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Supply Chain Network Optimization and Competitive Advantage – Part 2

In Supply Chain Network Optimization and Competitive Advantage – Part 1, I began exploring the notion articulated by SC Digest’s editor Dan Gilmore in a recent post about Supply Chain Network Optimization and Competitive Advantage. In the article Mr. Gilmore goes on to describe how a few companies are adopting this particular aspect of Supply Chain Management in their processes so much so that it is seen as a source of competitive advantage.
In Part 1, I explored whether the use of such network modeling and optimization tools constitute a true competitive advantage and finding in the negative, I hope to explore what it might really be called. But before getting there, I need to revisit the notion of competitive advantage again (and not for the last time). As explored in the previous post, the essential components of a competitive advantage are:
1. A member of {Demand Competitive Advantage (Customer Captivity), Patented/Superior Technology, Economies of Scale}
2. Provides a barrier to entry
3. Realizes a net positive return on some Sales-Cost metric
As Greenwald and Kahn note in their article – All strategy is local, there is an essential difference between Strategy and Efficiency. Strategy is (Oh well! – change that to “should be”) cognizant of (if not focused on) the other players in the arena – thus outward looking. A strategy that doesn’t assert (based on the probable reactions of competitors) or react (based on the actions of competitors) can be effective if only luckily so. However, while the formulation of a strategy is outward focused, executing a strategy is limited by what is available internally. Efficiency on the other hand is very much focused on internal structure, processes and in an advanced case collaboration and partnership with key suppliers and enablers. Efficiency might have a focus on the efficiency benchmark from other players in the arena (or in the case of benchmarking – players that are quite unrelated in the competitive space) but again it is not related to the topic of competition per se. As the authors note,

A company’s best and most innovative users of information technology, business models, financial engineering and almost everything else that applies to operations suffer from the same availability to rivals. What a firm can do, its competitors can eventually do as well. IT effectiveness, HR policies, financial strategies, and so on are essentially aspects of what it means to operate efficiently.

So where does the above discussion leave the supply chain planning and network optimization function?

Read the rest of this entry »

About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

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April 2007
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