@ Supply Chain Management


Creating sustainable competitive advantage in your supply chain

If I were to saunter down to a manufacturing/operations floor and impress upon the line managers that what they should really be doing in their operations is creating competitive advantage, chances are I’d be shown the door toute suite. Perhaps, I should be. A wise consultant does not get his head chopped off by spouting well worn academic/business terminology even if it is essential to business survival.
T’is something that I have learnt from working with managers – a commandment to savor – Thou shall not confuse the managers you seek to change.
What is the Competitive Advantage Model of Michael Porter?

Competitive strategy is about taking offensive or defensive action to create a defendable position in an industry in order to cope successfully with competitive forces and generate a superior return on investment (ROI).

And more or less:

The basis of above-average performance within an industry is sustainable competitive advantage of which there are two essential types:
1. Cost leadership (low cost)
2. Differentiation
No matter the scope of the above two types, the resultant competitive strategy is:
3. Focus

If one were to adpat such a model into one’s framework of developing a supply chain, it is quite obvious that both cost leadership and differentiation can be adapted.
Here’s a view of how a firm can create sustainable competitive advantage by Innovation labs.

The only way a competitive advantage of any kind can be made to sustain is through innovation.
This might logically lead you to ask how we define innovation. In our view, innovation is improvement in the value that a company offers to its customers, or reduction in the cost of delivering value to customers.

They go on to differentiate continuous innovation which is characterized as small and incremental and discontinuous innovation which is characterized by breakthroughs and disruptions. But is there any reason to think that even innovation can be sustainable ad infinitum – I think not. How about the process of continuous and discontinuous innovation? Perhaps, they can be sustained a little longer than the actual service/product created.
Going back to the outline from Porter’s model:
More than cost leadership, which may be a function of continuous improvement and strategic decision making to outsource or offshore low-value added activities, differentiation – real differentiation, seems to be the more significant lever of creating true sustained competitive advantage. How? – I’ll try to elucidate that in the next few posts.

Category: Strategy, Supply Chain Management


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June 2006