CSS Solved Business Administration Past Papers | What does a company need to do to achieve strategic fit between the supply chain and competitive strategies?
The following question is attempted by Miss Nimra Masood, the top scorer in CSS Business Administration papers. Moreover, the answer is written on the same pattern, taught by Sir to his students, scoring the highest marks in compulsory subjects for years. This solved past paper question is uploaded to help aspirants understand how to crack a topic or question, how to write relevantly, what coherence is, and how to include and connect ideas, opinions, and suggestions to score the maximum.
Topic Breakdown
Business competition and innovation have made supply chain management an integral part of business management. For the past many years CSS papers are incomplete without this topic; hence, highlighting the importance to thoroughly study this area.
Subject: Supply Chain Management
Chapter: Supply Chain Performance
Introduction:
With induction of technology and growing competition, the need for strategic fit has become even more important. An effective supply chain is core of the whole business process that helps in balancing the resources and efficiency. Strategic fit is incorporated in strategic goals implemented through strategic management process. A strategic fit between the supply chain and competitive strategies is desired by company to satisfy customers and maximize profits.
Supply Chain Strategy:
It is a responsiveness approach. It focuses on responding to any discrepancy or dissatisfaction among customers. Cost and profit is the prime focus while quality is secondary.
Competitive Strategy:
It is an efficiency-based approach. According to this approach the company must plan its strategy according to needs of customer. Customer delivery and quality are prime focus while cost and profit are secondary.
Strategic Fit:
Taking maximum benefit from the opportunity in external environment by optimally utilizing the resources available, its purpose is to build consistency between prioritizing customers and supply chain capabilities.
Prerequisites to achieving strategic fit:
- There must be a coordinated strategy in which competitive and functional strategies are aligned.
- Each functional Strategy must aid other strategy and leads towards strategy goal.
- Each functional unit must be properly structured and utilized to execute strategy successfully.
- The design of supply chain and role of each stage must be aligned to support supply chain strategy.
Steps in Achieving Strategic Fit:
- Understanding the Customer and Supply Chain Uncertainty:
The first step in achieving strategic fit is to identify the target segments, their needs and uncertainty in needs. This will help company understand the performance expectation and the costs required to achieve that performance level.
- Reasons for Demand Uncertainty:
Customer demand along different segments varies along several attributes.- Response time that customers are willing to tolerate is likely to be small during an emergency, whereas it could be prolonged in case of routine work.
- Variety of products available is another factor behind demand uncertainty. Customers prefer to buy all items/ products from a single supplier.
- Service level required is another factor. Quality of service is very crucial to keeping the customer satisfied; hence, demand certain.
- Pricing is another factor in losing customers. Companies must be conscious about losing customers to competitors or substitute products. In case of emergency or extreme desire, the customer is price insensitive; however, in less problematic situations, price is a crucial factor.
- Desired rate of innovation in product is another criteria for demand certainty. Technology and fashion related items require consistent innovation. A mobile giant like Nokia, failed to keep its demand stable due to poor innovation and technology.
- Implied Demand Uncertainty:
The demand uncertainty for only that portion of the demand that the supply chain desires to satisfy based on customer needs. This demand uncertainty is correlated with other characteristics of demand:- Products with uncertain demand are often immature and have less direct competition. However, the profit margins are high.
- More certain the demand more accurate is forecasting.
- More uncertain the demand, more difficult it is match supply with demand.
- Supply Chain Uncertainty:
The other side of uncertainty spectrum is supply chain. This challenge evolve along different phases of product life cycle, it is most vulnerable in the introduction stages when the product is newly launched.
- Understanding the supply chain Capabilities:
Once the uncertainties are defined next step is to determine how the company can effectively meet its demand. Supply chain responsiveness is the ability of supply chain process to respond flexibly. Following factors contribute to supply chain responsiveness:
- Responding to fluctuation in demand.
- Handling the product variety
- Building highly innovative products.
- Handle supply uncertainties
Nonetheless, on instances supply chain capabilities may result in higher costs; thus, there is need for cost-responsive efficient strategy.
- Achieving Strategic Fit:
Once the first two steps are complete, the final step is to ensure supply chain responsiveness is consistent with demand uncertainties. The goal is to manage supply change and demand uncertainty to effectively achieve targets. Supply chain responsiveness by assigning roles to different stages of supply chain. Another crucial element of supply chain effectiveness is to maintain ideal level of inventory to lower cost.
Conclusion:
Achieving strategic fit is a key factor to ensuring effective supply chain. Supply chain strategy must be formed according to firm’s capabilities; on the other hand, analyzing the competitive strategies can be useful in identifying key success factors and highlighting weakness to overcome. Thus, achieving strategic fit between supply chain and competitive strategies is an ideal combination.
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