The Case for Competitive Advantage

The modern business environment brings dynamic global challenges, as business leaders lose sleep, trying to keep pace with political, ecological, technological, industrial, socio-demographic, economic, and competitive trends.

Survival for the modern organization lies in the very fundamental challenges of maintaining or increasing Global Market Share. The Concept of Competitive Advantage is a critical cog in harnessing a strong market position, but if we ask the average business professional to define this, she or he may fall short.

The Next Level Purchasing Body of Knowledge underpins, integrates, and enhances the vital Mission Critical elements of Competitive Advantage in simple how-to-do steps. This cutting-edge BOK is designed by practitioners for practitioners

Competitive Advantage as a desired outcome has 4 key drivers that business and procurement leaders must understand and leverage effectively:

1. Quality

The quality of a firm’s offerings must be superior to its competitors. According to Quality Guru Philip Crosby, “quality=conformance to specifications” (ASQ- Certified Quality Engineer Handbook pg.8)

Maintaining superior quality products and services by the above definition means that companies must focus their resources on meeting Customer Specifications. Therefore, customers define quality. For a company that produces cars, quality parameters may include the cars and other aspects that must meet customer requirements. Quality, in this case, may include correct billing, timely delivery of the cars, superior customer service, short on-hold times if customers call about some issue. Every time these requirements are not met, a defect is being generated.

Many progressive companies find out what are the most critical characteristics their customers demand products and services and prioritize them on a list called CTQs (Critical to Quality Characteristics).

An example of CTQs for a car maybe:

  • Ease of driving or operation (5)
  • Ease of repair (4)
  • No less than 27 miles per gallon in city driving (3)

Key: Level of importance rated from 1 to 5, with 5 being the highest score and 1 being the lowest

2. Speed

The time to market for a firm’s new products must be faster, and the lead time for order fulfillment for existing products must be shorter than its competitors. Procurement Leaders play a vital role in enabling New Product Development and commercialization processes, by assuring strong supplier capability, quality, and feasible Total Cost of Ownership. The same is true as procurement professionals are pivotal in the acquisition of robust technology, equipment, raw materials, and other vital assets that enable their organizations to manufacture and deliver robust products and services to their customers without delays. Unreliable suppliers increase the probability of supply chain bottlenecks, cost, rework, inventory buildup, bull-whip effect, overproduction, and extended lead times. Supply Chain Professionals are tasked with simplifying their procedures and eliminating time-consuming non-essential activities to increase “Organizational Speed and Supply Chain Agility”.Remember delays cost money and opportunity and the fast eat the slow in business.

3. Responsiveness

The capability of a firm to respond to market trends is critical and must also be superior to its competitors. Supply Chain Professionals must be part of continuous Environmental Scanning Initiatives to understand the economic, customer tastes, technological, political, demographic, ecological, shifts, shocks, trends in their respective supply chains. Forward-thinking professionals naturally dive into a mode of reflection as to how these current trends are moving, how they will impact their organization’s viability, and how their firms are positioned to leverage positive trends or reduce the impact of negative trends.

Supply Chain responsiveness also includes a firm’s natural ability to quickly resolve customer complaints, assure issues are not repeated and effective error-proofing mechanisms (poka-yoke) are implemented.

4. Efficiency

The ability of a firm to convert its resources into useful products and services meeting or exceeding customer and stakeholder requirements, and creating significant Economic Profit, must be superior to its competitors.

The process of conversion must be formulated and executed with minimal waste, and maximum First Pass Yield. Procurement Professionals must guarantee the acquisition of defect-free inputs delivered on a timely basis, in accurate quantities, and at the agreed-upon cost structure. Imagine the cost a manufacturer of 200 employees incurs because it stops its production line to wait for an emergency delivery of raw materials because the raw materials on hand were all defective. Waiting for itself is a huge waste and does not add value to customer nor stakeholder portfolios, and usually hurts the overall experience.

The assurance of defect-free inputs and raw materials takes rework out of processes, increases customer satisfaction, reduces the cost of poor quality and lead time. The key in this realm is to successfully affect the so-called triple constraint of modern customer demand for products and services delivered faster, better, and cheaper.

Caveat: Reducing process waste, getting things done right the first time, reduces time, cost, and improves quality. Do you know that the average organization has about 60% waste, 30% Non- Value Add essential activities and only about 10% Value Add activities?

What is the Value Add to Non-Value Add ratio of your organization? Supply Chain professionals have a critical role to play.

NLPA Learning: Looking for authoritative procurement templates, tools, webinars, and more? Stop trying to create resources from scratch and start taking advantage of having exactly what you need right at your fingertips in NLPA Learning.

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Categories: Procurement


Published On: June 22nd, 2018Comments Off on The Case for Leveraging Competitive Advantage