What Is Strategic About Supply Chain Management?
By Gwendolyn Whitfield, Ph.D.
One of my first jobs as the new editor of the Global Supply Chain
Review was to look at the results of the Executive Survey sent to
members of the Global Supply Chain Leaders Group earlier this
year. One data point that caught my attention was the number of
people who said that supply chain management was important for
their company's strategy. In fact, over 87% of the respondents said
that supply chain management is either very important or extremely
important to their company's overall business strategy. I found this
very interesting and asked myself two fundamental questions. How
is supply chain management strategic and why is it capable of
providing long-term competitive advantage for those companies that
make investments in their supply chain? I believe these are
important questions that every supply chain executive and every
chief executive officer should be able to answer.
Traditionally, the supply function was carried out with deeply
ingrained assumptions about how to interface with suppliers and get
the job done. The focus of the company was not necessarily on supply management, but on product
positioning, marketing or capital structure. Maximizing supply management was, at best, an
afterthought. In fact, just a couple of decades ago, some CEO's may not have been fully aware of the
benefits of managing the supply chain as a strategic asset. Fortunately, technological opportunities and
proven results are putting an end to viewing the supply chain as anything but strategic.
Before I weigh in with answers to the questions posed, let me begin by describing how the nature of
competition has drastically changed over the last two decades, moving supply management beyond a
functional-level tactic to a strategic capability ample enough to provide a competitive advantage. Some
would argue that strategy is about positioning and others, the skillful use of resources and capabilities.
Yet, few would disagree that at the heart of strategy is the ability to respond to a changing business
environment. Opportunities and threats exist everywhere and firms must continually face new
challenges to remain competitive. Successful firms have had to align and re-align efforts to build a
competitive advantage in response to those threats and opportunities.
Much of the realignment has been caused by changes in technology. How successfully firms respond
to technological opportunities will, in a large part, determine their ability to leverage resources and
harness new markets. Gone are the days of established firms being able to sustain a competitive
advantage in uncontested market space. To the point, companies like Dell and Wal-mart have
steamrolled the traditional rules of competition by masterfully infusing their supply chains with
technology. These two companies, among others, have taken full advantage of the opportunity to gain
a competitive foothold with the strategic use of technology in their supply chains.
Initially, companies were eager to infuse technology into select aspects of their business, including
electronic transactions, teleconferencing and merely having a web presence. However, companies
quickly realized that these activities, alone, could not provide a rare, valuable and non-substitutable
competitive advantage. Infusing the entire supply chain with technological capabilities, on the other
hand, provides a real opportunity for differentiation. As such, the supply chain has become a massive
interplay of internal and external functions and activities, involving purchasing, logistics and operations
and supplier management. When combined with technology, the interplay of activities and relationships
has the potential to create a sophisticated supply chain system capable of carving out a competitive
position far above rivals who chose not to invest in their supply chain competence.
Supply chain management is strategic because the use of technology in supply chains makes it
possible to go where no firm has gone before. With technology, firms are making dramatic improvements in supplier communication and integration, replenishment and logistics management.
With technology, companies are able to achieve higher levels of responsiveness, flexibility and
efficiency than what was possible in traditional supply chains. With technology, businesses are able to
integrate their operations, communicate with suppliers and provide up-to-date, real-time data for
partners throughout the supply chain. This is possible whether the partner is in Hong Kong or Maine.
And if you're still not convinced, consider Porter's Five Forces Model. Heralded as a cornerstone in the
field of strategic management, Porter clearly identifies the relative power of buyers as a crucial element
for firm profitability. And we know, above average returns, the goal of strategic effort is the result of a
sustainable competitive advantage. Supply chain management just might be the source of that
advantage as technology enables it to manage relationships with suppliers. The increased use of
strategic supplier partnerships is also ushering supply chain management center stage. But, Mr. Porter
already knew that is where it belongs.
|About the Editor:
|Gwendolyn Whitfield, Ph.D.
Assistant Professor of Strategy
Ph.D., Western Michigan University
M.B.A., Wayne State University
B.A., Howard University
Dr. Whitfield specializes in business growth strategies, new-venture strategies and
supplier management and diversity for small and medium sized firms and governmental
entities. She is the author of numerous articles which has been featured in such
publications as the Journal of Supply Chain Management and Purchasing Today.
Her research on Public Policy and Entrepreneurship in High Technology won an award
from the Consulate of Sweden and the Swedish Institute. She has been an invited
presenter at the Strategic Management Society, the Institute for Supply Management
and the International Council for Small Business. In addition to serving as sales
executive for a high-growth entrepreneurial firm, Dr. Whitfield served as director of
operations, project manager, service leader and business consultant in both for profit
and not for profit environments. Her functional area expertise includes strategic planning
and budgeting, operations and human resource management and information
technology training and she has helped manage budgets ranging from $5 million to
$190 million. Dr. Whitfield is an invited speaker, consultant, and facilitator for
corporations and governmental organizations and has been on the faculty of Pepperdine
University since 2003.