The Secret to Successful Enterprise Strategy? Always Include Supply Chain Management [Guest Commentary]

In this guest commentary, John McKeller explains four key considerations for successfully integrating a firm’s strategy with supply chain management.

A firm wins in the marketplace by providing better value for customers than its competitors, and achieving that goal starts with strategic planning. At the enterprise level, the strategy is the result of decisions executives make about what to do and not to do. A firm’s strategy is intended to answer some key questions such as: what markets do we serve, who are our customers, and what do our customer's value that we offer. Providing the answers to these questions require trade-offs influenced by supply chain considerations. That’s why merging the development of international business and supply chain strategies is critical. 

Bring the supply chain into the strategy development process.
Although some surveys have shown that many CEOs are unaware or ambivalent about supply chain considerations, internal collaboration must start at the executive level. Bringing supply chain representation into the executive level strategic planning process ensures that the internal collaboration required is directed from the top. It also assures that attention is paid to the resources required for the operations management. In one high-tech medical electronics firm, an executive decision was made to penetrate a new international market with products no other company offered. A supremely confident president announced to the company that “within 18 months the majority of our revenue will come from products we do not yet even make!” Just one problem—there were currently no suppliers capable of producing the required component of those new products.

Communicate and deploy the strategy.
To achieve the goals of the firm’s strategy, the project must be clearly communicated to the team. Each functional area in the firm must align their strategies with that of the overarching enterprise strategy. They must also collaborate (instead of negotiation) in making those strategies synergistic. For example, the design for the supply chain is the best practice among many firms. This starts with the consumer and works backward up the supply chain to look for ways to maximize value and minimize cost. Multiple functional areas must collaborate in both product and supply chain design. For instance, competing in high-end fashion apparel will require a different supply chain strategy than selling cotton briefs. If the procurement function is focused on low-price instead of agility, then there’s no chance for success. The company can also try to adopt a lean manufacturing concept to reduce wastes and improve efficiency.

Create the right metrics and monitor them.
There is no one right set of supply chain metrics, and there will be trade-offs that reflect the needs of the markets and customer service. Align metrics with what is most important to the successful execution of the strategy. This applies to the executive level where KPIs (key performance indicators as in six sigma program) may focus only on short-term financial results, and it’s relevant to functional groups where KPIs may actually conflict. For instance, reducing all forms of inventory to minimize cost is a terrific goal, assuming the procurement, production, and logistics functions collaborate to make it happen without retail stock-outs.

Great strategies need perspectives from across the enterprise. Unfortunately, even great strategies are useless unless they can be executed. Integrating enterprise and supply chain strategies will help ensure better strategies and profitable results.

About the Contributor:
John McKeller is a senior lecturer for the Wisconsin School of Business Grainger Center for Supply Chain Management at the University of Wisconsin-Madison. Before entering academia, He held various supply chain managerial positions with subsidiaries of Ralston Purina, Eli Lilly and Company, and General Dynamics Corporation.

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Last review and update: December 7, 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.