How to define a Supply Chain strategy

The most important goal in defining a Supply Chain strategy is to achieve a full alignment with the corporate (business) strategy. The strategic alignment between corporate and supply chain strategies will enable the company to achieve its primary goal, which is the long term survival through the search of sustainable competitive advantage.

The whole proccess of strategy definition and implementation may be summarized in 4 steps:

1. Understand customer needs and the Business strategy
2. Decide the type of supply chain strategy to pursue (more on this very soon)
3. Map the supply chain's strengths and weaknesses
4. Define an action plan to achieve the desired supply chain performance

At a very high level, supply chains support business strategy by focusing on a trade-off between two types of strategy: Responsiveness or Efficiency. On the one hand, a company may choose to be Efficient and minimize supply chain cost in order to offer low price products or services at the expense of responsiveness (and eventually availability). On the other hand, companies may choose to be Responsive and ensure product avaiability and quick response to customer orders even if that means increasing supply chain costs. In between the two options there are many combinations of responsiveness and efficiency.

Customer is king. The choice of business strategy and its aligned supply chain strategy may not be the same for all customer segments. The company must spend time to understand customer segments and expectations. Afterwards, supply chain strategy needs to be defined in such ways that delivers the expected value for each customer segment.

Once the business and supply chain strategies have been defined, we need to make sure that each of the activities along the supply chain (procurement, manufacturing, distribution and delivery) share the same goals and measure success in the same way. This does not happen naturally and the corporate leader must work to ensure this internal alignment.

Next activity is the assessment of the company's actual supply chain strengths and weaknesses. In short, we must check if our supply chain have the right capabilities (in terms of talent, infrastructure, systems and processes) to deliver the expected value.

Finally, we will have a map of gaps that need to be filled. Then it will be the time to define an operational plan to achieve the desired capabilities and performance, either through continuous improvement or through a deeper supply chain transformation.

#supply chain, #strategy, #performance