Historically, supply chain and logistics functions were viewed primarily as cost centers to be controlled. It is only in the past 20 years or so that it has become clear that it can be used for a competitive advantage as well.
To accomplish this, an organization should establish competitive priorities that their supply chain must have to satisfy internal and external customers. They should then link the selected competitive priorities to their supply chain and logistics processes.
Krajewski, Ritzman, and Malhotra (2013) suggest breaking an organization’s competitive priorities into cost, quality, time, and flexibility capability groups:
- Cost strategy: Focuses on delivering a product or service to the customer at the lowest possible cost without sacrificing quality. Walmart has been the low-cost leader in retail by operating an efficient supply chain.
- Time strategy: This strategy can be in terms of speed of delivery, response time, or even product development time. Dell has been a prime example of a manufacturer that has excelled at response time by assembling, testing, and shipping computers in as little as a few days. FedEx is known for fast, on-time deliveries of small packages.
- Quality strategy: Consistent, high-quality goods or services require a reliable, safe supply chain to deliver on this promise. If Sony had an inferior supply chain with high damage levels, it wouldn’t matter to the customer that their electronics are of the highest quality.
- Flexibility strategy: Can come in various forms such as volume, variety, and customization. Many of today’s e-commerce businesses, such as Amazon, offer a great deal of flexibility in many of these categories.
In many cases, an organization may focus on more than one of these strategies, and even when focusing on one, it doesn’t mean that they will offer subpar performance on the others (just not “best in class” perhaps).