Value creation through alignment of supply chain strategy with firm strategy in a large FMCG retailer

Abstract

Creating value for the firm requires getting the right product at the right place, at the right time, at the right price to the customer and this is not only pivotal for business success, but also for survival. As markets become more competitive, and as the need for firms to reinforce relationships and working together increases, it is clear that achieving such business objectives should be assisted by efficiently utilising the organisation’s operational tools whilst simultaneously establishing a thorough process for working with suppliers, distributors, customers and the final consumers. A firm must therefore correctly align its supply chain design and therefore its supply chain strategy to its overall strategic objectives, the supply chain strategy should be subordinate to, supportive of, and be derived from a firm’s strategy. This research study focused specifically on Pick n Pay Retailers (Pick n Pay) which is one of the largest FMCG retailers in South Africa. Fourteen in-depth interviews were successfully conducted with respondents who were above a predetermined employee level within Pick n Pay to ensure they were familiar and directly involved with the retailer’s overall business and supply chain strategies. The respondents were made up of category managers, supply chain managers or specialists within the business functions relating to supply chain management, corporate strategy or supply chain strategy formulation or implementation It emerged that Pick n Pay has had to implement a large number of strategic changes in a short period of time after it lost significant market share to competitors in recent years. It was necessary for the business to identify its shortcomings and immediately put plans in place and action them to address all the shortcomings simultaneously in a bid to improve performances. The changes related to both the overall strategic orientation of the organisation as well as the complete redesign of Pick n Pay’s operations capabilities. In the midst of all these changes, it was established that alignment between Pick n Pay’s overall strategy and its supply chain strategy had improved during the last 5 years and - iii - the efforts have started to yield positive results for the business. It is clear however that there is still some way to go before Pick n Pay can be regarded as the leading retailer in South Africa. A brief investigation into many markets today will reveal that it is commonplace to find the competing businesses attempting to build the most efficient supply chain, regardless of whether the businesses’ market strategy is to compete based on superior product availability or depth of range as examples. This can have adverse effects on the business and as optimising cost and inventory on the one hand can come at the expense of leadtimes, flexibility and risk on the other. It therefore important that a firm’s supply chain strategy pursues objectives that are aligned to the way the company competes for market share to enable it to be competitive, if the company is able to compete then an opportunity to create value exists for that firm.