10 Minute Supply Chain & Logistics Strategy

Introduction

In today’s competitive landscape, a well-defined supply chain strategy is more crucial than ever for business success. Despite advancements and discussions surrounding supply chain management, many businesses still lack a clear strategy. This article outlines a step-by-step approach to creating a supply chain strategy that can be developed quickly and effectively.

The Current Landscape

Many organizations often have a great vision and mission statement—vividly portrayed through imagery of people looking out over landscapes or awe-inspiring scenes like breaching whales. However, this lofty vision doesn't always cascade down to employees working in the supply chain. It's imperative to bridge the gap between high-level strategy and the everyday functions of staff working at the operational level.

Disparities in understanding can cost organizations. A study indicates that disruptions in the supply chain can lead to an average decline of 8.6 percent in shareholder value. Alarmingly, only 39 percent of businesses have a documented supply chain strategy, and 65 percent of those without believe that their lack of strategy negatively affects performance.

Important Components of Supply Chain Strategy

To create an effective supply chain strategy, we can visualize it through a Venn diagram consisting of three interlocking circles: business strategy, financial strategy, and service strategy. The intersection of these strategies leads to:

Happy Shareholders: From aligning business and financial strategies.
Happy Customers: From successful service and financial alignment.
Happy Teams: From clear communication of objectives and duties.

The three critical areas of focus are:

Business Strategy: This should have clarity, development, and constant calibration.
Financial Alignment: Key components encompass warehousing, transport, and procurement.
Service Alignment: Must include a customer service policy, an inventory policy, good planning processes, and solid inventory management practices.

Developing Objectives

Starting from the top, business leaders should identify about three to four clear objectives for the supply chain—rather than the overloaded approaches that often comprise 8-16 points. These should stem from organizational goals and must be easily understood by employees on the ground, such as:

Cost: Aim for “lowest total cost always.”
Service: Promise to “never have any back orders.”
Quality: Maintain a focus on providing “quality products.”
Safety: Especially pertinent in industries like mining or heavy manufacturing.

Tactics and Measures

Once the objectives are in place, it’s essential to determine the tactics that will enable the achievement of these goals. For example:

Always in Stock: Focus on effective inventory management, sales, and operations planning.
Lowest Prices: Concentrate on effective procurement methods and low-cost transportation strategies.

Finally, measurable Key Performance Indicators (KPIs) should be created for each objective—typically three KPIs per objective. For “always in stock,” KPIs may include:

On-shelf availability.
Warehouse inventory levels.
Supplier performance regarding timely deliveries.

Conclusion

Crafting a supply chain strategy doesn’t need to be a daunting task; it can indeed be distilled into a simple, understandable format. With clear objectives, supporting tactics, and measurable outcomes, businesses can ensure that their supply chains not only support their broader business strategies but also foster better communication among all employees involved.

Keywords

supply chain strategy, business strategy, financial alignment, service alignment, objectives, tactics, measures, KPIs, inventory management, procurement, customer service policy

FAQ

Q: Why do many businesses lack a supply chain strategy?
A: Many organizations have visionary goals but fail to communicate and translate these into actionable supply chain strategies at the operational level.

Q: What impact does a supply chain gap have on businesses?
A: Disruptions in the supply chain can lead to a decline in shareholder value and affect overall business performance.

Q: How many objectives should a supply chain strategy have?
A: It is ideal to have three to four clear and simple objectives to focus on, rather than an overwhelming number.

Q: What components are essential in building a supply chain strategy?
A: Key components include alignment between business strategy, financial strategy, and service strategy, as well as objective development and measurable KPIs.

Q: How can a company ensure their supply chain strategy is effective?
A: By articulating clear objectives, developing relevant tactics to meet those objectives, and establishing measurable KPIs to monitor success.