In our last post we presented an example of how a leading technology company, namely Apple, probably used a variation of the Value Focussed Supply Strategy when they decided to enter the smartphone market with the iPhone and illustrated, with a few liberties, how the VFS process could have led them to that market and that product and the success that followed. In this post we are going to elaborate on the process that was described in CAPS recent report on Linking Supply to Competitive Business Strategies.

Given the following seven-step process that we outlined in our last post:

1. Understand Customer & Supplier Markets
2. Identify Directional Changes
3. Link Insights into Directional Changes to the Business Strategy
4. Evaluate the Company’s Strategic Options
5. Set Holistic Value Focussed Goals
6. Evaluate and Select Strategic Supply Options
7. Identify and Implement Levers

We can identify the following key questions for each step:

1. Understand Customer & Supplier Markets
   
   • What are customers buying and what do they want to buy?
   • What is the balance of supply vs. demand in the supply market?
   • What capabilities do organizational suppliers have that are not being utilized?
   • Are there any limitations on raw material supply?
2. Identify Directional Changes
   
   • How are customer buying patterns shifting?
   • Is a market transformation occurring?
   • Is the supply base expanding or consolidating?
3. Link Insights into Directional Changes to the Business Strategy
   
   • Which categories and products are likely to have the greatest market demand?
   • Which categories and products will have the greatest impact on financial and market performance in the short and long term?
   • Which categories and products fit with the business strategy?
4. Evaluate the Company’s Strategic Options
   
   • Which categories and products could be truly strategic now and in the future?
   • How would each of these shape the company’s market presence and supply chain?
   • From a VFS viewpoint, which are the best options?
5. Set Holistic Value Focussed Goals
   
   • What performance is expected from the supply base?
   • What performance is expected from the organization?
   • What performance is expected from the distribution partners?
6. Evaluate and Select Strategic Supply Options
   
   • Which suppliers will be used? Which are strategic partners and which are tier two?
   • Will the organization handle JIT inventory itself or use third party inventory management services?
   • Will the organization manage distribution itself or hand it over to a 3PL?
   • Will the organization use currently existing supply markets and supply chains or create new ones?
7. Identify and Implement Levers
   
   • What can change the market dynamics?
   • What can change what is bought?
   • What can change interaction with suppliers?

The answers to these questions will dictate:

• target market,
• primary category,
• key product(s),
• key suppliers,
• VFS strategy,
• VFS goals, and
• VFS levers.

In our next post we will dive into some of the key questions in each category and explain some of the thought process that will help lead the organization to the right answer(s).