Supply Chain Strategy: Back to Basic

Supply Chain Strategy: Back to Basic


The question ‘what is supply chain strategy?is a common one, especially because the world depends on supply chain management today like never before. Supply chain management describes the flow of products and information from the point of manufacture through transportation to the consumer. Supply chain strategy then denotes the processes a company applies to manage the supply chain. To ensure that a business remains sustainable over time, a balance in the inventory, transportation, and manufacturing costs is critical. This explains why learning the basics of supply chain management is of utmost importance for every successful supply chain management. Here are the basics of the supply chain strategy needed for a successful chain;

1 Have the customer as the central focus of the supply chain management

While many players are involved in supply chain management, the customers should be the central focus of the strategy. Of course, the suppliers, logistic providers, distributors, and in-house customers are part of the chain. However, the chain runs with the sole intention of fulfilling the needs of the customer. Therefore, while you manage the chain, do your utmost to meet the customer’s demand. This means supplying exactly what they need, at the right time when they need it, and for the prices, the customers want the product. This is possible when the supply chain management (SCM) spins all its links toward this specific goal.

2 Be practical even as you work with a strategy

In running the SCM, you will definitely choose a strategy. While doing so, it is important to choose only what seems viable and workable. Often, business people feel pressure to imitate other organizations without going to the nitty-gritty and seeing whether they can sustain the copied choice. Often, the answer is no, and the business collapses. So then, as you choose a strategy for your SCM, ask the question ‘what if.’ This analytical question enables you to foresee various scenarios and how the chosen strategy could fit in. with the multiple options in place, a business lands what it can accomplish. This must be something practical, not too general nor conceptual.

3 Get the CEO to the overall corporate strategy

Business has two approaches; the top-down and the bottom-up. Of course, the bottom-up approach is commonly used as it is more participatory and seems to welcome on-board ideas from various stakeholders. However, when it comes to a successful SCM, a top-down approach seems to be better. A Booz Hamilton study revealed that when companies assign CEO roles, they tend to save less by 55% than the companies that engage the CEO hands-on in the entire strategy. 

4 Play smart with customization

One challenge digital transformation and supply chain strategies face is the pressure for more customization from the customers. Even for the most customized products, customers will demand more. However, customization may be adding unnecessary costs to the supply chain since it comes with more suppliers, shorter run times, and more inventory. The bigger problem is that when an organization keeps succumbing to customer pressure for customization, the business may become unsustainable. Therefore, the SCM team needs to sit down and run a product architecture to see the implications of further customization and the ultimate result.

5 Ensure steady communication between key stakeholders

Communication is the fuel in every relationship, including one between the key stakeholders in supply chain management. The implication is that for the chain to run smoothly and have services, cost, and revenues optimized, communication must occur steadily. Imagine a supply chain in which the managers are solely concerned with reducing cost and maximizing revenue without caring about the quality of the product. If it gets compromised, the customers may decide not to buy the product, leading to losses. The best way to approach this is by discussing any issues of concern or any suggested changes with the key stakeholders before initiating such a change.

6 Ensure healthy trade-offs between cost and services

The ultimate goal of every business is profit-making, but at least not at the expense of customer satisfaction. Therefore, healthy and balanced trade-offs between cost and services are needed to make the supply chain sustainable and a win-win for all the involved parties. For instance, an SCM should carefully assess the people, resources, capabilities, suppliers, raw materials, and logistics providers needed and where they should be located. What’s more important is comparing the cost of owning these resources and outsourcing them and seeing what’s more viable and holds more weight for the business. 

7 Be agile and adaptable to changes

Markets, people, channels, and resources evolve, and so must every supply chain. Many supply chain strategies fail because they are rigid and stick to the existing supply chain structure even when immediate change is needed. What may work for customers today may not work for them tomorrow. Therefore, there is a need for supply chains to be on the lookout for changes in customer behavior and adapt to them immediately. One way to ensure this is frequently running a ‘what if’ analysis which preempts situations, mirrors them, and allows the supply chain to respond to them. When the organization is faced with such a situation in real life, it is better placed to handle it.

8 Use technology wisely and understand its risk

With digital transformation taking roots in supply chains and technology presenting new features daily, a business may be tempted to replace the human workforce with technology. While this may make work easy, the technology will certainly not understand what plans the company has for the next five years, and it may never adjust to new changes. Thus, instead of replacing the hands-own knowledgeable managers with technology, use the technology for data science and simulation to make predictions for the future and see how you would react to them.

Conclusion

Supply chain strategy refers to the processes and methods a supply chain management applies to run its duties and monitor the flow of products and information from the point of manufacture to the consumer. Understanding the basics of supply chain strategy is the key to excelling in business. Learning about these basics from this article.