Go to Market Strategy before Supply Chain Strategy

This article is directed mostly towards practitioners who operate supply chains within companies which market and sell products. I have done a lot of thinking recently about the discussions going on concerning "is just in time dead" or "on-shoring / near shoring" etc. There are a lot of conversations happening relative to all sorts of strategies for supply chains (and no lack of consultants who want to sell you on the latest and greatest ideas). My thesis here is that the first thing you have to develop and fully understand is your business' go to market strategy. Then, after that is completely articulated and written down, you can discuss your supply chain strategy. 

So, what is a go to market strategy? It is simply writing down what products you will provide, what markets will you provide them into, who are your competitors, who are your customers and how will you compete? In a 1993 Harvard Business Review article (and subsequently in his book Double Digit Growth) Micheal Treacy and his co-author Fred Wiersema argue that most companies have to pick one strategy they will really excel at and exploit it. The three strategies, from which a company picks are: 1) Customer Intimacy 2) Operational Excellence 3) Product Innovation. It is a fairly rare unicorn which can "master two".

Just by the names of these strategies and without reading the book (Although I highly encourage you to read it) the reader can understand the implications for your supply chain strategy:

1. Customer Intimacy - High service is the calling card. Maybe not service at any cost, but high service nonetheless. The thesis here is that if you provide a truly differentiated and incredible service level, customers will be loyal and they will buy more from you. You will also keep your competitors away as they likely cannot functionally or financially compete against you. 
   
   
2. Operational Excellence - This is low cost. You will compete on cost and every nickel counts. Your customers do not want (and certainly will not pay for) extra bells and whistles. Just do what you say you will do. At this year's CSCMP Edge conference I attended a great presentation with one of the returnable pallet providers. Their strategy was all about efficiency and low-cost. 
   
   It is not "bad" to be in a low cost industry. You have to know it and embrace it and that is what this person did in his presentation. The company's network design, systems and operations were totally geared towards efficiency. They will do exactly what they say they will do with no frills, bells or whistles and they will do no more. The customer gets what they need at rock bottom prices. 
   
   
3. Product Leadership - Think Apple. This is where the product is so good that customers, while they want efficiency, will actually "pay up" or even wait for the product because that product is so good and desirable. Everyone uses the iPhone as an example of this and so some may think only Apple can do this. Let me use another example: The Kitchenaid Standmixer. I worked specifically for this division of Whirlpool for over a year and I can tell you, people will wait for that product. It is iconic. Everyone wants one. Mother's took bus tours of the plant with their daughters before they got married. So, yes, if you truly do have an exceptional and differentiated product, you do not need to be Apple to win. 

So, what does this have to do with supply chain? My submission is it has everything to do with supply chain because you first have to understand which of the three your company is doing to determine what your supply chain strategy will be. Imagine if the person from the pallet company decided his supply chain strategy was going to be "Customer Intimacy" and he built a highly responsive, high service and high cost supply chain. This would be a complete mismatch to the customer's desires and expectations of a low cost and highly efficient supply chain. The supply chain leader needs to fully understand the "go to market" strategy of the company before s/he can build out the supply chain strategy. 

One last bit of advice and warning: Be very leery of a company that wants to be one of the strategies above but is in an industry that demands another strategy. For example, many sales and marketing people want to be in a customer intimate industry because that is what they do. It is fun and energizing. But, this what they want. What do the customers want? If the customers want operational excellence or product leadership then what you will have is chaos. You will never get the supply chain strategy right.

In conclusion:

• Understand your company go to market strategy before you do anything.
• Ensure that stated strategy matches up with the industry you are in. 
• Then, and only then, develop and implement your supply chain strategy. 

After two years of supply chain disruptions and craziness, I tend to think I am Napoleon at Waterloo so tonight, I offer ABBA singing Waterloo: