Supply chain management can be said to operate at three distinct levels: the strategic, tactical, and operational. Show
At the strategic level, the business's leadership team takes high-level supply chain decisions that affect the entire organization. Such decisions around the supply chain typically mirror the business's overall corporate strategy. A prerequisite for strategic supply chain management is to define corporate strategy. This strategy then flows into functional areas. Strategic supply chain management is the means to differentiate the business by creating the highest possible value for customers and investors. Top Performance Disciplines in Strategic Supply Chain ManagementThe performance disciplines of strategic supply chain management determine how the organization plans to compete in the market. The five disciplines for top performance include:
Also read: The Cost-Plus World of Supply Chains • Business and Organizational StrategyThe business strategy specifies how the business will be grown, competitive differentiation achieved, market performance improved, financial goals met, and how competitive edge will be created and maintained. The organizational strategy deals with the end goals of the business. Whatever business goals the organization adopts to satisfy customers, grow the business, compete, etc., the supply chain strategy has to align itself to further this strategy. The strategies could include customer focus, forecast-driven business, demand-driven business, and the number of supply chains. Supply Chain Strategies Supply chains deal with the end-to-end movement of information, products, and money. Hence, managing supply chains effectively impacts the organization’s competitiveness in cost, speed to market, etc. The supply chain strategy must be aligned to the business and organizational strategy to achieve targeted business goals. Supply chain strategies are formulated based on: • Business environmentThis refers to the interplay of suppliers, customers, technology developments, and economic conditions that affect the business environment. • Unique value propositionThe unique value proposition defines the organization’s competitive positioning. Identifying the value proposition enables the organization to incorporate key drivers into its supply chain to fulfill its customers' unique value proposition. • Managerial focusManagerial focus is essential to ensure alignment between supply chain execution and the business's unique value proposition. • Internal processesInternal processes define the interrelation between supply chain activities that determine how the product are sourced, manufactured, and delivered. Also read: Supply Chain Digital Transformation Guide 2022 How Do You Develop and Implement A Supply Chain Strategy?The key to developing a successful supply chain strategy is aligning it to the organization’s business goals. The strategy is designed to leverage the organization’s core competencies to attain high-level objectives. A supply chain not guided by any strategy is sure to fail. If the goal is to be the lowest-cost provider, then the supply chain should be designed to reduce costs. The critical steps to developing and implementing a supply chain strategy include: • Two-way communication between teamsThe supply chain strategy should be developed with customer needs at the center. The fulfilment team, for example, should be able to deliver a superior fulfilment experience to the customers. An open communication channel should exist across the supply chain extending from sourcing to production, to fulfilment, and to the customers such that feedback can flow freely to improve supply chain performance. • People, processes & systemsIn addition to aligning supply chain and business strategy, it is also vital to anticipate coming changes. Periodically review operational data to evaluate alignment with future goals. The supply chain processes and systems should be designed to respond to changes in the business environment. The supply chain should allow the induction of technological developments to remain competitive. Align your strategic and operational staff with the systems and processes. The person in the warehouse should be as aware of business goals as the leadership team. • Building a business case and set performance KPIThe supply chain should not be treated as just another department. It should be integral to the customer-focused approach of the organization and should work to strengthen your brand. To evaluate the supply chain's performance, develop a set of KPIs, set measurable goals, implement a tracking mechanism, and get your key people to buy into the strategy. Enhancing Business Performance Using Supply Chain ManagementEffective supply chain management enables businesses to optimize the product, information, and financial flow. Strategic supply chain management helps improve business performance by incorporating: • ResponsivenessA responsive supply chain allows for short production lead times, reduced set-up costs, and small batch sizes that enable the business to respond quickly to market demand. • ResiliencyAn effective supply chain can mitigate supply chain disruptions and substantially limit any adverse business effects due to those that do occur. • ReliabilitySupply chain reliability helps deliver consistent performance. Increasing reliability, minimizing inventory costs and preparing for demand enhance business performance. • RealignmentRealignment helps a business change the way it does business. This becomes necessary if it is underperforming compared to the competition. ConclusionTechnological innovations as well as disruptions add complexity to the supply chain. This places an additional onus on business leaders to formulate sound supply chain strategies, implement best practices, and integrate functions, activities, and people along the entire value chain. Learn how GEP helps enterprises efficiently manage their supply chains. Frequently Asked QuestionsStrategic SCM is important because it helps streamline product and information flow and respond to unexpected disruptions. Ensure efficiency, optimize logistics, improve quality, monitor financial success, and deliver value to the customer. Globalization allows firms to reach new customers in new markets, which necessitates changes in how manufacturers manage supply chains. Enables companies to work with their products' distributors and vendors and improve operational efficiencies and drive down costs. The elements of strategic SCM interact in support of the business strategy to maximize value for the customer. What is supply chain strategy and why is it important in an organization?Supply chain management streamlines everything from product flow to unexpected natural disasters. Logistics of a large company are managed completely by supply chain managers. With an effective SCM, organizations can diagnose problems and disruptions correctly.
How does good supply chain management provide advantage for organizations?Reduced inventory and overhead costs
An efficient supply chain can reduce the need to maintain inventory, therefore cutting overhead costs associated with storage and security. However, a very lean inventory increases pressure on distribution networks and reduces resilience to supply chain shocks.
How supply chain strategies have contributed to corporate goals of an organization?The results indicate that supply chain contribution to the corporate strategy is significant in multi-business firms that are characterised by low clock-speed industry, high reciprocal interdependence between OEM and immediate suppliers, related diversification strategy, focus on economy of scale advantage, and that ...
How supply chain management can influence business strategy?Procuring raw materials, parts, supplies and services is one of the key benefits of supply chain management. Through supply chain management, companies are able to strike long term deals with suppliers instead of purchasing items on an ad hoc basis.
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