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Chapter 11 • Supply Chain Management 307

and these are often conflicting to a certain degree. Purchasing contracts are often negotiated with
very little information beyond historical buying patterns. The result of these factors is that there
is not a single, integrated plan for the organization (i.e., there are as many plans as the number of
departments). There is clearly a need for a mechanism through which these different back-office
and front-office plans can be integrated together. Supply chain management is a strategy through
which such integration can be achieved.
All functions that are part of a company’s supply chain contribute to its success or failure.
These functions do not operate in isolation: No one function can ensure the supply chain’s
success. Failure at any one function, however, may lead to failure of the overall chain. Thus, a
company’ success or failure is closely linked to the following key perspectives. The competitive
strategy and all functional strategies must fit together to form a coordinated overall strategy.
Each functional strategy must support other functional strategies and help a firm reach its com-
petitive strategy goal. The different functions in a company must appropriately structure their
processes and resources to be able to execute these strategies successfully.
To achieve strategic fit, a company must ensure that its supply chain capabilities support its
ability to satisfy the targeted customer segments. They must understand the customer and supply
chain uncertainty. A company must understand the customer needs for each targeted segment
and the uncertainty the supply chain faces in satisfying these needs. This gap analysis will help
the company define its desired cost and service requirements, and identify the impact of a disrup-
tion or delay, or both, in the supply chain. A company should also understand its supply chain
system capabilities. There are many types of supply chains, each of which is designed to perform
different tasks well. A company must understand what its supply chain is designed to do well. If
there is a mismatch between the supply chain outcomes and the desired customer needs, the
company will either need to restructure the firm’s competitive strategy or alter its supply chain
strategy as seen in the case of Wal-Mart (see Vignette) as it promotes the use of radio frequency
identification (RFID) technology to its suppliers and partners.???

Wal-Mart’s RFID Strategy

A typical U.S. Wal-Mart has 142,000 items, so multiplying those savings makes sense that
Wal-Mart’s efforts on enforcing new SCM technology on their suppliers make a big impact on
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the bottom line. Wal-Mart has definitely started a ripple effect within its own supply chain.
Ever since 2002, when radio frequency identification technology proponents began
insisting that it would dramatically change the way companies track goods in the supply
chain, it has remained a niche technology because of the cost of RFID tags. The most gener-
ic RFID tags cost around 10 cents apiece, whereas latest generations of chips are getting
better with standardization and improved functionality. Consumer goods companies always
talk about 5-cent tags as a price that would open RFID up to broader uses and remove the
difficulties pioneers like Wal-Mart have had in pulling in a critical mass of partners.
Just 600, or about 3 percent, of its suppliers have started using RFID since the retailer
announced its famous supply chain ”mandate” in 2003. The slow uptake is prompting
Wal-Mart to change its strategy for the RFID technology drastically. It is moving away
(continued)

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Weier, M. H. (April 2, 2007). RFID: Hold the Revolution. InformationWeek, Manhasset, Issue 1132, 30–31.