Five Questions to Test Supply Chain Competitiveness

April 6, 2011
Answer these five questions to see if your supply chain is helping you top your competitors.

In Riverwood Solutions' annual survey of supply chain executives in the electronics industry, we ask if the respondents' CEO views supply chain as a competitive advantage, and if they believe their company's supply chain is more nimble than their competitors.

By a 3-to-1 margin, we consistently find more affirmative answers to the first question than the second. Clearly, many executives think supply chain can be a source of competitive advantage, but they don't believe their supply chain is delivering that advantage.

Here are five questions to see if your supply chain is providing competitive advantage:

Do You Do it Differently?

You should be able to identify something in your physical supply chain network, your supply base, your processes, your systems or your organization that is unique. In the electronics industry, it is common to see companies use the same sets of suppliers, in the same locations, feeding the same channel, operating with similar IT systems and processes. If you do the same thing as everyone else, it is unlikely that you have a competitive advantage. Perhaps you execute better, but without a unique plan to stay ahead, that advantage is hard to sustain.

Of course, different doesn't always mean better. There is often good reason that things become industry standard, and there are many examples of doing something different than the norm and getting worse performance. It may be that being as good as your peers in supply chain is good enough if you compete on other factors. But if you want your supply chain to be an advantage, you can't do it the same way.

Do You Have Metrics that Make a Difference?

You may have a "good" or "bad" supply chain by typical supply chain performance measures, but that doesn't mean your supply chain is helping or hurting you from a competitive perspective. A competitive advantage exists in your supply chain when your customer chooses you over your competitor based on an aspect of your supply chain where you perform better relative to your competitors.

Therefore, your key supply chain metrics should have these characteristics:

1) You can connect that measurement to your customer's decision process.
2) You benchmark your performance against your competitors' results.
3) You understand the tradeoffs between metrics and you choose to optimize the ones where you can create an advantage.

Do You Invent?

Companies that leverage the supply chain for competitive advantage look to their suppliers and their supply chain processes as sources for new or improved products and services. It could be a new product technology enabled by a supplier, or increased customization enabled by the distribution channel, or new processes to differentiate your product based on quality or delivery.

Achieving innovation through your supply chain requires rethinking the common "turn the crank" tactical approach and making your supply chain part of your strategic planning, competitive positioning, and product roadmap processes.

Do You Invest?

A branded consumer company will invest in marketing to grow brand image. A technology company will spend a lot of money on R&D to improve their technology. In order to differentiate yourself with supply chain, you have to invest in your supply chain capabilities so they get better over time. Often companies view their supply chains as costs to be minimized, not a place to invest scarce resources. Not so if you expect to maintain competitive advantage.

Do Your Customers Agree?

You may answer all the other questions affirmatively, but if you ask your customers, and they don't identify something about your supply chain as the reason they buy your product versus a competitor's, then you don't have an advantage. Of course, they won't say "your supply chain is an advantage", but they may describe things that are enabled by your supply chain: lower cost, better quality, faster delivery, the ability to adjust quickly to changes, product features that derive from a unique supplier set, etc. You can only answer this question positively if you can connect customer value back to specific activities or assets in your supply chain.

So, how did you score?

Jeff Wallingford is vice president, Supply Chain Strategy for Riverwood Solutions.

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