What is Supply Chain Strategy and Strategy Formulation?

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

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 supply chain strategy" by J. Pual Dittmann.

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, the strategy should be a plan that takes many years to implement 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 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 of 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 the supply chain management area changes more rapidly, so we should track the technology outside the supply chain world too.

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 agreed upon so people can take action and make decisions in the same direction.

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

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Last review and update: August 29, 2018
About the Editor
Ben Benjabutr is the editor of SupplyChainOpz. He holds an M.Sc. in Logistics Management with 10+ years of experience in various functions in supply chain magement. In his free time, he enjoys reading business and management books. You can learn more about him here or connect with him via Twitter, and Quora or drop him a line via e-mail.