Strategic SCM

What Is Strategic Supply Chain Management?

When we discuss supply chain strategy we are discussing ‘value’ that can be derived from our supply chain.

Before we can build a strategy for the supply chain we must initially identify our corporate strategy and how our consumers perceive ‘value’ from our product or service offering. In essence we are identifying why consumers buy our product or service over that of our market competitors.

Organisations generally identify with a ‘cost leadership’ or ‘innovation’ market offering, consumers purchase based on your organisations ability to compete on price within a market place or because you can offer a new and exciting product that they desire.

Once the corporate strategy is defined, this will cascade into the functional areas of the business where each function will set their strategy that is aligned to the corporate strategy.

The supply chain strategy may be set for example as “We aspire to reduce waste in our supply chain activities to support the company’s strategy to be a cost leader in our market”. Once this strategy is determined for the function it will influence daily operational decisions.

  • Procurement may focus on driving cost out of the procurement activities by sourcing suppliers with favourable terms, negotiating quality improvements that reduce waste activities or stronger contractual terms
  • Operations may look to remove the 7 wastes from their existing processes.
  • Logistics may look to invest in equipment to support removal of waste activities or review their operational processes.

How Do You Develop a Supply Chain Strategy?

To develop a supply chain strategy there needs to be two way communication between the functional and operational aspects of the organisation upwards to the senior leaders who determine the corporate vision, strategy and mission and vice versa , the strategic pyramid is a good visual example of this.

Once you have an awareness of the corporate strategy you can then undertake SWOT and STEEPLED analysis to identify micro and macro factors that may impact supply chain activities.

  • Micro factor is internal to your organisation, for example you may have a shortage of specialised skill in your labour force and there is limited availability to gap this skill set within the recruitment market.
  • Macro factor is external to your organisation, such as a global disruption that may impact your raw material supply.

Once you have identified your strengths and weaknesses you can then look to address these challenges and build a business case for investment in the applicable areas.

There are three core areas to consider when developing your supply chain strategy and business case:

  • People – Do you have the right number of staff with the right skill set?
  • Process – Are there waste activities within your current operating processes?
  • Systems – Are your systems enablers to the strategy or are legacy systems holding you back?

How Do You Implement a Supply Chain Strategy?

To implement a supply chain strategy once you have undertaken the analysis will require:

  • Building business cases: to gain investment for the areas requiring development. I.e. new systems or increase in staff numbers.
  • Stakeholder buy in - to gain support for the roll out of the strategy, by ensuring existing members of staff within the team understand their objective whilst taking them on a journey of change management, also engagement with senior or peer stakeholders who can influence the strategy , as your business proposals may in turn impact their operating areas.
  • Setting KPI’s: You can’t measure what you don’t know, identify your start point and then review on a regular basis to ensure you remain on target for change progression.

What Is the Strategic Importance of Supply Chain Management?

Without a strategy the supply chain activities cannot be aligned to an overall objective. Think of an organisation with no functional or operational strategy much like a ship setting sail without letting the crew know the destination, the crew could be making decisions that could unwittingly impede the ship arriving safely at its end destination.

Strategies need to be clear, voiced to ALL staff members and have buy in.

When in 1961 JFK visited NASA he asked a janitor what his job was, his reply was:

“I’m sending a man to the moon”

This is a clear example of a well communicated strategy and mission flowing throughout the whole organisation, with complete buy in, regardless of an individual’s position within the organisation they understand expectations and the part they play in that strategy.

To find out more about this subject read the full knowledge papers:

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