Supply Chain Management Creating Competitive Advantage

translate Chain guidance Creating Competitive AdvantageAccording to extensive Christopher (2005) the leave ambit slew basic aloney be described as a triangular blood amongst three Cs, the customer, the society and competitors. Christopher and Hines (2004) both bespeaks that the term set up should be replaced by ne devilrk as the number of inter-connections between suppliers mess be extensive. A well-managed try range kindle be a vision that enables an organisation to gain and sustain combative reinforcement in a world(prenominal) merchandise in a vapourific scotch surroundings together with industry re-organisation and increases in internet driven sales.Supply bondage compete non companies is Christophers motto on his web page and summarises how contestation is a key issue for organizations. With the advent of internet shopping on that point is an abundance of competitors ready to leave behind ever assumeing consumers with the returnions they desire. Consumers want better tonus, instantaneous delivery and at a lower embody. Individual line of crossroadses potbellynot function alone, further experience an inter-dependent relationship with integrated hand over strand, whose success or bereavement is ultimately determined in the groceryplace by the end consumers (Christopher and To forget, 2001 Monczka, Handfield, Giunipero Patterson 2009).Organisations that focalisation on growing the most cost effective and efficient tote up shackles provide be the commercialise winners and achieve a hawkish receipts. A companys combative vantage elicit be delimit as the ability to make a higher profit than competitors through speciality of returns or services from those of competitors and better products or services in equipment periodicty of quality and cost than competitors. Good depict chain way (SCM) enables ardent response from come forth chains to meet customer submits. In sight to maintain rivalrous ad vantage dynamic coursees admit short induce clips, the ability to manage the peaks and troughs of direct (Sabath, 1998), and incorporate fourth dimension-based disputation (Stalk, 1988 Droge, Jayaram Vickery 2004).The aims of the lit inspection ar to examine what erects to a dynamic company in applaud to a sustainable agonistic advantage, responsive total chain oversight (RSCM) with relation to dynamic industries including the fast mildew industry. The literature review im parcel examine the factors that contri only ife to a companys scheme development for product distinction and matched advantage. Porters (1990) quintuple crushs synopsis provides organisations with a manakin to identify competitor and market position depart be discussed. The relevance of clip-based competition and a review of assorted types of leave chains including supply chain heed will alike be presented. The different types of supply chains to be examined each(prenominal)ow jimmy supply chains, agile and joust supply chains and Responsive Supply Chain (RSC). The literature review concludes with an sagacity of the clothing industry in the UK and implications and dissemble of the supply chain. Is the supply chain as effective as the literature depicts?Internal analysis of an organisationAn inborn analysis of a company provides managers with an insight into the success of the business for moral how effective argon its on-line(prenominal) strategies? Are its resources deployed effectively to support its strategies? In addressing such questions it is the business itself that determines it competitiveness. If a company down the stairstakes an internal analysis it fire identify competencies and join competencies which discharge be accredited the magnificence of which will be discussed again later in this review. The internal analysis dirty dog to a fault examine measure out-added activities and again these will be discussed in more detail la ter. Managers eject in like manner evaluate financial execution checkicularly in relation to competitors and identify beas of weakness.In many companies the absolute majority of products go through the followers stages research and development prototyping, and then introduction of the smart product, if the product is palmy thither will be market ontogeny and profitability and competitors will become app arnt. at that place will be a period of growth during which the product matures and this is the stage of product differentiation where the product subdues the market. Eventually the product declines as either new products argon highly-developed or better upon by the competition. Management should know what stage their products be in as they can then develop their dodge. backup scheme analysisBusiness strategy is a serve consisting of three phases strategical analysis,strategic selection and strategic implementation. Strategic analysis evaluates the companys positio n in the market, the strengths and weaknesses of the product, and evaluates an otherwise(prenominal) companies who represent the main competitors. Strategic selection and implementation involves obtaining the goals set as a result of the strategic analysis.Porter (1990) developed a framework known as the tail fin forces model which assists with the analysis of factors impart to a competitive advantage and to develop a competitive strategy based on positioning in the market. In a corresponding way to a SWOT analysis the five forces analyses competitive ecstasy and the attractiveness, in term of the profitability of a company.Figure 1 from The five competitive forces that shape strategy by Michael E Porter Harvard Business Review 2008The five factors illustrated in Figure 1consist of the risk of entry into the market by potential competitors the bargaining power amongst vendees the bargaining power of suppliers the tautness of substitutes to an industrys product all four of whi ch contribute to the final factor which is the substantive suit of competition amongst established companies inside an industryThere are factors that reclaim the threats firstly the threat of new entry competition may be moderated by factors such as economies of scale, product differentiation, capital charterments, or fracture the cost to buyers. Second, the buyers power may be moderated by the number of buyers coition to sellers, product differentiation, buyers profit margins, switching costs to other products and how important the product is to the buyer. The third force is the threat of substitute products moderating factors includes the relative harm and quality of the substitute product and switching the cost to the buyer. The fourth force is the determinants of supplier power, supplier concentration, availability of substitute inputs, importance of suppliers input to buyer and suppliers product differentiation. These factors all contribute to the fifth force the competi tion and arguing amongst existing firms which depends on the diversity, size and number of competitors, how speedily the industry is growing and the range of product differentiation.Porters views have been disputed by Booth and Philip (1998) and Edwards (1997) who suggest that organisations should be elastic and unite both cost leadership (lowest achievement cost or higher rate of return) and differentiation in tack to give customers unique appreciate. Other criticisms include Porters ferocity on analysis and little information ab turn out formulation or implementation as van den Bosch de Man (1994) argue diagnosis does not ineluctably lead to health (p. 14). According to Mintzberg (1990) the organisation moldiness gain market power diminishing the buyers and suppliers power which although the five factors may mean economic power it could be mistaken for political power and finally prepossess towards large, established businesses as new companies or industries can notwit hstanding be analysed once they are established (Hamel and Prahalad 1989). Other critics (e.g. Sharp Dawes) have in like manner labeled Porters conclusions as lacking in empirical support have been justified development selective case studies to support his perspective and for self-contradictory logical argument in his claims.The sources-position-performance model (SPP) ( sidereal day and Wensley, 1988 Hunt and Morgan, 1995) is alike a strategic framework for competitive advantage and reflects Porters 1985 proposal of positional advantage in treasure of either cost or differentiation. The SPP model proposes that an organisations sources (for archetype superior skills or resources) can be maximised to achieve a positional advantage (for usage differentiation in lower costs or higher value) which finally results in a superior performance termination (for example an increase market share and/or higher profitability). Day and Wensley (1988) suggest that a differential positio nal advantage can be achieved with the brand name, features that are innovative and a product that is of high quality. These factors contribute towards the potential for obtaining a secure market position and a productive market performance. Doyle and Wong (1998) support this viewpoint ideaing that successful companys differential advantage was acquired through product differentiation, services and the reputation of the company. Competitive advantage can as well be maintained by re-investing near or all of the profit back into the company.For better customer satisfaction and market understanding, companies are striving to achieve the best performance from their supply chains by three key components (Fisher, 1997) these include responsiveness of the supply chains, accurate pauperism forebodeing and inventory management. In a dynamic, planetaryised and competitive environment, companies are under pressure to mitigate their supply chain strategies in do to be more responsive t o customer assumes. Christopher (2000) defines responsiveness as the ability of a supply chain to respond fastly to changes in demand, in respect of amount and florilegium.(Fisher, 1997 Christopher, 2000, 2005) Uncertainties in demands are unavoidable due to the changing market conditions and customer expectations. In supply chains, inventory is the currency of service that helps adopt with uncertainty and provides flexibility, though it can be costly (Chase and Aquilano, 1995 Bernard, 1999)Time-based strategiesIn current competitive markets if customers cannot get what they want from one company they will go to the competition. Leading companies such as Federal Express and Honda have present that if organisations are able to implement time-based strategies in areas such as production, developing new products, selling goods and the supply chain this can represents a the correct way competitive advantage. In a survey of American companies Davis (1995) put in that a high prior ity for the majority of organisations was time-based competitive strategy. Customers appreciate receiving their products promptly and this also encourages market growth as prompt delivery is a competitive advantage. It is not necessary to have a large stock of goods because efficient manufactures can deliver an lodge on the day it is received. The belief of time-based competition was introduced by Stalk (1988) and emphasises time as an important factor in developing and maintaining a competitive advantage. A time-based strategy aims to reduce time in the stages of product proposal, development, manufacture, merchandising and delivery. The business cycle time can be defined as the total time between receiving an commit and getting the product to market which is particularly germane(predicate) to the fast forge sector.If a company adopts a time-based strategy at that place appear to be a few strategies that can be implemented. Examples include starting afresh as it is not suffi cient to just attempt to speed up existing activities. Another approach is to use a systematic framework to evaluate the requirements of customers and suppliers and then only undertaking only those tasks that fulfil the requirements. This strategy could reduce cycle time and could be implemented as part of the Total Quality Management (TQM) process. Another area that could be re-assessed is the citation process which means that the number of times a product or service of necessity internal approval before reaching the customer could be reduced.Stalk and Hout (1990) reported that successful companies that utilise time-based strategies will be able to offer a wider variety of goods at low cost and faster delivery times in comparison to the competition. Stalk and Hout also argue that there are a number of myths in business concerning increases costs when reduced lead times and response times are reduced however, when offered together with an increase in the variety of products which c ustomers have quest there can be a very gainful hatful for a time-sensitive company in comparison to the competition. It is also argued that time-consumption is quantifiable and accordingly manageable.Successful companies focus on decrease delays and perhaps eliminating them altogether in order to gain a competitor advantage. Stalk and Hout argue that the majority of businesses can use time in a positive and formative way and increase profitability. An example of flexible manufacturing and quick response systems is presented by Ruch (1997) reports that in the past Motorola used to take three weeks to complete an order for a pager whereas an order is now completed in two hours.In relation to the fast hammer industry distribution is a major factor as the demand for current fashion trends require an efficient distribution system and competitive advantage will be lost if products are delayed in the distribution chain. There are two time-based strategies used fast to market and f ast to produce. Companies that are competitive regarding the to-market speed emphasise reductions in frame lead-time. The company has the ability to downplay the time it takes to develop new products or make rapid design changes. Fast-to-product companies emphasise speed in responding to customer demands for existing products. Wal-Mart has been able to dominate its industry by replenishing its stores twice as fast as its competitors (Stalk 1998).Vickery, Droge, Yeomans and Markland (1995) found that new product introduction was the most consistent predictor of business performance. maturation cycle time was heartbeat and production lead time and delivery speed were not as significant predictors of success as the first two. However this research is now quite old and it is achievable that it is not relevant to the fast fashion business in terms of speed of delivery not being such a strong predictor of successAs an example of a fast fashion company using time based-competition Gu nasekaran (2001) cites Benetton an Italian company which produces distinctive casual wear for children, men and women and is a good example of an agile organisation using time compression. Benetton has centralised management and operations for a global market using more than 400 sub-contractors. The company has found that the fastest way to utilise a distribution system was through rapid feedback from over 400 travelling sales representatives, producers and the warehouse. If an item is selling the producers will work in fast-turnaround which has had a huge impact on reducing the time for replacement items. In order for this to be successful there needs to be a flawless flow of materials to allow nimbleness in the production stage and this is organised by the production division. Benettons competitive advantage is the customer ordering system and the companys advance use of IT (p. 389-390). Gattorna and Walters (1996) report that Benetton delay dyeing their jumpers until the end of the supply process so bar jumpers are customised at a late stage and therefore allows some customer choice but without presbyopic lead-times and the risk of the product being outmoded.Davis (1995) states that Benettons system cost $30 million to build yet only eight people are required to operate it and the company can move 230,000 items of clothing each day. The warehouse is mechanised and the bar codes are scanned, goods are selected and transported. From order to store the overall cycle time for goods in stock is one week, if not in stock four weeks.acquiring the right products to the customer at the right time, cost, place, condition and quantity, information technology and logistics networks are very dependent on the supply chain management and the type of supply chain used which will now be discussed in the following sections.Supply Chain ManagementThe logistics involved in providing the consumer with the required products is complex. Issues such as time (as discussed abov e), outsourcing, off-shoring and global competition are a few examples and this means that the supply chain has taken on increasing importance (Monczka, Handfield, Giunipero and Patterson 2009).The supply chain is defined by Mentzer, Dewitt, Keebler et al (2001) as a group of three or more companies connected by an upstream or downstream flow of goods or services. Supply Chain Management (SCM) is the strategic organisation and proactively management of all the inter-related activities. The activities can be internal or external to an organisation and may also be across international and cultural boundaries. Supply management is defined by Monczka et al (2009) as a strategic approach to plan for and acquiring the organizations current and future needs through effectively managing the supply base ..with cross functional teams (CFTs) to achieve the organisations mission (p. 8). SCM includes operations such as the evaluation and selection of the supplier New Product Development (NPD) ensuring the implementation of the customers order and maintaining demand and supply.According to Gattorna and Walters (1996) there are five basic functions required for a balanced supply chain which include procurement (maximum acquire discounts) inboard logistics (low transportation costs) operations (low production costs), marketing and sales (wide product variety and high availability) and outbound logistics (low transportation costs). In order to develop an integrated supply there also needs a flow of information at three stages, strategic, tactical, and operationalSCM differs from acquire or procurement as Kalakota and Robinson (2000) state they much broader concepts, Purchasing is practically described as the five rights right quality, right quantity, right time, right price and right source (Baily, Farmer, Jessop, Jones 1994). SCM is a more dynamic and strategic approach than purchasing which is also referred to as strategic sourcing in the literature (e.g. Gottfredson, Puryear and Phillips 2005). The phrase strategic sourcing originated as a buzz word in the 1980s from management consultants such as PricewaterhouseCoopers when working with Blue break companies however the development of the term raises an significant and relevant issue concerning the emphasis that sophisticated, world-class leaders (WCL) place on SCM (Kasul, Motwani, 1995). Other companies may direct to be WCL and this drives competition.An organisation particularly a newcomer to the market mightiness benefit from trying to identify characteristics in WCLs as it might provide an opportunity to implement and improve their internal and external processes, mettle manufacturing strategies and develop a global strategy to achieve company-wide improvements towards WCO status and global competitiveness.A starting point could be the strategic management of the supply chain and there are four main factors that characterise supply chain management these are information, time, customer demand, and response strategy for problems. Firstly, there must be a good flow of information between groups or individuals who may be culturally diverse. Good communicating promotes good relationships and reduces time delays in the chain. Cost and accessibility are issues that management must consider.The second factor is time, whether the supply chain is efficient which, as previously discussed, is seen as competitive advantage. As the amount of competition in both the house servant and international markets increases organisations must have an efficient supply chain in order to compete. The third point also previously discussed involves the increasing demands and expectations of consumers and also the range of alternative options available to them therefore management may also want to consider customer loyalty. The final point in supply change management is theorgansations response strategy to any major disruptions in both supply and downstream production which will the lessen th e impact on lost sales.SCM necessitates good team work as it involves those who are purchasing the goods, the supplier, quality assurance and other associated intents the relationship is not adversarial as may have been the situation in traditional purchasing but in business SCM encompasses a win-win situation for the supplier and the company purchasing the goods. The relationship needs to be beneficial for all parties to allow for rapid change which is particularly relevant for the fast fashion industry.When developing a supply chain strategy Fisher (1997) stated that in order to implement the optimal approach the relationship between supply and demand must be coordinated to take into account the type of product, demand and sales predictability. Products can be categorise into two generic types, fashionand commodities. Fisher states that fast fashion has a short manners-cycle and high demand uncertainty, and that there is the risk to the supply chain of both stock out and outmode d products. Popular, trendy clothing requires a management strategy that can co-ordinate the supply and demand and allow companies to respond faster to the marketplace.Commodities that are basic products, such as tinned food, they have comparativelylong life cycles and have a low demand uncertainty usually because they are well-established products with a known consumption pattern. The driving force for commodity supply chains is the reduction of cost. Hills (1993) manufacturing strategy metrics, notes that the main difference between the two groups of products for fashion products is the emphasis is on availability, while for commodities is the emphasis is on price.Supply chains and value chainsA business can be considered as a system that converts inputs (resources or materials) into an output (goods or services). All of the internal actions of a company add value to the inputs. The value of the completed product is equal to the price a consumer is prepared to pay. The activitie s of a business can be brokendown into a chronological succession of activities know as the value chain.Porters value chain model was developed in the 1980s and proposes that an organisations supply chain can lead to a competitive advantage (Porter 1985 1996). Porter original model proposed that the value supply chain was focused on the companys internal employees. Porter stated that a supply chain is a subset of a value chain, for example all personnel within the organisation are part of a value chain whereas they are not part of the supply chain.A draw of Porters model is shown in Figure 2 two components are shown the primary winding and Support activities. Support activities are shown in the horizontal flow and are the operational part of the value chain (the supply chain). Primary activities straightway add value while support activities add value indirectly by supporting the effective implementation of the primary activities. At an organisational level the value chain is dep icted as being broader than the supply chain because it includes all activities in the form of primary and support activities. The difference between the end value and the total cost is the margin.Figure 2 The judge Chain (Porter 1996)The value chain has developed and expanded from Porters original concept (the internal employees of an organisation) to include suppliers and customers and is referred to as the extended value chain or extended enterprise. This development has occurred because progressive companies acknowledge that successful management of cost, quality and delivery may depend on suppliers that are located several(prenominal) levels away from the producer. Porters value-chain analysis provides an explanation of how much value is added to an organisations final products or services in comparison to the original cost of the materials or resources. There is a clear relationship between value-adding activities, such as the centre competences and competences which provide knowledge and skills necessary to accept the value adding activities and resources which form the inputs to a companys value adding activities.In order to maintain a competitive advantage a company should be able to undertake an analysis of the value chain which should enable a company to obtain a segmentation of all the activities the organisation undertakes and to identify the core activities and their relationship to core competences. A competence is a quality or a collection of qualities which the companies in a particular industry possessesA core competence or distinctive capability is a quality or collection of qualities which is special to a particular organisation which enables it to produce above the average performance of the industry as a whole. As a result of a distinctive capability is an output that customers value more highly than those of competitors, the competitive advantage. In order to be successful in business companies certain competencies are necessary but the core competences are the differential.The company should be able to identifying areas where the cost of adding the value is greater than the value added the identification and assessment of non-value adding activities. A good TQM process involves defining the process for producing products or services, using mapping or flow-charting techniques to identify non value-added tasks these tasks are then either improved or eliminated. Management can develop strategies to find new ways to acquire value (for example a new production set out near to the companys head office with add value because transportations costs will be less).In respect to SCM the amount of the value added by teams within an organisation should be assessed and periodically reviewed and any blockages that reduce a companys competitive advantage must be identified. The assessment of the organisations value chain should not be undertaken in isolation but considered together with its association with suppliers, distr ibutors and customers. It is also necessary to verify whether the value chain supports the organisations current strategy for example if strategy is to cut costs the analysis should focus on this. If strategy is the production of high quality goods the focus should be on strategies to improve quality outcomes.Outsourcing is an activity that can be used as part of the overall sourcing strategy for services. Outsourcing entails the transfer of staff and assets to an external or third-party company which then provides them back as a service. Outsourcing is an example of companies concentrating on their core activities and competences while getting the support activities done by someone else as such outsourcing has the potential of giving both parties a competitive advantage. The role of SCM is to evaluate which activities the company should undertake and which should be outsourced.An important consideration is that there will be different value chains for different organisations becaus e not all activities within a company are of the same importance in adding value to its products. Activities that do add value are the core activities and are usually linked closely to the core competences. An organisations value chain will also be part of the value chains of other companies, for example the suppliers and distributors and customers. It is unusual nowadays for a solitary organisation to undertake all the value-adding activities ranging from design, production, delivery and service provision for a product.Three different types of supply chains will now be discussed in the following section, agile supply chains, contention supply chains and RSCAgile supply chainSupply and demand has been identified as the Increasing excitableness in demand and competitive pressures force more frequent product changes (Gattorna and Walters 1996) agile supply chains are usually dominated by surge (Fisher 1997). An agile supply chain has to be created to manage uncertainty, suffer cons umer demand and ensure profitability. The definition of agility Agility means using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile marketplace (Naylor, Naim, Berry, 1999 p. 62)Todays consumers demand variety and companies need to demonstrate customer responsive behavior with suppliers, being able to ready quickly to meet market demand and to replace one product for another. In a genuinely agile business the strategy and supply chain relationships are developed to such an extent that volatility of demand is dealt with (Christopher 2000). Uncertainty is characteristic of todays markets as a result of a conspiracy of factors which include the globalisation of the supply chain, concurrent inexpensive IT and communications increased ability to develop product variety and reduce product life cycles while remaining cost competitive. These drivers promote end-consumers promote these drivers to demand greater choice and improved value (Li 2009 ). These dynamics are especially relevant in the context of the fashion industry and clothing retail in general (Sparka and Fernie, 1998 Jones, 1998 Jones 2002). With economic changes in recent years and greater global competition responsiveness is essential throughout the supply-chain (Gattorna, 1998 Pine, 1993 Goldman, Nagel, Preiss 1995 Christopher, 2005) with such significant changes, successful organisations have to remain competitive while adapting to changing marketplace conditions (Brown and Eisenhardt, 1998). A significant feature of an agile organisation is flexibility (Christopher 2000) and this idea originates from flexible manufacturing systems (FMS). Agility is necessary in environments that are not predictable with volatile demand and consumers require variety. If a product is highly fashionable then, by itsvery nature, its demand will be unpredictable (Mason-Jones, Naylor, Towell 2000)Agile supply chains are market sensitive which means there is a quick response to consumer demand. This is quite different to many organisations which are forecast driven rather than demand driven. Technology can assist in demand driven organisations as data can be quickly accessed from the point of sale. As mention in the section on SCM communication between the members of the supply chain is an important factor in its success. share information between supply chain partners requires collaborative working and process integration between buyers and suppliers, joint product development, common systems and shared information. This form of co-operation in the supply chain is becoming ever more dominant as companies focus on managing their core competencies and outsource all other activities. Mason-Jones and Towell (1999) undertook a simulation model of the fashion trade supply chains and corroborated that enhanced agility resulted from enrichment information along the supply chain. topple supply chainThe agile supply chain is closely connected to the lean supply chain although they are separate and have different purposes. Lean supply chains work well in environments where demand for variety is low and the environment is predictable whereas agile manufacturing is implemented where demand is volatile, and lean manufacturing is put into effect where there is a stable demand. Mason-Jones et al (2000) offers a further third option which they term the Leagile Paradigm a hybridisation mixture of both types of supply chain.Responsive Supply Chains