Organizations need a supply chain strategy as it comprises 50-60% of their overall costs (more in some cases). A good supply chain strategy is a multiyear roadmap that includes the system of people, processes, and activities that it takes an organization to deliver a product or service to clients. It also includes a set of actions related to the supply chain capabilities of your business. The delivery of the finished good or service may include the transformation of resources, materials, and/or components into a product.
Based on various studies, many companies report that they do not have enough time to develop a supply chain strategy. In reality, these companies are spending more time reacting to their business than they would planning their business. The impact of having a supply chain strategy outweighs the reasons companies have for not having them every time.
Creating a supply chain strategy
A good supply chain strategy includes the following:
- Customer requirements: Customer requirements are where supply chains start. Get requirements from clients, flesh them out, and start defining your strategy for meeting or exceeding them.
- How your supply chain stacks up: Asses the capabilities, strengths, and weaknesses of your supply chain. Next, compare your metrics against industry leaders. Perform a benchmark assessment.
- Plan for the future: Organizations must plan for tomorrow, not just today. Anticipate any government regulations, like tariffs, and how they may impact your business. Consider any changes in technology (like Blockchain) that may change the way your organization handles data.
- Know your competition: Identify and keep track of your top three competitors. Your organization’s supply chain should be a competitive differentiator. The ability to meet and exceed service levels, avoid stock-outs, and deliver a quality product are essential.
- Technology: Microsoft Excel will not fully support your organization’s planning needs. Your ERP is a transaction system; it is not an analytical system. With the high availability of SaaS solutions (best-of-breed), organizations can easily justify leveraging state-of-the-art technology to help with automation and decision-making. End-to-end visibility is a must, not a nice to have.
- Risk management: Identify risks to your supply chain, such as natural disasters, product defects, and issues related to politics, competitors, suppliers, and customers. Document and model what-if plans and processes to manage risks should they become a reality.
- Create a future supply chain: Define your organization’s future state. Prioritize which capabilities to tackle first and determine the ROI. Tie all initiatives to cost reduction, inventory reduction, quality improvement, or product availability.
- Plan, set goals, and measure: Once your strategy is in effect, measure the performance of people, processes, and technology. You must measure how the new organization is performing, including how your suppliers are performing.
Make no mistake, what has been described above is not an easy undertaking. It is often a supply chain transformation. Executive buy-in is essential. However, the journey will undoubtedly yield rewards.