Just as pilots don’t take off without a flight plan and builders don’t start construction without blueprints, companies shouldn’t operate without a supply chain strategy. Only when this strategy is in place can a business effectively navigate through evolving markets and deliver on customer expectations.
A supply chain strategy is an overarching plan for the planning, design, execution, control and monitoring of supply chain activities. It guides efficient operations and brings about initiatives that deliver on key performance indicators. A supply chain strategy also documents what function handles each supply chain activity, as well as when collaboration is needed; what activities need to happen and when; and how performance is measured.
Supply chain strategy should clearly align to business goals, integrate the various supply chain activities and drive the entire supply chain forward. A good starting point is an industry framework, such as the ASCM Supply Chain Operations Reference (SCOR) model. Note that effective supply chain strategies take a high-level, top-down approach to guide business direction, rather than getting to deep into tiny details.
Best-in-class companies have a unique supply chain strategy for each of their core supply chain functions. For instance, they would have a separate strategy for make-to-stock, make-to-order or engineer-to-order manufacturing, or a strategy for both just-in-time and just-in-case inventory management.
Key Supply Chain Strategy Characteristics
The following qualities and attributes are key to building and executing an effective supply chain strategy:
- Collaborative: All key stakeholders should participate and share plans and data so everyone is well-informed, plans are synchronized, and disruption and risk are mitigated.
- Agile: New opportunities arise every day. A supply chain strategy must scale up or down to respond to changing market demands so opportunities are not missed and so productivity is not wasted.
- Resilient: In an ever-changing market, organizations must be prepared for any and all disruptions. Supply chains must expect problems, create plans to avoid or mitigate them, and recover from them to full functionality as swiftly as possible.
- Digital: A variety of digital solutions can help make your supply chain more connected, controlled and informed. For example, modern enterprise resource planning (ERP) tools orchestrate all supply chain activities and offer real-time information about processes, machine status, inventory and more. The internet of things and its sensors help monitor machine productivity and prepare for predictive maintenance or unscheduled downtime. Artificial intelligence and machine learning automate manufacturing, warehousing, transportation and distribution activities. Big data and advanced analytics give organizations visibility into operations or market conditions so that leaders can make data-driven decisions. In short, let technology do the heavy lifting so you can focus on decision-making and business improvement.
Supply chain strategy at work
Companies large and small can leverage a variety of supply chain strategies to drive improvement and growth. Boeing recently took a collaborative approach to improvement with its supply chain strategy inspired by the ASCM SCOR model. After implementing the SCOR framework and educating employees about the model, team members were able to speak a common language and address supply chain challenges and opportunities across various functions. Within 90 days, the SCOR team clearly defined deficiencies within Boeing’s fighter plans program, mapped them to best practices, and made recommendations for advancement. One of the main benefits of this supply chain strategy was that critical shortages in the program dropped 44%.
In another case, Univar Solutions was undergoing a corporate transformation to unite its operations with those of newly acquired Nexeo Solutions and make the entire organization more efficient. Leaders also focused on agility to eliminate redundancies and unnecessary processes and materials to make room for growth. This first involved leveraging the ASCM SCOR model to improve overall efficiency and increasing visibility by growing a data-driven culture backed by the company’s ERP system. In each strategic SCOR area — plan, source, make, deliver, return and enable — the Univar team focused on consolidating systems and overlapping legacy goods and service contracts to create leaner and more streamlined operations. The supply chain strategy was agile enough to keep this transformation moving during the onset of the COVID-19 pandemic. In boosting its efficiency, the organization achieved more than $100 million in savings from net synergies, priming it for growth and fostering the capability for it to take hold of new opportunities to become an industry leader.
Also during the pandemic, Eaton established a supply chain strategy to become more resilient. Employees were educated about supply chain basics and best practices. Then, they used this knowledge to address disruptions including material and labor shortages and logistics capacity constraints. Some of the supply chain strategies involved strengthening multi-sourcing, increasing supplier collaboration and connecting its end-to-end supply chain.
Finally, Intel leverages digital tools to fulfill its ethical sourcing supply chain strategy. The company created a smelter audit protocol to validate that its tin, tungsten, gold and tantalum are procured from conflict-free sources. The protocol uses radio-frequency identification technology along with bagging and tagging to ensure the ethical origin of the metals.
These and many other organizations use supply chain strategy to provide a sense of operational direction in order to maximize efficiencies, minimize costs and deliver on customer demands. At times, a strategy will need fine-tuning, but a well-prepared and well-executed supply chain strategy will always guide a business toward success.