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Chip Exercise: Competitive Requirements Analysis
The agenda for Day Two is comprised of two tasks: conducting competitive requirements (sometimes known as the chip exercise) and preparing for steering team review number one.
Rules for the Chip Exercise
There are four attributes of supply chain performance (as defined in the second column of the metrics template, Tables 4-1a-c):
Delivery performance
Flexibility and responsiveness (combined)
Supply chain cost
Asset management efficiency
The objective of the chip exercise is to prioritize these attributes for each customer or market channel, determining whether the company needs to perform each attribute at a superior level, a level of advantage, or at parity with other providers.There is a catch: For each customer or market channel, the team is only allowed to set one performance attribute at the superior level and one at the level of advantage. The other two attributes must be set at parity.Finally, the requirements are established from the company's point of view as they relate to the competitive landscape of the future. This is not a goal-setting exercise; it's a strategic Table 3-5) as a baseline, the team determined that there were really only three supply chains with unique requirements. All of Fowlers' U.S. retail markets had the same overall performance requirements regardless of the product group. Similarly, the U.S. distributor markets and U.S. government had similar requirements independent of product type. Lastly, the U.S. direct-to-consumer markets and U.S. OEM/key accounts were grouped together with similar delivery, cost, and inventory requirements—again, with little distinction required from one product to another.
Performance Attribute or Category | Associated Level 1 Performance Metrics | Competitive Requirements S = Superior ... 1 category per supply chainA = Advantage ... 1 category per supply chainP = Parity ... 2 categories per supply chain | |||
|---|---|---|---|---|---|
U.S. Retail Markets | U.S. Distributor Markets U.S. Government | ||||
U.S. Direct to Consumer U.S. OEM Key Accounts | |||||
Supply Chain Delivery Reliability The performance of the supply chain in delivering the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. | Delivery Performance | S | P | P | |
Fill Rates Substitute Line Item Fill Rate here | |||||
Perfect Order Fulfillment | |||||
Supply Chain Responsiveness The velocity at which a supply chain provides products to the customer. | Order Fulfillment Lead Time | P | P | S | |
Supply Chain Flexibility The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. | Supply Chain Response Time | ||||
Supply Chain Flexibility The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. | Production Flexibility | ||||
Supply Chain Cost The costs associated with operating the supply chain. | Total Supply Chain Cost | A | S | A | |
Warranty / Returns Processing Costs | |||||
Supply Chain Asset Management Efficiency The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital. | Cash-to-Cash Cycle Time | P | A | P | |
Inventory Days of Supply | |||||
Asset Turns | |||||
Figure 5-2: Fowlers' competitive requirements summary.
The results of the chip exercise were clear. To differentiate in the U.S. retail channel, Fowlers needed to achieve superior delivery performance, advantage supply chain cost, and parity performance in flexibility and asset efficiency.To differentiate in the U.S. distributor and government markets, Fowlers needed to achieve superior performance in supply chain cost, advantage performance in asset efficiency, and parity on delivery performance and flexibility and responsiveness.
To differentiate in the demanding direct-to-consumer and OEM/key accounts, Fowlers needed to achieve superior performance in flexibility and responsiveness, advantage performance in supply chain cost, and parity on delivery performance and asset efficiency.
