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When the scope of strategic fit within a supply chain is narrow, individual functions aim to optimize their own performance, leading to siloed decision-making and potentially compromising the overall supply chain performance. A broad strategic scope encourages alignment of functions towards greater economies of scope, achieving cost savings and efficiencies across the various stages of the supply chain.
Explanation:
The scope of strategic fit within a supply chain refers to how the various functions and stages are aligned to fulfill the strategy and achieve a common goal. In a situation where the scope is narrow, individual functions within the supply chain typically aim to optimize their own performance without necessarily considering the overall impact on the supply chain as a whole. This can lead to siloed decision-making where departments or stages in the supply chain prioritize their own efficiency or objectives rather than those of the entire supply chain, potentially compromising the overall effectiveness and the pursuit of economies of scope.
Supply chains vary based on factors such as industry, manufacturer resources, and market conditions, but their primary purpose is to integrate business functions into a cohesive model. Under narrow scope conditions, each function risks losing sight of the bigger picture. For example, sourcing may aim for lowest cost suppliers without considering the quality impact on manufacturing, or manufacturing may focus on maximizing its operational efficiency without factoring in the distribution capabilities, eventually affecting overall supply chain performance.
Economies of scope play an important role in strategic supply chain management. By providing multiple products and services, a firm can often realize cost savings and efficiencies that cannot be achieved when producing goods or services independently. When supply chain activities are aligned under a broad scope with a clear focus on overarching strategic objectives, individual functions are better positioned to create synergies that contribute to the overall performance and cost savings for the firm, achieving a more effective economy of scope.
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