Supply chain management has been in vogue for the last decade. Now, in an era of outsourcing and offshoring, global supply chains are the keys to a firm’s success. But why are some global supply chains more effective than others? Finding the right answer is becoming intriguing to corporate executives and rightfully so.

By some accounts, an announcement of a significant supply chain problem reduces a firm’s market value by more than 10 percent. Even more telling, Deloitte Touche Tohmatsu finds that “only 7 percent of companies today are effectively managing their supply chain…however, these companies are 73 percent more profitable than other manufacturers.”

These drastic numbers are frightening since rivalry is becoming more supply chain vs. supply chain and less firm vs. firm in today’s global business world. Firms such as Amazom.com, Dell, FedEx, Toyota and Wal-Mart clearly owe much of their success to outmaneuvering rivals via unique supply chain capabilities. Some of these firms operate so-called best value supply chains while others focus on achieving competitive priorities that are narrower in scope. Both approaches can lead to success but they are vastly different in design and implementation.

Succeed with a narrow scope

Before supply chain management became SCM, we had logistics, purchasing and operations management as independent functions. These functions still exist but are often framed within SCM. A strange thing has happened, logistics professionals actually communicate with purchasing professionals! Sometimes even operations professionals get along with both logistics and purchasing.

Well, do not let my cynicism get in the way of the real message. Supply chains are becoming integrated in the same way advertising and promotion had to give way to integrated marketing communications. The reward is efficiency and effectiveness. It also results in give and take—where internal negotiation is both needed and understood by SCM members. And logical reasons exist to outsource some elements and keep others.

These goal-driven supply chains, by direction of their firms, focus on the competitive priorities of speed, quality, cost or flexibility as the performance objective. Speed refers to the total cycle time from the starting point to the ending point in the chain for a particular firm.

For example, before Dominos got into legal trouble for their 30-minute-or-free promise of delivering pizza, speed was their main concern. The quality of the pizza, the cost of the pizza, and the variety of toppings on the pizza were secondary to the time it took to get a hot pizza to the customer.

Other companies such as Rolls Royce focus on delivering top-notch quality products but cost is not an issue, nor speed. Rolls Royce still stresses certain flexibility in the product customization, however. Wal-Mart is the poster example of stressing the low cost of their products, often at the

cost of speed, quality and flexibility. Yet, some firms thrive on being flexible. For example, L.L.Bean provides almost endless flexibility, particularly in return policies. However, very few stores exist where customers can get their products so the speed is slower than for some of their competitors. Cost is higher than the industry average, but their products are usually of high quality.

Succeed with a broad scope

Some of the brief examples above illustrate that firms can focus on more than one competitive priority. However, very few go after all four of the priorities. It is not realistic to assume that a firm can be the ideal performer on all four priorities – delivering the highest quality products in the exact right quantities at the perfect time and at the lowest cost. However, developing the right mix of emphases on speed, quality, cost and flexibility is possible.

The result is that the strategic global supply chain (SGSC) has been born. Strategic global supply chains deliver quality products in suitable quantities at the proper time and at a competitive cost. This can be done globally, but being an ideal chain in all world markets is not feasible. And, just because you can develop the best product, should you? Probably not.

These SGSC chains outperform chains that strive for the ideal because too much effort is spent by these ideal-striving chains on being the best and not enough effort is spent on marketing products to customers. At the same time, SGSCs are masters at always knowing the preferred constellation of speed, quality, cost and flexibility to adopt (i.e., what weights to place on each of these competitive priorities to beat the competition globally).

Features of Strategic Global Supply Chains

• Focus on delivering products at the appropriate time
• Focus on delivering quality products in their target region
• Focus on delivering products at a competitive cost
• Focus on delivering products with features the customers typically want
• Have a great deal of experience with supply chain activities
• Have a great deal of knowledge of supply chain activities
• Use existing knowledge to make specific supply chain decisions
• Use existing knowledge to enrich the basics of their supply chain activities
• Have supply chain knowledge that is practical and needed at the time
• Constantly have reliable and relevant knowledge
• Have quick access to existing supply chain knowledge from key people
• Periodically review product lines to ensure compatibility with customers’ needs
• Make a concerted effort to modify products when customers demand it
• Prefer to develop an edge by continual innovation of supply chain processes
• Prefer to develop a supply chain edge by continual product innovation

		Tomas Hult, PhD, is director of the Center for International Business Education and Research (funded by the U.S. Department of Education) and professor of international business at Michigan State University. He is also executive director of the Academy of International Business. Professor Hult’s expertise is in international business strategy and supply chain management.