What is a Supply Chain Strategy?

22.09.22 09:17 AM Comment(s)

Supply chain strategy is about more than just logistics. It's about optimizing your company's performance in three key areas: cost, service, and sustainability. As a business owner or manager, it's important to understand what your company's supply chain strategy is, why it matters, and how you can use it to help your business succeed.

The supply chain strategy is the overarching plan for how your organization will use its time, money, and people to achieve its goals. It defines how you'll prioritize getting products from point A to point B efficiently and effectively. Supply chain management refers specifically to inventory control, procurement, distribution, and all related activities that support sales growth within the business.

The importance of supply chain strategy:

Supply chain strategy is important for a number of reasons. Businesses need to develop a supply chain strategy when they understand the following:

  • Why they have a supply chain in the first place, and what their goals are for it.

  • How they will execute their supply chain strategy.

  • What risks may arise during execution and what contingency plans they have in place if something goes wrong.

Developing a Supply Chain Strategy

Before you start on your supply chain strategy, it's important to define the supply chain issue. If you don't know what your goal is, it will be difficult to determine if you're making progress in achieving it. Supply chain strategies are most effective when they are grounded in a specific problem or issue that needs to be addressed.

For example, your company is entering the market for a new product that requires significant investment in manufacturing plants and equipment. The primary challenge you face is demand forecasting: Can you accurately predict how many units of this new product will be purchased by customers?

The secondary challenge is to design and implement a strategy for your supply chain: How should you source materials? Where should the materials be manufactured? What transportation methods should be used to deliver those materials where they need to go? 

The tertiary challenge- and perhaps the most difficult of all- is determining how best to execute that strategy. For example, you might have determined that it makes sense from an efficiency standpoint to manufacture your products overseas instead of domestically; but if you do so, how can you ensure quality control while still meeting customer expectations in terms of delivery times and cost effectiveness?

There are many different types of goals that can be set during this stage of developing a supply chain strategy; however, we highly recommend setting tangible goals with 3-6 month time frames so that you have something concrete by which success can be measured over short periods of time consistently throughout implementation (rather than focusing exclusively on long term impact).

How to Execute a Supply Chain Strategy

To execute your supply chain strategy, you'll need to:

  • Develop a strategy by defining the problem you're trying to solve, identifying possible solutions and establishing criteria for evaluating each solution.

  • Develop a plan for implementing the solution based on the resources available and any constraints that may apply. This can include setting goals, identifying key players, and assigning tasks or responsibilities for implementation of the plan.

  • Evaluate outcomes using metrics as well as qualitative methods such as interviews with stakeholders, surveys of customers or focus groups with employees and suppliers.

A solid supply chain strategy can help you in three key areas

Reduce costs-

A well-thought-out supply chain strategy will help your company reduce its purchasing costs by ensuring that the right product is purchased at the right time, and in the right quantity, from the appropriate source. The result? You pay less for products and services, which means more money left over for important things like employee bonuses or growth initiatives.

Improve customer satisfaction

By improving your ability to anticipate customer demands, you can also improve their level of satisfaction with your service as a whole—and thus gain further market share over competitors who aren't as organized when it comes to ordering new products and keeping them on hand for customers' needs! This is good news for everyone involved because higher sales numbers mean better revenue streams than before.

Improve inventory management

A solid supply chain strategy allows businesses to better manage their inventory through careful planning based on historical data trends related specifically back toward production capacity thresholds established during earlier stages such as “what kind of product do we need?" How many units will go out? When should they go out? In order words - how long should each phase last before moving onto another phase?

A Supply Chain Strategy Right for You

It's critical to develop your supply chain strategy as part of a clear business strategy that takes into account all relevant aspects of your organization. When done correctly, the result will be a supply chain that is optimized for both cost and value, allowing you to better meet customer needs.  

Need help planning or executing your supply chain strategy? Contact us with the link below and we'll be happy to assist you!

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