The Basics of Supply Chain Strategy

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Developing a solid supply chain strategy is essential for companies to succeed. But what is supply chain strategy and how can you develop one that meets the needs of your company?

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Developing a solid supply chain strategy is essential for companies to succeed. But what is supply chain strategy and how can you develop one that meets the needs of your company?

What Is Supply Chain Strategy?

Supply chain strategy is often confused with supply chain management, but in reality they are different beasts. Supply chain management is the management of supply chain activities with the aim of maximising customer value and achieving a sustainable competitive advantage.

Supply chain strategy is much broader. It’s a formal written plan, covering multiple years, that defines how a chain needs to operate in order for the company to be competitive.

Most companies have some sort of business strategy that defines the products and services they are offering, and when and where they are offering them. The supply chain strategy deals with a company’s actual operations, with a focus on driving down operational costs and maximising efficiencies.

Analysing a Customer’s Needs

Supply chain strategies will vary from company to company, but they always start with the needs of the customer. They are, by definition, a forward-looking document that should anticipate evolving customer needs and define how the supply chain can adapt to meet the new requirements.

It’s worth bearing in mind that the needs for a product with a stable demand, such as bread, milk and eggs, will be fairly predictable with a low-profit margin, whereas innovative products such as electronics, computer games and fashion clothing will be unpredictable with varied demand, higher profits and a shorter life span.

Assess the Current Chain Capabilities

Next, you need to carry out a thorough assessment of the capabilities of your organisation and those in the external supply chain. Old machinery and technology could be costing you in the form of high operational overheads and inefficient processes.

Some organisations prefer to look to an external, non-biased party to carry out a survey and advise them where their strengths are and where there is room for improvement.

If there is too much disparity between the strategy and your operational assets you may need to consider making new investments to meet demand or changing your strategy altogether.

Develop a Plan for Implementation

Once that phase is complete, you will start work on developing your plan. This needs to be highly specific and should include roles and responsibilities, activities and tasks, a timeline and performance metrics so you can check that you’re on track.

Throughout the development stage, it’s important to communicate and cooperate with your supply partners and seek out mutual goals you can collaborate on. You also need to deal with supply chain risk, and take steps to outsource any elements that aren’t your core competency, allowing you to focus on the areas in which you excel.

Executing Your Supply Chain Strategy

Once your plan is complete, it’s time to put it into action. To ensure your strategy is successful you need to make sure it’s well executed. Monitoring performance will demonstrate how successful you are in implementing your strategy and help those involved understand their contribution and responsibilities. This is most successful when organisations set performance goals where staff and those in the external supply chain are rewarded for their performance.

You should conduct an annual review of your supply chain strategy to determine how well it meets your business strategy, whether the needs of your partners have changed and whether there have been any major changes in your industry, such as new technology, practices, or new competition. If changes are significant, then you need to adapt your strategy to ensure it remains relevant and successful.

Finally, you need to ensure that you regularly communicate with your supply partners so you remain in sync – all parties need to be moving at the same speed and have adequate resources to meet demand.

An efficient and highly strategic supply chain strategy is a major factor in a business’ profitability, but the success of the strategy is only as good as the organisation’s ability to execute it efficiently. A great supply chain strategy, along with operational excellence, can set an organisation apart from its industry competitors and provide success for the company concerned and their partners and customers.

For more information about how Marpak helps UK & European businesses improve the efficiency of their supply chain, get in touch by calling 0113 277 5518.

You can also contact us online.

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