Value-Chain Report -- Four Dimensions For Supply-Chain Strategy

Dec. 21, 2004
Creating supply-chain strategies that provide superior performance is an approach that often results in success.

Cap Gemini Ernst & Young has worked with its clients to ensure that their supply chain strategy is consistent with and supports their overall business strategy. Many CEO's in traditional brick-and-mortar companies have a clearly defined business strategy and, over the years, their supply chains have evolved in support of that strategy. However, in the new connected economy, business strategies for companies transitioning to "click and mortar," as well as pure play Web-based companies, are not so well defined and can be rapidly evolving, leaving supply chains struggling to catch up to a level that effectively supports those business strategies. Because traditional supply chains can be inadequate for the connected economy, the CEO has a legitimate concern. Frequently posed questions include, "I've got a strong brand, how do I take it to the Internet profitably?" or "I'm on the net, but it's very clear that we're not delivering at an acceptable level. What do I do in order to get there?" The CEO's agenda and the resulting business strategy have always been about top-line growth and profitability, but today we also are hearing more and more about technology utilization. The Internet has created a lot of promise and a lot of confusion. Nobody has all the answers, but it is becoming clear as we study the market that technology utilization is an under-pinning of the firms that are winning. More and more, the CEO's agenda in the new economy includes three key elements:

  • Growth
  • Profitability
  • Technology Utilization During the early 1990s, profitability was the key strategy driver. During the middle 1990s, however, top-line growth became the primary focus. At the end of the 1990s and into 2000, technology utilization and the Internet have moved to the forefront in terms of strategic focus. The important point is that, while the focus of overall business strategy may shift from time to time, all three elements are important and the supply chain needs to be capable of responding. How can supply-chain strategies support the CEO's agenda? At Cap Gemini Ernst & Young, we work with our clients to create high performing supply chains for the connected economy with strategies that address four primary dimensions:
  • Connectivity -- How connected are they to their customers and suppliers?
  • Execution -- Can they deliver on everything they want to be?
  • Offer -- Are they making incremental changes in the market or are they bringing a real creativity and innovation?
  • Speed -- Can they really operate their business at Internet speed? Connectivity Traditional supply chains typically include individual business units, separate product lines, and little communication or connectivity among individual parts of the business, much less with customers or suppliers, except via EDI or other limited processes. True connectivity is about being networked, which is about being at the point where simultaneously your customer, your enterprise, your supplier, and your employees are all linked. When a customer clicks in and conducts a transaction, it's about the supplier knowing that there's an inventory need to fill, the employee knowing there's a customer relation to manage, and the fulfillment center knowing there's a delivery required. Connectivity and network is about doing all of those things simultaneously so it appears seamless to the customer. Execution Supporting the CEO's agenda also is about execution. It's about moving from variable to stable to scalable. Variability creates problems in being able to deliver on quality, consistency, and schedule that is demanded by the market. Replacing variability with stability builds brand strength and efficiency. But stable is not enough. Scalability is what's needed. Scalability means overnight we're ready to handle 50% volume swings, because in the Internet, we're seeing those kinds of swings. Scalable means overnight we've got a breakthrough product and need to ramp-up production in days or weeks to beat the competition. Offer In terms of supply chain-strategy, the offer is a really different perspective. It's really about getting away from incremental value propositions by delivering a wholly new experience. Breakthrough offers are blurred, as in the experience. Most people who go to aren't there because they already know what book they want to buy. They go for the experience . . . to be entertained, to get information, to learn, and to get help in making a choice they didn't even know they were going to make when they got there. It is a blurred experience. The service, the tangible product, the environment are all part of it. Speed In the new economy, this doesn't mean the speed of the Internet and the customer connection. This means the speed of the organization and supply chains. It is about moving from what previously took months or years all the way down to weeks or days. For example, Sprint has gone live with its wireless phone and wireless digital data. It is at the point where it can sign up a new service, put it on that wireless data network live with transactions in billing, and have it operational in just days. It brought up live on its wireless network in just a few days. Customers can order what they want while they are walking down the street and it's billed and shipped instantly. Most mature companies do not have supply-chain networks, supply webs, or similar structures that fully support their company's strategic imperatives. To be truly effective, supply-chain strategy must support the three key elements of the CEO's agenda - Growth, Profitability, and Technology Utilization. Creating supply-chain strategies that provide superior performance across the four dimensions of connectivity, execution, offer, and speed is an approach that often results in success. Kevin P. O'Brien is a Cap Gemini Ernst & Young practice leader for supply-chain consulting with high-growth and middle-market companies.
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