Simon, (2003), Limited 2003. Christoper, M., (1992) Logistics and Supply Chain Management, Pearson education limited. Christoper, M., (2005) Logistics and Supply Chain Management. Pearson education limited. Flint, D.J. (2004) Strategic marketing in global supply chains: Four challenges, Industrial Marketing management, Vol.33, pp. 45-50 Hammant (1995) p32. Hammant, J. (1995) “Information technology trends in logistics”, Logistics Information management, Vol. 8 No. 6, pp32-37. Huttenlocher, D. (2004), “Differentiating IT” Department of Computer Science, Cornell University. URL: Ketchen, D.J.Jr & Giunipero, L.C. (2004) The intersection of strategic management and supply chain management, Industrial marketing management, Vol. 33, pp. 51-56 Lumsden, K. (19198) Logistikens Grunder, Studentlitteratur, Lund “Business Information Systems. Technology, Development and Management for the e-business. Second Edition”, FT Prentice Hall, Pearson Education Martin, J.H. & Grbac, B. (2003) Using supply chain management to leverage a firm’s market orientation, Industrial marketing management, Vol. 32, pp.25-38 Porter, M. (1985) Competitive Advantage, The Free Press, new York Rungtunsanatham, M & Co.(2003) Supply chain linkages and operational performance: A resource-based-view perspective, International Journal of operations & Procustion management, Vol. 23, No. 9, pp. 1084-1099