What is Supply Chain Strategy and Strategy Formulation?

What is supply chain strategy? We will show you 7 attributes of a solid supply chain strategy and supply chain strategy formulation tools you can use.

What is Supply Chain Strategy?
Based on strategic management thinking, strategy consists of 3 levels of planning, namely, operational planning (day-to-day operations), tactical planning (one year plan) and strategic planning (long range planning). Anyway, we've found that lots of people in supply chain management can tell the difference between short term and long term planning. For example, managing daily delivery is considered a supply chain strategy for many people.

As a result, we would like to explain what supply chain strategy really is.


Supply Chain Strategy


1. It's a multi-year roadmap
When people talk about strategy, they often say something like,
"We want to reduce costs by 5%" or "we will do whatever it takes to achieve 95% service level"

However, Merriam-Webster dictionary defines strategy as,
"A careful plan or method for achieving a particular goal, usually over a long period of time"

So, supply chain strategy should be a plan that takes many years to implement to achieve a long term business results, not just a set of "KPIs".

2. Start with customer needs
We believe many organizations incorporate customer satisfaction survey into a supply chain strategy formulation process which is a very good sign. Anyway, current customer needs may not be enough. We should try to anticipate the future needs as well.

Another point about customer needs is that people in the supply chain function should try to "go see" customers so we can have a better understanding about the issues that might have the impact on demand/supply and the future of business.

3. Include internal assessment
SWOT analysis seems to be a standard method for an internal assessment. Anyway, you will be able to understand your own deficiencies much better if you do the business process analysis, even simpler one.

4. Think about evolving technology
Technology is the enabler for new process and practice. From my observation, people read news related to supply chain technology so extensively on social media. My question is, do we ever turn the news that we read everyday into something more meaningful like making a summary about pros and cons of each technology?

5. Track domestic and foreign competitors
When your competitors offer some new products/services, these will eventually become the new customer's requirements. Then, we need to track competitors' movement so we can determine what customers might want in the future.

6. Consider megatrends
The technology outside supply chain management area changes more rapidly, so we should track the technology outside supply chain world too.

7. It must be accepted across the company
A good supply chain strategy is not merely the action plans by each functional area, but a plan that is agreed upon so people can take action and make decisions in the same direction.

Supply Chain Strategy Formulation Tools?
To formulate a solid supply chain strategy, you need to use appropriate tools and techniques. The examples are as below,

- Measurement customer requirement using kano model

- Establish supply chain metrics system

- Conduct a supply chain mapping exercise

- Use supply chain maturity model to determine where you are

- Drive costs down via techniques like SKU rationalization or value engineering

- Establish supply chain planning system or sales and operations planning system

- Integrate your supply chain to improve supply chain visibility

- Develop a supply chain risk mitigation plan

- Adopt the lean supply chain principle

- Streamline your supply chain network

- Reduce carbon footprint via green supply chain practices


What else we can do to make a better supply chain strategy?