Building Blocks of Supply Chain Strategy

Supply Chain

Supply chain strategy as a competitive weapon

In today’s rapidly evolving business landscape, developing a robust supply chain strategy is critical in order to be able to serve your customers better and faster than your competitor. Even though it has become important to ensure that supply chain strategies are not rigid and have flexibility to evolve, the core of any supply chain strategy should always align with certain core aspects/building blocks.

At the core of any supply chain strategy, there are ten building blocks

Each company has its own supply chain strategy, based on its business model, industry dynamics, etc. However, at the core of every supply chain strategy, there are certain key dimensions. As mentioned earlier, in today’s rapidly evolving business environment, your supply chain strategy also needs to evolve. In order to determine the direction where should your supply chain strategy needs to go, you need to be aware of the dimensions impacting your strategy.

We will go through these building blocks in three levels:

Level 1: Strategic

This level has only one element, which is the most critical one – Customer value alignment. The key questions here are:

(1) What would be the supply chain structure and capabilities that will be required to meet customer service needs in an optimal way?

(2) How can you leverage your supply chain to create value for your customers, partners and your organization?

Level 2: Structural

There are two key elements in the structural layer of a supply chain strategy:

(1) Network optimization: What should be the best supply chain network configuration to meet channel and customer service requirements?

(2) Channel design: What level of operational integration needs to be achieved among the channel members?

Level 3: Operational

(1) Sourcing, production and inventory management: How should the company source inputs, manufacture products and deploy inventory to match supply and demand at the right cost?

(2) Facilities and Transportation operations: What type of distribution and transportation will optimize service, investment and cost?

(3) Integrated Planning: What is the most optimal and best in class way to plan end to end Supply Chain operations in collaboration with all the partners?

Level 4: Foundational Supporting Elements

(1) Technology: What type of technology infrastructure is needed to manage and plan the end to end supply chain?

(2) Processes: What processes and procedures need to be in place for flexible, effective operations?

(3) People: What type of skills, capabilities and organizational structure are required to achieve service and operating objectives?

(4) Performance Management: What infrastructure, measures and incentives need to be in place to ensure ongoing peak performance?

The Bottom Line

Supply chain strategies should not be rigid. The flexibility to evolve, as business landscape evolves is extremely critical. The building blocks/elements are the basis for the strategy and you need to evaluate your strategy against these elements regularly to ensure that you are operating a best in class Supply Chain.