Competition/competitiveness supply chain metrics

The focus of a company is to be competitive in the marketplace and thus be profitable. A competitive supply chain has to provide customers with the expected or superior performance. But what does it mean to be competitive The competitiveness of a supply chain refers to two aspects of the supply chain (1) the link between a supply chain s choice of its competitive metric and the corresponding choice of its architecture and (2) the impact of competitors on a supply chain s performance. While successful firms in every industry often have unique capabilities, an important question for every firm is to adjust its supply chain architecture to remain competitive in the presence of a changing environment. 

The first goal of this book is to focus on supply chain architecture by focusing on four specific concepts, i.e., the Four Cs of supply chain man etnent. These four Cs are chain structure and ownership, capacity—its type and location across the supply chain, coordination mechanisms, and competitiveness—the metrics of competition and the competitive pressures faced by the supply chain. Choices made regarding each of these Four Cs generate possible supply chain architectures. 

Competitiveness is the fourth C in our list of concepts. Managing the competitiveness of a supply chain requires two sets of choices—the choice of the metrics of competition as well as responses to competitors choices. Typical metrics used include lead time, cost, profit, product variety, consistency, service level, fill rate, and others. For a monopolist, it is important to identify appropriate metrics to coordinate optimal choices across the supply chain. However, competition has an impact on the feasible... 

The book supply chain involves the printer, the wholesaler, the retail store, and the customer. Ownership of this supply chain is fragmented, with each entity s success based on different metrics. For printers to be competitive, they must have large-volume press runs that economize printing costs. Capacity decisions are made by retailer and wholesaler and determine the level of inventory and lead time to satisfy demand. Coordination between wholesaler and retailer depends on the flexibility offered for books to be returned from the retailer to the wholesaler. At the store level, competitiveness requires a large variety of books to be in stock, the flexibility for the customer to browse books before purchase, accessible locations, and other factors. The wholesaler has to be flexible to accommodate bookstore returns. The flexibility to return books provides the incentive for the bookstore to order efficient quantities from the supply chain. 

What is the basis of competition for the supply chain For purposes of illustration, we will use cost as a metric of performance, but many other possible choices (e.g., time, days of inventory) could also be the relevant metric. Consider the cost impact on the product as it moves through the supply chain. Examine how costs are added as each of the entities in the supply chain impact the product. 

In today s global operations environment, competitive suppliers are expected to follow manufacturers to different locations around the globe and provide product with consistent quality and delivery metrics. How should a supplier position a supply chain structure to succeed in such an environment Should operations be established in all of the locations where the manufacturer plans to operate Should alliances be established with local suppliers to supply this manufacturer Or should logistics companies be used to supply locally but from central manufacturing locations Each of these questions provides interesting alternatives to be competitive on the global access dimension. Given the need to coordinate... 

In summary, an important decision for a supply chain is the metric of competition. We have identified several different metrics that have significant impacts on the supply chain structure. The key takeaway is that the metric of competition will affect the supply chain structure chosen. This suggests that prior to evaluating supply chain structures, it is important to understand the metric of competition. 

In other words, competing retailers offer the customer the option to take advantage of many possible pools of capacity, as we will discuss in Chapter 4 on capacity. We described competitive effects on service level in this section, but the same idea can be considered for any metric in the supply chain. 

This chapter showed how the choice of metric of competition and the existence of competitors affects the performance of a supply chain. The first part of the chapter examined the many alternate metrics that can determine performance, including costs, profitability, service, variety, and lead time. Each of these alternate metrics implies different choices for supply chain architecture as well as for the details of operation. In addition, in the presence of competitors, agreements that are good for the supply chain in a monopolistic setting may be bad for the supply chain in a competitive environment. Thus one may find an industry supply chain stuck in a bad equilibrium with frequent harmful promotions or advance order discounts, unable to pull itself out of this state due to competitive pressures. This chapter thus su ests that competitiveness can be a significant driver of supply chain performance. 

In a next step, the table checks to detect performance metrics especially relevant to the operations of the company which are not covered by the supply chain strategy and the corresponding competitive priorities filters. If there are additional performance metrics which need to be taken into account, they should be added to the existing list. 

From benchmarking. Wireless Services management assessed that each of the performance metrics was either a "major opportunity" or a "disadvantage" in terms of competitive position. This created a large gap that had to be closed by supply chain redesign. 

Table 3.6 shows 13 metrics at level 1 in the SCOR model, and is taken from the SCOR website (www.supply-chain.org). As with processes, the model s hierarchical stmcture is repeated also for the metrics. That means that the SCOR model provides a breakdown of level 2 and level 3 subcomponents of the level 1 performance metrics. The intention is that an individual company should not attempt to be best in class in all areas. Rather, a given company should target its strength in four to six selected areas to create differentiation in the marketplace. The company will also need to ensure that it stays competitive in the other areas. 

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