Gaining Competitive Advantages Through Supply Chain Management:Success Stories

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Gaining Competitive Advantages Through Supply Chain
Management:Success Stories
Lijo MLoyid
School of Management Studies
CUSAT, Kochi - 22
E-mail:lijomloyid@gmail.com
Abstract: Supply chain management is defined as the management of a network of
interconnected businesses involved in the ultimate provision of product and service packages
required byend customers.Organizations increasinglyfind thattheymustrelyon effective supply
chains,or networks,to compete in the global market and networked economy.Vendor-managed
inventory (VMI) is a family of business models in which the buyer of a product provides certain
information to a supplier of that product and the supplier takes full responsibilityfor maintaining
an agreed inventory ofthe material,usuallyatthe buyer's consumption location. B2B,an effective
supplychain can create a strong competitive advantage for the firms involved within it. Just-in-
time (JIT) is an inventory strategy that strives to improve a business's return on investment by
reducing in-process inventory and associated carrying costs. Strategic partnership involves a
supplier / manufacturer partnering with a distributor or wholesale consumer. Demand chain
managementis the managementof upstream and downstream relationships between suppliers
and customers to deliver the bestvalue to the customer atthe leastcostto the demand chain as
a whole. These types of recent developments are included, which help an organization to
increase profit.
Key words: Competitive advantage in Supply Chain,Supply chain,recent issues,SupplyChain
Management, waste inventory reduction,Inventory, JIT, DCM, EDI,B2B

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1.0 INTRODUCTION
The business environment has been suffering from fierce competition since the escalation
of technology evolution and internet growth had become wildly increasing. To survive in
today’s market; the business should be characterized by faster production pace, shorter
productlife cycles, more innovative and sophisticated,and well-organized.Thatadds much
pressure to the supply chain usability. It should react rapidly, efficiently, and effectively in
order to respond to changes happening in the marketplace so as to sustain, and, most
importantly, to create competitive advantage.
According to Towill and Christopher (2002) the key success of a supply chain is basically
determined by the end customer. Delivering the right goods to the right customers at the
right price and time is not a guarantee for companies to stay competitive in the market,but
it is an inevitable keyto survive. As a result,competition betweensupplychains has become
more importantrather than competition between individual companies (Christopher,1992).
In B2B, an effective supply chain can create a strong competitive advantage for the firms
involved within it. A competitive advantage is defined bythe capabilities thatan organization
can develop for defensible position over its competitors (Li et al., 2006). This goal can be
reached in several ways, starting by creating a strong collaboration with companies by
working together to make the whole supplychain competitive.The backbone ofthis strategy
requires wide useofinformationtechnologyin order to share information,and also generate
future demand.The primaryidea in SCM is that the entire process mustbe viewed as a one
united system. The core competencies of individual organizations are determined and
invested for to create supported competitive advantage for the supply chain.
This report discusses how a supply chain can create a strong competitive advantage for
organizations. In order to give the reader a clear idea about that, several success
storiesrelated to some of the most well-known organizations are reviewed.
1.1 BACKGROUND
The transformation that accompanied the industrial revolution had also a direct impact on
supplychains, which forced the latter to apply some changes in order to keep the business
updated and adapted. In the past, and to differentiate themselves from their competitors,
companies useda combination offactors including quality,price, customer service,product
features,and availability.The new nature of competition is driven by critical factors, such as
rapid shrinkage of product lifecycles,in which products are placed and replaced on the
market faster. High technology and apparel industriescould be evident examples of that
shrinkage,where newproducts introduced arequicklyreplacedbynew ones less than within
six months. Anotherdriving factor is the growth of internetnetworks. Selling goods through
via webspositively affectsale growth forcompanies because of the possibility to be
connected directly to their end customers.
E-business dramaticallychanged the way companies produce,sell, and distribute products,
and even the way they share information with their suppliers and partners. Previously,
companies considered information as confidential thatneed to be protected instead ofbeing
shared. The nature of competition has been shifted from company-based to supply-chain-
based competition, which encouraged sharing information along a supply
chain.Havingefficient information systems, companies have not to own all the pieces of a
supply chain network, instead, they may consider working as a cooperative supply chain
that functions as a single entity. A supply chain that assures secure and smooth flow of
information can react faster to fulfill the customer’s needs and be adapted to the market
changes.Coordination and information exchange between partners within a supplychain is

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the key to stay competitive. Such change requires set of business processes including
planning, ability to receive regular feedbacks, and usage of information technology.
2.0 THEORY
A supply chain is a network of organizations performing various processes and activities to
produce value in the form ofproducts and services for the end customer (Christopher,1992).
In other words,and according to (Stapleton et al., 2006), supplychain managementis the
integration ofall network activities which manufacturers,suppliers,,retailers and distributers
are involved to improve products,services,and information flow throughoutthe chain from
suppliers to the end customers, without ignoring the need forcost reduction while
maintaining target service level.
Supply chain management is undertaken to achieve four major goals includingtime
compression, waste reduction, and unit cost reduction,flexible response. For waste
reduction,companies thatuse SCM strive for waste reduction at all levels within the supply
chain, through minimizing duplication by keeping inventories maintained and managed
efficiently, and seeking to achieve uniformityof operations and systems among supplychain
actors. Another importantgoal of SCM is time compression oforder-to-delivery cycle time,
since it helps in reducing inventories,and therefore, all entities in the supplychain become
able to operate in more efficient way.Thatalso allowsa quick response whenever problems
occur, and speeds up the cash flow and financial performance connected to the system.
The third goal of SCM is to develop flexible response to meet customer’s needs in cost
effective manners thatmayinclude order size,configuration,and productvariety. The fourth
goal of SCM is reducing cost per unit to end users (Hutt &Speh, 2004).
According to (Day, 1994),the competitive advantage has traditionally been gained through
focusing on price and product performance attributes to conserve the market share of the
current customer.However,competition is considered as a war of movementthatrelays on
quick responding to market needs by creating superior competencies required to add a
customer value and achieve cost efficiency and profitability (Stalk et al., 1992). Competitive
advantages are builtup on five main dimensions.The first dimension is price/cost,which is
the ability to compete with lowest possible prices (Li et al., 2006). The second dimension
isproviding customers with appropriate product qualities (Koufteros, 1995). The third
dimension is delivery dependability, which means providing the clients with their right
products,at the right quantity, and on time (Li et al., 2006). The fourth dimension is product
innovation, which could be seen as thereintroductionofproduct features to the marketplace
(Koufteros,1995). The fifth dimension is time to market, which is the time required to react
(Li et al., 2006).
SCM efficiency andeffectivenessareenhancedbythree importantdrivers including powerful
information systems.The mostimportantdriver is internet,which is regarded as essentialfor
managing all types ofintegrated supplychain systems.The use of internethelped business
marketers to achieve several benefits such as reducing customer supportcosts, minimizing
channel inventory, and targeting new customers. The third driver is the SCM software
applicationsthat supportmanaging the flow of information and material throughout the
network (Hutt &Speh, 2004).
Logistics is the critical element in supply chain management. The main task oflogistics
facilitatesis managing material and information flows. This task is a key part of the overall
task of SCM. SCM is concerned with managing the entire chain of processes from raw
material supply to the end-customer (Hutt &Speh, 2004).

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3.0 DISCUSSION AND ANALYSIS
Since integrating supply chain management requires a comprehensive view through the
business chains, driving success factors that could bring competitive advantages may be
reflected by enormous ways. Besides, there are too many relevant models and tools that
could be considered and make supplychain managementvery wide perspective in today’s
business. Therefore,our insight for this report is to show some success stories ofbusiness
leaders who could manage to gain competitive advantage using effective supply chain
management. Among global companies, we find the success stories of Zara, Dell, FedEx
and Wal-Mart quite interesting to discuss in this report. The main discussion is mainlybuilt
on the role of powerful information systems,internettechnologyand supplychain software
as drivers for SCM to gain competitive advantages to achieve SCM goals including time
compression, waste reduction, unit cost reduction, and flexible response.
3.1 ZARA
ZARA is a Spanishcompanyregardedas the mostdynamic andsuccessfulapparel business
in the world. Even though their manufacturing system is similar with the other competitors,
they could manage to surpass them by uniquely integrating SCM. They inspired many
aspects of that benefiting from experience of Toyota in lean enterprise. Additionally, ZARA
continuously dedicate innovation relevant to the overall process. The stores of ZARA are
globally linked to headquarters, where employees can easily add the daily change of
customer demand across countries.Thatplays a very significantrole in keeping designers
and trends trackers updated with which styles are more favourable from economic
perspective. This kind of data transparency enables getting closer to the real customer
needs and reduces the waste of efforts dedicated to styles that may not achieve significant
sails in a certain area. Furthermore, design-led procurement improves the responsiveness
to the marketby observing the drawn trends soon they can give helpful indications to what
should be focused on in the near future. Design-led procurementalso prevents building up
excess inventories. There are broad and diverse collections of styles that customers atthe
level of B2B have to pull. That also contributed in waste reduction, since stocks are
constantly kept refreshed and updated. Once the order is left, there are two times weekly
ZARA deliver their products in, and few products are available for more than month.
ZARA could not be able to take the advantage of time compression until they adopt
appropriate sourcing policy to their industry. Some items supplied with a good quality by
Asian suppliers are imported to Spain, while the rest of items are available with a quick
responsiveness.The main policy that ZARA follow for sourcing is having a broad suppliers’
base that offers the mostfeatured selections offabrics at very low prices. Additionally, they
do not seem to be attracted to depend on certain groups of suppliers. We think that this
policy is specifically dependant on the type of industry. That makes sense if the dynamic
aspectofapparel industrythatrequires highcustomization is considered.On the other hand,
more than 50% of the materials are purchased locally from the gray market. All items are
dyed and printed by a Galician subsidiary, while the local workshops are employed to
conduct final sewing or assemblyand quality control. Therefore, although manyoperations
are conducted outside, they still keep their quality standards controllable. Moreover, they
could be able to design a SC able to postpone notonlycolour butalso final designchanges.
Thus, they only pay for the completed garments, which limits the business risk.
Speaking ofnumbers,ZARA produce their products to a couple ofdistribution centres. They
are both fed twice a week.The delivery processes are done within 24 hours,and the overall
lead-time is 4-5 weeks,while it is several months for the competitors.Generally,the driving

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strategy involves employing a smart sourcing policy, while only keeping locally the
operations that enhance cost efficiency including dying, cutting, labelling and packaging.
The centralization could help ZARA to support rapid production of new collections in a
coordinated and consistentmanner. ZARA align design with the SC to reduce the potentials
of supplychain failure and ensure the accuracy of supplies.That shows a unique example
of how to integrate lean enterprise, while showing agile performance.
3.2 Dell
Dell is one of the biggest and most well-known PC makers in the world. They could also
gain competitive advantages over other competitor, such as IBM, through applying
significant changes in the supply chain. Dell reengineered its processes and relationships
with suppliers and logistics providers so thatthe overall processes ofbuilding,customizing,
and shipping PCs does not take longer than eight hours. Unlike what ZARA follow, Dell
created long-term relationships. However, competitors as IBM and Toshiba had the same
aspect of long-term relationships. Dell reduced the number of logistics providers from 130
to 60, and suppliers from 204 to 30 companies.This reduction of connections had the aim
of cost reduction and time compression. Dell dedicated VMI (Vendor Managed Inventory),
where components are never ordered. The actors are selected so that they have
warehouses with no more than 8-10 days capacities, which are as maximum located 15
minutes awayfrom Dell’s factories.Moreover, Dell rely on very capable information system
that enables suppliers to reschedule their operations every two hours. All actors have
accessibility to extranet that provides them with updated forecasting records. They could
also access hub-level inventory holdings,where all relevant information aboutshelves and
stock are available. That all resulted in reducing the inventory to only four days, while it is
20-30 days for the competitors. Dell could be able to improve inventory turns to 24 hours,
while the competitors had to wait for 35 days for payments through primary dealers.
Furthermore,the internetcontributed significantlythrough e-commerce in the sales growth.
Through internet, Dell gain average sales accounts for 1 million dollar per day (McWilliaims
&White, 1999).
3.3 FedEx
As business leader in courier and logistics industry,FedEx passedthrough historical stages
to bring competitive advantages through network improvements.Such improvements could
be redefined as SC practices.FedEx started differentiating themselves by providing better
services to their B2B customers in terms ofdata availability. What would make B2B market
relies on FedEx services is being able to track their packages,and thus,better control their
businesses. This realitywas not that clear for FedEx in the beginning (Huttenlocher,2004).
But after integrating reliable information system, and internet-based access, the form of
value proposition became clearer. The company focused on excelling in information
availability as a competitive advantage. That required increasing the transparency of data
by integrating innovative technology. The FedEx Institute of Technologyat the University of
Memphis is assigned to develop and support the dependency on technology innovation
through 150 researchers. The mailrooms are designed so that the operations such as
tracking are sophistically automated. Moreover, the dedicated client/server network is one
of the world’s largest ones (FedEx, 2013). The most recently “3D wizardry” and Wi-Fi
networks systems have been incorporated as fundamental elements ofthe overall structure.
FedEx exceeded the technological limits thatothers are stuck to. The companyintroduced
a 3D globe with use of a webcam that could analyse data and produce statistics on the
business world and update information on current economic situations, in the all countries

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FedEx are located. The number of website visitors recorded then successive significant
increases.Moreover, for integrating easy social connectivity to smaller businesses,FedEx
use social media to allow companies to track their packages. All these practices have been
integrated to the SC of FedEx not only to offer very transparentand featured wayof sharing
information, but also to let their B2B customers survive and thrive, as that account to the
overall return on investment.
3.4 Wal-Mart
Using efficientsupplychain practices to win competitive advantages could not be reflected
more perfectly without showing some respect to the experience of Wal-Mart in America.
Wal-Mart is undoubtedly the cost and market leader in American retailing. They could
overcome competitors,such as Kmart,and leave a large difference later on. No competitor
could geteven close.We do not know even if the term “competition” is relevantin their case.
But focusing on the historical review of Wal-Mart is for sure helpful. Wal-Mart invested
generously in integrating innovation and information technology systems in retailing. They
constantly considered re-engineering in processes, waste elimination, and performance
efficiency. They are the first who dedicated Bar-codes technology in their operations,
especially, inventory management system. They also deployed all possible technologies,
such as EDI (Electronic Data Interchange), to facilitate the best possible communication
atmosphere. They adoption of technology continued through employing wireless scanning
guns and supporting software that captures data relevant to stock holding and sales
patterns. That contributed not only in better inventory management, but also in significant
cost savings. The result was introducing available final product at low prices, which
accounted for improved customer satisfaction.Wal-Mart took the lead of adopting models
that had not been regarded as efficient ones. They depended on centralized distribution
network with cross-docking warehousing method, which also reduced the holding cost
extremely.
4.0 CONCLUSIONS
There are three main competitive advantage drivers dedicated through supply chain
management including information system, internet, and supply chain software. The main
goals of supply chain management are time compression, waste reduction,unit cost
reduction, andflexible response. The SCM strategies may gain competitive advantages in
many different ways. The type of industry and the geographical distribution may affect the
driving strategies ofSCM. The success stories ofZARA, Dell, FedEx, and Wal-Mart reflect
many differentaspects ofhow supplychain can come up with competitive advantage. Each
case shows different improvements built up within the supply chain. For instance, ZARA
depended on short-term relationship for sourcing,while the type of Dell’s industryenforces
them to adopt long-term relationship.The customer value proposition mayimpact the type
of relationship, as clearly shown in the case of FedEx, where data sharing is a crucial
customer value. Generally, all stories are characterized by many similarities, though they
are introduced in different manners. All companies rely on powerful information system
characterized by high connectivity of supplychain actors.Re-engineering ofprocesses and
waste inventory reduction are essential practices they adopt. Smart integration of relevant
technologies could also be crucial especiallyfor Wal-Mart and FedEx cases,while internet
became more fundamental necessitythan an optional feature to offer. However,behind such
success stories,there are manymore supplychain failures.Thatcould be due to integrating
inappropriate techniques,misestimating relevantcustomer value proposition,applying parts
of supply chain management tools and leaving collateral parts, or any similar reasons.

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5.0 REFERENCES
Literature Sources:
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Electronic Sources:
FedEx (2013).FedEx Strategy, mission, and values. Available:
http://about.van.fedex.com/mission-strategy-values [2013-02-23].
FedEx (2013).Overview and facts. Available: http://about.van.fedex.com/fedex-overview [2013-
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