What Is Supply Chain Strategy?

With a growing global market and more complex supply chains, it is more important than ever to ensure that your company has an effective supply chain strategy. To do so, you must balance efficiency and resilience, as well as create a strategy that aligns with the overarching goals of your organization. So what, exactly, is supply chain strategy, and why should you worry about it?

A supply chain strategy is a formal approach to optimizing operations, meeting customer expectation goals and managing relationships between your organization and suppliers. Strategies can also have multiple goals that may include reducing costs and maximizing profits by creating more efficient processes and improving the customer experience. How your company receives goods and gets them to your customers plays a significant role in the overall reputation and success of your organization. With a clear strategy, you can enjoy an efficient supply chain and meet your company’s forward looking goals. 

Why Is Supply Chain Strategy Important?

As the global market becomes increasingly complex and consumer demand becomes more volatile, your strategy is critical to keeping your customers happy and ensuring that your company stays ahead of the competition. When you have an effective supply chain strategy, you can better overcome any disruptions in the supply chain, no matter how big or small and no matter what causes them.

It is important to set clear goals, align with executive leadership and then determine what measures will help you reach those goals. Some of the most prominent goals of a supply chain strategy are to reduce costs and improve customer experience. This can be done with faster delivery times and greater efficiency throughout each stage. 

A good supply chain strategy should address how to improve responsiveness, how to build a good network of suppliers, how to fulfill high demand, and how to drive financial success.  Improvement in each of these areas can help your organization respond to changes in demand or problems that arise within the supply chain. 

What to Consider When Developing Your Supply Chain Strategy

Supply chain strategies can and should be tailored to your company and its business goals for optimal effectiveness. When developing a strategy, you should first determine what you want to achieve. Most supply chain strategies focus on either efficiency or responsiveness.

Efficiency-oriented strategies are best when you are working to optimize your supply chain operational spend. If this is the focus, you should concentrate on lowering the expense of your operation and moving packages to your customers or retail locations at the greatest cost value. On the other hand, responsiveness-oriented strategies are most effective when an organization focuses on the customer and ensuring that customer demands are met within your supply chain. If you take this approach, you may choose to compromise on expense for the sake of meeting customer expectations with the end goal of increased revenue. Creating a balance between both an efficiency-oriented and a responsiveness-oriented strategy can be effective for an organization. 

No matter the approach you take, understanding your current supply chain makes a considerable difference. Looking at your current operations to see what is working well and  identifying any problem areas will help you address them in your strategy. Once you understand the state of the existing supply chain, you can more confidently and effectively develop a strategy to help your company meet its business goals.

How to Create a Supply Chain Strategy

Creating a supply chain strategy that will meet the needs of your company can be summarized in five steps. 

Step 1: Discover & Gather

Gather data on your current operating process to aid in identifying warehouse constraints, network capacities, and more. Inbound receipts, orders, outbound shipments, operating financials, growth forecasts, inventory positions, and facility capacity levels are a great place to start and will provide visibility to power your new strategy. You need to be able to see where you are so you can discover the best path to improvement. 

Step 2: Analyze

Analyze the data you’ve collected to create a baseline network model that will show how your existing network performs. Breaking the information you’ve collected down to a granular level allows you to see how your network is performing and identify where you may be losing time and money as well as opportunities. 

Step 3: Design

Using your baseline model as a starting point, design future scenarios to show how your company can scale as you grow or change nodes in your fulfillment. Decide on core objectives and KPIs that will drive the rest of your strategy. This means looking at different fulfillment options or potential providers and choosing those that offer the best selections for your goals. Geoprofiling your data will help you see where your facilities should be located. Keep an eye on what systems you may need to operate your supply chain and provide visibility to its performance.

Step 4: Plan

During planning, your company should determine which of the scenarios will help you meet your goals in the best possible way. Making data-backed decisions will help you implement a strategy built for success. Plan out the steps you will take to put the new process in motion, along with a timeline for completion and metrics to watch for that validate your improvement. 

Step 5: Execute 

This is where you implement your plan. Be sure to continue monitoring the process after you execute your strategy to catch any potential problems and make adjustments as needed.

How to Optimize Your Current Supply Chain Strategy

If your current supply chain is relatively efficient and does not need a complete overhaul, you may consider optimizing your current network or systems. In order to do so, you will still need to gather analytical data to identify opportunities for improvement.

Incorporating data analytics software into the process will help you see your processes more clearly and identify areas that can be improved. Making use of the modern advances in software technology will help you mitigate risks and protect your profit. 

The appropriate software will help you build a supply chain strategy to take your supply chain operations to the next level. Making day-to-day operational decisions and creating long term plans will be easier with an appropriate supply chain data analytics tool. With real-time data, you can gain insight necessary to create a more effective process and minimize supply chain disruptions. Streamlined and efficient processes can ensure the smooth fulfillment of orders, all with reduced costs to you.

How Summit Advisory Team Can Help

Creating and executing an effective supply chain strategy can feel overwhelming if you don’t know where to start. You must understand the current state of your supply chain, find what is working and where improvements need to be made for the best results. If you aren’t sure whether you should focus on efficiency or responsiveness, the team at Summit can answer your questions and help you find a solution tailored to your needs. Get started with your supply chain strategy by contacting The Summit Advisory Team today.