What is Supply Chain Strategy Formulation?

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

What is Strategy Formulation?

Based on strategic management thinking, the 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 strategy for many people.

As a result, we would like to explain what strategy really is, according to the book "Supply chain transformation: Building and executing an integrated strategy" by J. Pual Dittmann.


The 7 Elements of Solid 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, the Merriam-Webster dictionary defines strategy as,
"A careful plan or method for achieving a particular goal, usually over a long period of time"

So, the strategy should be a plan that takes many years to implement the project to achieve 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 customer service strategy formulation process which is a very good sign. Anyway, current customer needs may not be enough. We should try to anticipate 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 international 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 of the 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 purchase in the future.

6. Consider megatrends
The technology outside the supply chain management area changes more rapidly, so we should track the technology outside the supply chain world too like lean manufacturing and six sigma.

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

Do you usually include these elements in your supply chain strategy?


Reference
- Dittmann, J. P. (2013). Supply chain transformation: Building and executing an integrated supply chain strategy. McGraw-Hill.


Last review and update: September 16, 2019
All contents are written by Ben Benjabutr unless marked as [Guest Commentary]

About the Author and Editor:
Ben Benjabutr is the author and editor of SupplyChainOpz. He holds an M.Sc. in Logistics Management with 10+ years of experience in supply chain management. You can connect with Ben via Twitter, and Quora or drop him a line via e-mail.