Why Achieving Strategic Fit through the Supply Chain is Important

strategic fit scm

Last updated on May 6th, 2021 at 08:48 am

Every business in the contemporary globalized marketplace wants to achieve a competitive advantage to stay in business longer. But it is not all businesses that are successful.

How do you achieve a sustainable competitive advantage?

Is it through product innovation or through reduction of cost in transportation and choosing low-cost distributors?

The supply chain has many wheels that must move in concert and which you must give proper attention to. This is through the creation of a proper link between manufacturing operations, supply chain, and strategy. To survive in an environment of growing global competition, firms must formulate strategic plans according to manufacturing and supply chain strategies and capabilities.

The new competitive environment is defined by the rapidly changing technology and markets, the ever-expanding global competition, and increasing uncertainty and complexity. Some literature has defined supply chain management as an essential element of competitive analysis. In other words, it can be said that it’s the supply chains competing in the market as opposed to the businesses themselves.

No matter the enterprise’s size, the business that understands how to work with vendors, customers, and distributors stands to benefit the most. This is pretty much using a supply chain to achieve a strategic fit.

Here are more reasons why your business should achieve a strategic fit through the supply chain.

Understand the Uncertainty between the Customer and Supply Chain

For a business, nothing is more critical than understanding the customer’s needs in every targeted segment with the primary goal of satisfying them. But understanding the needs is not enough.

You must understand the associated uncertainty in the supply chain in terms of cost and service requirements and the unpredictability of supply and demand.

So how does strategic fit through the supply chain help?

Well, by understanding the customer demands. For example, the quantity they need in a product lot. A particular customer category may be looking to fulfill their needs in a one-stop solution, and the business must adapt to provide this.

Then there is variety.

The number of people looking for variety in products is continually growing, especially in a highly globalized market. Their demands want, and needs are not similar.

The type of goods that fulfill their needs are not the same for all, and the business needs to understand this and align its supply chain.

For example, a particular business may choose to advertise about providing a wide variety, despite having low stock levels. This may create a conflict in the supply chain and the resulting long wait periods for customers leads to dissatisfaction.

Achieving a strategic fit also means achieving differentiation through supplier innovation.

But also, the response time and Service Level they are comfortable with are other vital factors. Some people may not be comfortable waiting beyond a particular time in some industries such as food and beverage. This is usually evident in a setting such as a restaurant or a cafe.

The restaurant staff needs to respond faster in some emergency orders, or they lose the customer forever. The service level required can determine if an establishment maintains its reputation or not.

Determine the Future Value of Suppliers

For a company to know where they are going, they must critically examine where they have been. This is by determining the value of distributors in the supply chain. How does each vendor contribute to your success?

A strategic fit through the supply chain involves identifying how much raw material the business received and the total cost for the year. Determine how the suppliers performed in terms of on-time delivery and promised price.

Then examine any apparent gaps and determine the causes. More importantly, weigh every vendor’s performance on an annual basis to determine their value to the supply chain strategy.

A business will fail to achieve a strategic fit if its choice of distributors has a very low response rate. This conflicts with the primary goal of customer satisfaction and the business losses out to the competition.

Adaptability to Changes in Internal Product Design

Profitability is the goal of every organization. However, products must be produced at the correct rate and cost, and the actual cost of delivery must be captured for financial planning.

While product innovation is vital to create a competitive edge, making the right decisions during the early stages of product development is equally important. The right supply chain strategy optimizes manufacturability and long-term supply.

Support the Overall Goals of the business

One of the most imperative things for a business is to know what they require from vendors and distributors to achieve their overall goals. List how the products or raw materials get to your business from the original supplier. Some organizations hire supply chain consulting services to map out and analyze each of the sources and anticipate needs coming from new models.

An adequate supply chain strategy can involve trade-offs between the level of service provided and its cost. This avoids a situation where there’s excessive inventory when every product is always available for purchase leading to idle manufacturing capacity.

But an excess focus on the cost is no good either. This is because it can reduce the quality of the products and eventually cause customer dissatisfaction.

Adapt to Market Demands

The current globalized marketplace keeps evolving and swiftly. The business identifies customer demand, delivery, and price changes to improve the profit margin and competitiveness. This must be done as soon as possible.

In the past, organizations relied on end-of-the-month reports to make any tangible adjustments to their strategy. But your business doesn’t have to wait this long. There are now cloud-based systems that allow dynamic adjustments. These systems produce daily reports that you use to make timely adjustments.

In conclusion, achieving a strategic fit in the supply chain is ideal. The strategy focuses on the customer and aligns with the overall goal of the business. It also means the organization can accomplish supply chain needs with what it has at the moment.

Read also:  4 Strategies for a Sustainable Oil and Gas Supply Chain

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