The benefits of seamless integration and the pursuit of a shared strategy within a supply chain are widely recognized, creating, among other things, a hard to replicate competitive advantage. However, achieving this is a difficult task because of the limited means to assess a supply chain's strategic consistency. The purpose of this manuscript is to describe and illustrate how the pairwise comparison method can be used to reveal the consistency (or lack thereof) among supply chain members' perspectives with respect to the importance of different competitive priorities, such as cost versus flexibility. Illuminating where senior decision makers agree and disagree regarding the current versus ideal value creation processes within the supply chain has practical benefits. At a minimum decision makers within the supply chain should be aware of differences in opinions, although for optimal supply chain performance reconciling these differences is recommended.
The traditional view that competition takes place between firms or products is being superseded by the reality that competition occurs between different value creating supply chains (Ketchen and Hult, 2007, Lambert and Cooper, 2000, McCarter and Northcraft, 2007 and Schnetzler et al., 2007). Consequently, the idea of joint creation of value should apply to all contiguous relationships within the supply chain with an overall goal of optimally creating value for the end customer — a critically important issue to those embracing the marketing concept. Supply chains are difficult to replicate and can therefore provide a sustainable competitive advantage when operating well.
Viewing competition as something that occurs between supply chains increases the importance of strategic consistency among the members comprising a given chain. It is no longer appropriate to consider a firm's value creation capabilities in isolation without considering the other members involved in the value creation process. To maximize a supply chain's overall performance value should be created in a consistent manner throughout the entire chain (Johnson, Scholes, & Whittington, 2006). The greater the consistency between the strategies pursued by all members comprising the chain, the greater is the overall business performance (Andrews, 1971). Thus, for example, if cost leadership is the intended end-product positioning strategy, all members within the chain should embrace that perspective. Conversely, markets characterized by technological dislocations may prefer chain members that initiate, or are prepared to respond quickly to, innovations up or down the chain. In this case, restraining costs may be viewed as less important than the ability to initiate or respond to innovations. Unfortunately, individual companies may be fixated on optimizing their own performance rather than the chain's overall performance. Pursuing what is best for the supply chain requires embracing a shared understanding of the competitive priorities that drive value creation within the chain.
Four decades ago Skinner (1969) highlighted the importance of making strategic choices among different competitive priorities, such as cost efficiency versus innovativeness, albeit his focus was intra-firm. Because companies cannot excel on every priority, he advocated the need for prioritizing a firm's available options. This study builds upon that philosophy, but applies it to the entire supply chain. Like individual companies, a supply chain cannot perform well on every competitive priority, hence prioritization is needed. Widely differing philosophies regarding what to emphasize (e.g., cost or innovativeness) is a potential source of friction among supply chain members and is likely to cause sub-optimal overall performance. Hence, identifying and isolating these conflicting perspectives has clear practical import. Unfortunately, there is a paucity of means to do so.
The purpose of this study is to demonstrate how the pairwise comparison method (PCM) can be used to assess the strategic consistency within a supply chain. PCM can be used to reveal areas of agreement and disagreement regarding the importance of various competitive priorities that drive value creation. A case study of a supply chain within the packaged food industry is presented for illustrative purposes. PCM was used to elicit opinions from senior management in each member of the supply chain about how value is created within the supply chain as well as how value should be created. These two perspectives, which need not be in agreement within or across firms, provide a basis for an in-depth analysis of the strategic consistency within the supply chain.
The overarching supposition is that the greater the difference between these two views (the current versus the ideal state), the less ideal is the current strategy being pursued; and the greater the differences in perspectives across organizations comprising the chain, the less there is consistency in strategy among chain members. As Swink, Narasimhan, and Kim (2005) note, practitioners and researchers do not have an adequate understanding of the role that consistency in value creation plays in achieving superior performance. To the authors' knowledge PCM has not been used to assess the strategic consistency within a supply chain. By working through a real-world example, the advantages and challenges of PCM are discussed.
The purpose of this manuscript was to demonstrate that PCM is a straightforward and valuable method for assessing strategic consistency within a supply chain. This was achieved through applying PCM in a food industry context to reveal areas of agreement and differences among supply chain members' perspectives on the importance of different competitive priorities. PCM is a viable approach for structuring multi-criteria problems involving multiple decision makers, as was the case herein. By imposing structure onto the problem, differences between decision makers regarding the importance of competitive priorities are illuminated. Resolving these differences through dialogue with other decision makers — or at a minimum, acknowledging their presence — is the primary benefit of this approach. Unresolved differences in opinions regarding competitive priorities are likely to be sources of friction within the supply chain, thereby causing sub-optimal overall performance.
However, utilizing the potential of PCM requires understanding the challenges that exist when applying the method. Choosing which priorities to compare is critical. The process undertaken to identify the appropriate priorities herein was straightforward: start with secondary research and then elicit reactions to a preliminary set of priorities from relevant decision makers. Breadth in the selection of priorities has advantages, but too high a number of priorities can be too cognitively demanding, resulting in high levels of inconsistency.
Given a set of priorities, it is necessary that their meaning be unambiguous to the participating decision makers in the supply chain. It is important to provide definitions that are appropriate for the specific context, not necessarily an all-encompassing, theoretical definition.
PCM enjoys a long and rich history, but has not previously been used to assess the relative importance of competitive priorities within a supply chain context. PCM provides practical insights relevant to strategic management of a supply chain. It is straightforward and much of it is mechanical. Yet, as the case example herein demonstrates the results can be clearly provocative and should prompt discussion among the various chain members and ideally motivate efforts to harmonize the value creation process within the supply chain. In sum, PCM is a viable method for managers to assess the critically important supply chain strategy that is too often left unexamined.
