Explore the importance of developing & executing supply chain strategy that align with the business strategy.
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Requirements:
Case study 1
Aligning Supply Chain Strategy with Business Strategies
The purpose of this assignment is to explore the importance of developing & executing supply chain strategy that align with the business strategy.
Read, summarize and critique four journal/web articles on the “Aligning Supply Chain Strategy with Business Strategies”. Articles can be found in professional journals and sites on the web. The article “The Importance of Aligning Your Strategies ” attached on the D2L can be used as one of the four articles.
The paper should address the content items described below:
Assessment Criteria Checklist
Paper includes an introductory paragraph, which introduces the reader to the topic. (2 points)
A section of the paper is devoted to the definition of business strategy, supply chain management, and supply chain strategy. (3 points)
Paper includes a section identifies and explains the importance of supply chain strategy. (3 points)
Paper includes a section on your technique of developing & executing a supply chain strategy (5 points)
Paper includes a chart that summarizes your technique. (4 points)
Paper includes a section on the important of connecting your supply chain strategy with your business strategy. (4 points)
Paper includes a conclusion and summary paragraph that highlights the main points of the paper and highlights the major points of the paper. (3 points)
Paper includes a section for references in APA style used in the paper. (2 points)
Written format is organized with use of subtitles for sections of the paper, writing style is grammatically correct, no spelling errors, complete sentence structure and paragraphs organized by sub topics. (2 points)
Minimum of 4 word processed pages, 1.5 line spacing, 12 point type. (2 points)
Things to Remember
Your paper should be four pages in length (not including title and reference pages).
Be sure to include a title page, introduction, conclusion & summary, and references.
Provide sufficient background information and clearly explain your responses to each question.
Your paper should be 1.5-spaced, with 1-inch margins, in-text citations and references for all sources following proper APA formatting.
Use the APA Format Tip Sheet to properly cite your work:
Compose your work using a word processor (or other software as appropriate) and save it frequently to your computer.
Submit your work to D2L drobox Research Paper 1.
Be sure to check your work and correct any spelling or grammatical errors before you submit it.
Review the assessment criteria checklist to see information on grading criteria.
Reminder of the Academic misconduct:
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UPS Supply Chain SolutionsSMSupply Chain StrategyThe Importance of Aligning Your StrategiesOur Insight.A UPS Supply Chain SolutionsWhite PaperCopyright © 2005 United Parcel Service of America, Inc. All Rights Reserved. No part of this publication may be reproduced without the prior written permission of UPS Supply Chain Solutions.
UPS Supply Chain Solutions1IntroductionChances are you’ve heard the term supply chain strategy. Used informally, it isoften confused with supply chain management, where supply chain operations arecontrolled to reduce costs. There’s some truth to this definition, but supply chainstrategy really is broader; it defines how the supply chain should operate in orderto compete. Supply chain strategy is an iterative process that evaluates the cost-benefit trade-offs of operational components. Business strategy involves leveraging the core competencies of the organization to achieve a defined high-level goal or objective. It also includes the analytic anddecision-making process surrounding what to offer (e.g., products and services),when to offer (timing, business cycles, etc), and where to offer (e.g., markets andsegments) as a competitive plan. While the business strategy constitutes the overall direction that anorganization wishes to go, the supply chain strategy constitutes the actualoperations of that organization and the extended supply chain to meet aspecific supply chain objective.That being said, most companies have a business strategy, but are unlikely to have overtly designed a supply chain strategy. So, why is a supply chain strategyso important? Well, one good reason is to operationalize and support yourbusiness strategy. At some point, a business strategy must be executed andtypically this is done through the operational components of a company. Supplychain strategy also focuses on driving down operational costs and maximizingefficiencies. For example, an organization may choose a strategy directed atsupplier management as a way to remain competitive. By providing a clear purpose, the organization keeps sight of the strategy and is able to devisetactical steps to achieve these goals. Another reason for having a supply chainstrategy is to establish how you work with your supply chain partners, includingsuppliers, distributors, customers, and even your customers’ customers. As themarketplace becomes more competitive, it is critical to reinforce existingrelationships and work together. And for all these reasons, a well executedsupply chain strategy results in value creation for the organization.Developing a Supply Chain StrategyUnderstand the Business StrategyThe first step is for supply chain executives to clearly understand how theenterprise chooses to compete. This is important not only for the obvious reasonof working off the “same play book,” but also for the reason that it forces thesupply chain operation to see itself as a customer facing entity serving thecompetitive goals of the enterprise—not merely an operational department.Supply chain strategy is not simply a linear derivative of the business strategy. At best, supply chain strategy can be the enabler of the business strategy. If thebusiness strategy is to be the low cost provider, the supply chain strategy shouldsupport this. And just like when developing a business strategy, look to your corecompetencies, focus, and means of differentiation when developing a supply chainstrategy. Being able to strategically source parts at an attractive price may supportA well executed supply chainstrategy results in valuecreation for the organization.
UPS Supply Chain Solutions2A formal supply chainassessment by a non-biasedoutside party may assist you in better understandingyour…opportunities forimprovement.both your supply chain strategy and business strategy, but only if you have thecapabilities to do so effectively. Look to your supply chain competencies andleverage what you do well. You may want to focus on a particular market orsegment in which to gain supply chain efficiencies. Or you may want todifferentiate your organization operationally by providing lower costs tocustomers or providing services that other industry players are unable to do. Assess the Extended Supply ChainThe next step is to conduct a detailed, realistic assessment of the capabilities thatexist within the organization and even the extended supply chain. Begin by closelyscrutinizing your organization’s assets and evaluate how well they support thestrategy. Old machinery and disparate systems may mean high operationaloverhead and costly process inefficiencies and redundancies – clearly notsupportive of a low cost provider strategy. A formal supply chain assessment by anon-biased outside party may assist you in better understanding your operationalstrengths and opportunities for improvement. Look for a firm that can provideyou with operational benchmarks both inside and outside of your industry inorder to gauge core competencies. Once the assessment is complete, assemble ateam to review and prioritize recommendations, validate the opportunities, definethe risks, and the requirements for implementation. Ultimately, if there is adisparity between the supply chain strategy and the operational assets, you mayhave to make capital investments. Of course, the other alternative is to changeyour assumptions and alter your strategy all together! Develop an Implementation PlanFrom this critical work emerges the “go forward” supply chain strategy – directlytied to the business strategy, highly specific as to enablers and metrics, and with adefined set of implementation requirements and contingencies. The developmentof an implementation plan should include activities and tasks, roles,responsibilities, a corresponding timeline, and performance metrics. Establish asub-team to shepherd the execution and provide project managementresponsibility to resolve issues and track status. Development ConsiderationsCooperate and Collaborate with Your Partners – Throughout the developmentprocess remember to include your supply chain partners. While you don’t necessaryneed to divulge the full details of your strategy, you can certainly communicate howyou would like to do business. Ideally, seek out mutual goals that bothorganizations can execute on. Not only will you be one step closer to realizing yoursupply chain strategy, you will learn more about the companies that you dobusiness with. For example, collaboration in product design may meet your need tostem R&D costs and also alert you to new product concepts that you wouldn’tdiscover without working with your customer.Outsource Where Appropriate – Part of developing a supply chain strategy includesevaluating opportunities to outsource areas that are not your core competency. Ifsomeone else can do it cheaper, it may be worth outsourcing not only to drive downcosts, but alsoto focus more resources on the core competencies yourorganization does well.
UPS Supply Chain Solutions3Executing Supply Chain StrategyPerformance ManagementExecution involves closely following your implementation plan and applying goodproject governance. You can improve your chances for success by managingperformance throughout implementation and beyond. Tracking performanceallows an organization to measure how successful it is in realizing the goals of astrategy. It also makes people understand their contribution and responsibilities,creating a more cohesive, in tune, organization. Performance management worksbest when people are rewarded for their performance and reporting is conductedon a regular basis. Moreover, performance goals should be used to communicatebusiness expectations to outside entities as well. The more the extended supplychain is involved, the more the supply chain strategy is supported and reinforced.Iterate the Cost – Benefit Evaluation ProcessOn a periodic basis (e.g., annually) you should formally revisit your supply chainstrategy. Did you meet the goals of the business strategy? Have the needs of yoursupply chain partners changed? How has the industry changed i.e., newcompetitors, business practices, products, technology? At this time, you may evenwant to reassess your supply chain organization, if the changes are significantenough to warrant it. Also, use this effort to look for new opportunities to further position your organization for success. Keep Communicating with Your PartnersExecuting a supply chain strategy means dealing with many different entities,both internally and externally. Just as it is crucial to align the supply chainstrategy with the business strategy, it is equally important to execute in a mannerconsistent with these different groups or stakeholders. The goals of your supplychain components and those that you deal with must be similar and conducted atthe same speed. Your organization may be able to move at speeds other supplychain entities are unable to maintain, resulting in misalignment and poorefficiencies. And some of your supply chain partners may not have the resourcesto commit to realizing these goals. Good communication can keep the extendedsupply chain in sync.Rising from humble beginnings, Inamed, a leading medical devicecompany, has seen itself grow to become a $300 million dollarcompany with its stock value increasing almost 200% over the lastyear. The company is credited with a clear business strategy ofgrowth through acquisition and new product innovations. Anticipatingcontinued growth and business success, Inamed needed a supplychain strategy consistent with an expanding organization. Faced with such challenging supply chain questions as “what is ouroptimal distribution network?”; “should we outsource some supplychain activities?” and “how can costs be better managed andcontained?” the company conducted a global supply chainassessment to identify supply chain costs and opportunities. In addition to offering supply chain strategy recommendations, thestudy provided a total picture of Inamed’s supply chain costs andcompared them to industry and non-industry benchmarks. Over $4million in process improvements and cost saving opportunities wereidentified. Now armed with a supply chain strategy, Inamed is in theprocess of implementing these changes.Case in Point:InamedREWARDS AND REPORTING Performance managementworks best when people arerewarded for their performanceand reporting is conducted on a regular basis.Good communications cankeep the extended supplychain in sync.
UPS Supply Chain Solutions4Avoiding Potential PitfallsEven before the well-publicized dot com collapes, business failures due to poorlyimplemented strategy were very frequent. Fortune Magazinereported in a studythat CEO strategy failures occurred primarily (est. 70%) because of failure inexecution, not with the vision and strategy development. “The real problem isn’tthe high-concept boners the boffins love to talk about. It’s bad execution. Assimple as that: not getting things done, being indecisive, not delivering oncommitments.”1And supply chain strategy is no different! During the build &implement phases, there are additional challenges including:Align the Supply Chain Strategy with the Business StrategyMost companies develop a supply chain strategy after the business strategy has been defined. While this approach can deliver some value, it does not support theinfusion into the business strategy development of very powerful supply chainmodel options, which could significantly improve the business strategy. A supply chain strategy should always support the intent of the business strategyDell broke into the big time by developing a business strategy andsupply chain strategy that worked together. In the late 1980’s andearly 1990’s Dell’s business strategy was differentiation through lowcost, speed of delivery, and customer service. The major channel forsales was from customers to call centers. However, the emergence ofthe internet called for more differentiation and fundamental change.With a well understood business strategy, Dell began to formallyintegrate operational components (e.g., logistics, manufacturing,distribution, inventory management) and develop a supply chainstrategy. The supply chain strategy focused at driving costs out of thesupply chain – being the low cost provider – while at the same timesupporting a business strategy emphasizing customer service. How was Dell successful with such conflicting charters? Internally, Business Performance Contracts (BPCs) were crafted thatdefined formal, but flexible operational agreements between eachoperational process area. These contracts tied to individualperformance targets so that imperatives were clear. Executionconcentrated on four areas: collaboration, value engineering,outsourcing, and the Out-of-Box Experience (OBE). As part of theprocess, the BPCs were also shared with the extended supply chainand similar operating agreements were arranged. These processeseffectively kept the organization’s focus on strategy throughperformance management. Externally, Dell worked with suppliers to help control costs andimprove customer service. Dell’s retail direct strategy requiresprocessing orders direct from customers, building the computers to acustomers specification, and delivery within a matter of days. Tosupport this model, Dell asked suppliers to keep inventories within15 minutes of the manufacturing locations. Virtually all products aremade to order. “Every two hours, the factory planning system sendsout a computerized message to suppliers detailing what parts theplant needs. That means there is almost no inventory of parts orproducts in the factory.”2Besides excellent working capitaladvantages, Dell also sells computers that are about two monthsnewer than the competition! In an industry where component pricesfall about 20% per year, this means significant cost-of-goods-soldadvantages for Dell. The Future of DellDell has continued to refine its business strategy, most recently byentering new markets such as printers and electronics in order togrow revenue. The company has set aggressive revenue targets –$60 billion by 2006 – almost double the earned revenue today. Tomeet these goals and the changing business environment, thecompany proactively reevaluates its supply chain strategy. This isnot only to make sure that the supply chain is strategy aligned withthe business strategy, but also to keep ahead of the competition.According to CEO Rollins, Dell “manages the value chain betterthan anyone else on the planet; the only one who might comeclose to us might be Wal-Mart.”3Case in Point:Dell1“Why CEO’s Fail,” Fortune Magazine, June 21, 1999. 2“Dell: One Company, Two CEO’s,” CEO Magazine, November 2003, pg. 34.3 Ibid.
UPS Supply Chain Solutions5and it is precisely because of these different “levels” of the enterprise at whichstrategies necessarily must be developed, that companies so often have major gapsbetween their highest level business strategy and their supply chain strategy. Thereare some additional risks associated with developing these separately, whichinclude:• Developing a supply chain strategy without a true understanding of the business case and value propositions – the costs and benefits are not known• Utilizing different or new resources in the operational model development that weren’t exposed to the original business strategy thinking, thereby diluting and weakening the supply chain strategy• Confusing or conflicting communications to the organization where objectives may be contradictoryOrganization ChallengesThe company and its organizational culture play a key role in developing andexecuting a supply chain strategy. The following are some common organizationalchallenges found in many companies:Lack of ownership –many supply chain processes and value levers do not have an owner in the traditional sense“Tower of Babel” problem –most organizations across the enterprise do not speak a common supply chain languageOrganizational focus –some managers are functional or process oriented and do not understand the value levers’ multiple drivers modelExtending the Supply Chain –most supply chain initiatives involve external parties (trading partners) which makes strong collaboration a requirementConclusionAs supply chains have moved from a cost focus to a customer focus and nowcurrently to a strategic focus, the need to think strategically about the supplychain has never been more important. The success of a strategy is only as good as the company’s ability to fully and properly execute it. A great supply chainstrategy, linked with operational excellence, can provide success for not only thecompany in question but also its partners and customers.The need to think strategicallyabout the supply chain hasnever been more important.
UPS Supply Chain Solutions6About the Author Susan Happek is a principal at UPS Supply Chain Solutions. Susan is based inAtlanta, GA and can be reached at [email protected] learn more about how our experience in supply chains and consulting canbenefit your business, please contact us:1.800.742.5727 U.S.678.746.4365 InternationalVisit us at ups-scs.comAbout UPS Supply Chain SolutionsBy aligning a client’s business strategies with its operating processes, UPSSupply Chain Solutions can create high-performance supply chains that frominception to implementation generate real, hard-number values and quickbenefit realization. This distinguishing capability, our experience in solvingreal-world challenges, and the resources of UPS enable us to set strategies,design and build solutions as well as implement, operate, manage andsynchronize your world of commerce.Copyright © 2005 United Parcel Service of America, Inc. All Rights Reserved. WP.SCS.CS.638 No part of this publication may be reproduced without the prior written permission of UPS Supply Chain Solutions.
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