The Supply-Based Advantage: How to Link Suppliers to Your Organization's Corporate Strategy

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It’s not enough for companies to simply try to find ways to save money through suppliers. If suppliers aren’t fully integrated into their corporate strategy, there’s no way for companies to ensure that they will continue to save money...and that their supply decisions will fit with changing organizational goals. Blending theory, best practices, and relevant examples, The Supply-Based Advantage reveals how to design, build, maintain, and "remodel" an organization’s supply base to support its total business strategy and operations. Readers will learn how they can:
• achieve greater profitability by using suppliers to capture value beyond price
• develop a supply management strategy that creates real, renewable benefits
• maintain flexibility in their supply chain to deal with unique business situations
• link supply execution into product marketing and fulfillment purposes

Filled with enlightening examples from companies such as Mars, Procter & Gamble, Intel, and Wal-Mart, this book shows how any organization can transform its supply function into a key driver of profit.

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Editorial Reviews

From the Publisher
"Rogers outlines a common-sense approach to boosting profitability by using suppliers to capture value beyond price." —Inbound Logistics

"a thoughtful, comprehensive book" —Transformation Leadership Blog, Supply Chain Management Review

"All employees, especially executives, will benefit from reading this book. The outlined techniques are applicable to small and large companies." —Quality Progress

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Product Details

  • ISBN-13: 9780814401552
  • Publisher: AMACOM Books
  • Publication date: 3/30/2009
  • Edition description: New Edition
  • Pages: 368
  • Product dimensions: 6.30 (w) x 9.10 (h) x 1.40 (d)

Meet the Author

Stephen C. Rogers (Cincinnati, OH) is a Senior Consultant with the Cincinnati Consulting Consortium, concentrating on purchasing and supplier management. During his thirty years at Procter & Gamble, he was involved in purchasing, manufacturing, and marketing. He has been the Program Director of The Conference Board’s annual SRM Conference, conceiving and directing the event during its first three years.

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Read an Excerpt


Competitive Advantage

Building a Supply-Based Framework

ADVANTAGE: any state, circumstance, opportunity, or means especially favorable to success, interest, or any desired end.

BUILD: to construct (something, especially, something complex)

by assembling and joining parts or materials.

If you don’t have a competitive advantage, don’t compete.

—Jack Welch, former CEO of General Electric

‘‘Our strategic goal is to deliver sustainable competitive advantage through supplier selection and management.’’ The words rolled off Carlo Soave’s tongue (as they had rolled off mine many times before) as he addressed a

P&G Purchases’ training class for new purchasing hires in Brussels, Belgium.

At the time, Soave was the Purchases vice president for the Fabric and

Home Care global business unit and overall leader of chemical sourcing for all of P&G. (Today he is a nonfamily CEO of a family-owned Italian nonwoven fabric producer, Albis.) Five concepts come together to define the business problem posed by ‘‘sustainable competitive advantage.’’ Let’s examine them one by one.

Concept 1: Sustainable Competitive Advantage

It wasn’t until later that I questioned what the phrase ‘‘competitive advantage,’’

especially sustainable competitive advantage, really means. Several ideas come to mind including value, capabilities, and innovation, and how they relate to marketplace competition. While researching this book, I quickly discovered there is no universal definition of competitive advantage and a more important, no agreement on the term ‘‘sustainable competitive advantage.’’

Some say that all competitive advantage is temporary and as MIT Sloan

School of Management professor Charles Fine once said, the faster the industry

‘‘clockspeed’’ (rate of change), the more temporary it is.

As with many strategic concepts, sustainable competitive advantage emerged in 1985 in Harvard professor Michael Porter’s discussion of basic competitive strategies, although he neither discussed nor defined the concept in depth. Its meaning evolved to focus primarily on a company’s distinctive a mostly internal, intangible capabilities like management skills, core competencies a ability to innovate, plus some tangible assets like financial strength a physical capital, and externally visible intellectual capital (patents, trademarks a etc.). These capabilities were viewed relative to which capabilities or resources one company has that its competitors do not.

Thus, a simple definition of sustainable competitive advantage becomes

‘‘an advantage that enables your business to survive against its competition over a long period of time.’’1 Easily duplicated aspects drop out, leaving something that is:

> Unique.

> Superior to competition.

> Sustainable.

> Applicable to multiple businesses or situations.

> Hard to copy.

These attributes allow a disproportionate contribution to shareholder value, open doors to new opportunities, and include implicit, not just explicit a knowledge.

While many companies see the customer facing implications of competitive advantage like branding (P&G), customer service (Nordstrom), shopping experience (Target), or shopping convenience (Amazon), it is the unique, difficult-to-replicate, broad application aspect of sustainable competitive advantage that allows supply to be an important source of competitive edge.

Establishing unique relational assets—bonds between firms and their customers, suppliers, and comarketing partners—is one of the most difficult business tasks to replicate. Customer relations are frequently cited as an advantage a but the ability to develop intimate supplier business relationships is extremely difficult, in part because suppliers are typically viewed as part of the firm’s cost structure, not its assets. Too quickly the goal becomes squeezing money from suppliers, leveraging volume to get lower prices. Such financial advantages are hardly unique and can be duplicated. The adversarial mindset that this creates is not conducive to suppliers becoming a sustainable competitive advantage for many companies. Instead, short-term savings equate to temporary advantage. The challenge is sustainable advantage over time, leading to a second major concept.

Concept 2: Value

At P&G, George Perbix, the father of modern purchasing, defined purchase of ‘‘total value,’’ the combination of price, quality, total system cost, supply assurance, service, and supplier R&D, as supply’s real goal. Like beauty, value often lies in the eyes of the beholder.

The traditional measures of supply value are cost, quality, and service.

Academics, consultants, and practitioners alike go on about value chains and the ‘‘value-add’’ at each step along a supply chain. But the everyday low-cost value proposition of Wal-Mart is not the same as the value proposition of a

Target or a Nordstrom’s. So, just what is value anyway and how does it relate to competitive advantage and, in this book, supply-based competitive advantage?

A simple definition results in a basic value equation:


where V is value, P is performance of the product (good and/or service) as seen by the customer, and C is the total cost of ownership from the customer’s viewpoint.

The Numerator: Performance

Performance is more than just how the product works, typically including components like quality, delivery, speed to market, and easy availability along with postpurchase service and customer satisfaction response. It also includes intangible factors like corporate reputation (supply chain ethics, legiti-mate ‘‘green-ness,’’ and overall corporate ‘‘persona’’); emerging customer expectations and needs—the unknown component that ongoing end user research and contact must determine (innovation); and other factors that can truly matter in the course of business.

In January 1995, Kobe, Japan, was hit by a massive earthquake that devastated the city. P&G’s Asian headquarters were located on a small island (Rokko Island) just a short elevated train ride off the coast, near Kobe. The power of the quake cracked P&G’s twenty-six-story building (constructed to earthquake standards) from the ground to its top floor, causing significant internal damage. A number of us, including then Director of Asia Purchases

Jim Dempsey, had left Kobe the afternoon before the earthquake for China a and awakened to CNN videos of the destruction on Chinese television. The rest of the story is Jim’s.2

Dempsey and his key lieutenants booked flights back to Osaka. What they found was devastating. P&G’s offices were not usable. Worse, the quake eliminated all transportation on or off Rokko Island, destroying both the elevated train and the roadway bridge. An enormous number of P&G employees and expatriate families were trapped on the island with no way off. The company was able to rent a small tug boat on which a few leaders, including then

Asian President, current CEO, A. G. Lafley, and Dempsey traveled to the island to attend to their employees.

That’s when a Japanese supplier of contract packaging placed a cell phone call. Its parent company had a small ship and offered to take all the

P&G people, their families, and salvageable possessions/luggage off the island.

The local government (and P&G) had not been able to find any other way off and, given the quake-damaged infrastructure, the situation was becoming critical. The supplier ferried the people and possessions to Osaka in three trips. They made no request for payment. They didn’t just drop the people at the Osaka pier, either, Dempsey recalls. They rented a building and served food and drink to the hungry and tired refugees.

The supplier’s president got up and gave a brief welcoming speech (through an interpreter) that had enormous impact on the P&G people. He

said that he wanted to welcome them, that his company was very happy to help, and that he understood how they felt because his own house was gone a lost in the quake as well. When your organization is knocked out of commission a the ability to get back up and running is critical to withstanding competitors’

situational advantage. The key to staying focused is to have your people and their minds on the business. This supplier provided enormous value on both fronts—rescuing P&G’s people took away many immediate worries, and focus on rebuilding the business could begin.

An interesting aside to this story is that months later, after completing the construction of a Chinese plant for P&G’s business expansion, the business changed. P&G canceled the product launch (for good business reasons).

The supply contract allowed P&G to cancel without penalty, leaving the supplier with an empty plant and significant economic disruption. A newly appointed procurement leader in China, without the background, began to do just that. But Dempsey and several other Asian managers stepped in, related the story, and supported the supplier. As a result, the two companies went outside the contract to reach a fair settlement. Value comes in many forms and can flow both ways.

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Table of Contents


Foreword: Why a Book on Supply and Competitive

Advantage? vii

Acknowledgments xiii

Chapter 1 Competitive Advantage: Building a Supply-Based

Framework 1

Chapter 2 Suppliers: The Forgotten Competitive Currency 18

Chapter 3 Small Companies: Seeking Value to Offset Lack of Scale 33

Chapter 4 Blueprint for Supply-Based Advantage: Plan

Before Doing 46

Chapter 5 Sourcing Strategy: Foundation of Advantage 70

Chapter 6 Supplier Relationships: Erecting Support for

Advantage 87

Chapter 7 Supply Chain Management: Connecting Across and Between Companies 124

Chapter 8 Floor Plan for Supply Advantage: Organizing

People, Skills, and Tasks 153

Chapter 9 Cross-Functional Collaboration: The Door to the

Ultimate Differentiator 186

Chapter 10 Market Flows: Monitor and Manage the Forces

That Shape Performance 214

Chapter 11 Outsourcing: Using Suppliers to Maintain and

Remodel Capability 244

Chapter 12 Risk Management in the Supply Base: Insuring

Against Damage, Loss, and Liability 272

Chapter 13 Building Supply Base Advantage: A Long-Term

Project 300

Chapter 14 Situational Supply Base Flexibility: Achieving the

Dream 321

Afterword: You Can Get Competitive Advantage from Suppliers 337

Index 343

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Sort by: Showing 1 Customer Reviews
  • Posted June 16, 2011

    more from this reviewer

    Excellent graduate school class in supply chain management

    Stephen C. Rogers enjoyed a 30-year career at Procter & Gamble, and he offers everything he learned about maximizing supplier relationships in this tome. His book is for dedicated supply chain management professionals. Rogers enlivens it with personal stories, industry case studies and fascinating research. Long descriptions of supply chain strategy, processes and contingencies slow the reading down for the half-interested. However, getAbstract regards Rogers's efforts as a graduate school class for those fascinated with the topic and for professionals who want to sharpen their knowledge. So if you are importing coffee from Africa and you want to maximize your suppliers' contributions, pour yourself a cup and get comfortable.

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