What is a supply chain strategy and the factors affecting it?
Strategic supply chain management or supply chain management is described as a plan for how the supply chain will operate in its environment in order to achieve the business and organisational goals. Some words, such as “strategy” and “strategic,” have a magical quality to them. When you add the word “strategic” to the name of any business process, it instantly takes on a new level of significance. Simple objectives do not scream to be met in the same way that strategic objectives do. The term “strategic planning” sounds far more sophisticated and powerful than “planning.” There’s a reason those words carry so much weight behind them. The way generals mobilise all available resources in pursuit of victory is referred to as strategy. All games are won by strategy.
In the corporate world, it’s the same. Each firm has a business plan that outlines how it intends to compete in the marketplace. Because supply chain strategy, like military strategy, necessitates the marshaling and organisation of all available resources, it’s evident that a company’s supply chain may be its most valuable strategic asset. The most potent approach to get an advantage on the competition, to move quicker, offer more value, and be more adaptable in the face of both constant change and surprises, may just be designing and creating the proper supply chain, one that promotes the business strategy. The supply chain strategy is a complicated and growing tool that businesses use to set themselves apart in the race to create value for their customers and investors.
The business strategy of a company or organisation determines its pathMusing different types of supply chain management. These days, companies utilise mission and vision statements to clarify their goals. The direction and fit will be off if these methods are not coordinated. All three tactics are interconnected and reliant on one another.
Understanding Strategic Supply Chain Management
Regardless of the company’s strategy for satisfying consumers, growing, competing, organising itself, and making money, the supply chain strategy for startups must support those objectives. For example, if customers are demanding dramatically discounted pricing on durable, high-volume items with predictable demand, a supply chain strategy that aggressively invests in obtaining lower-cost components from emerging regions would be on track to meet that aim. Because acquiring machinery requires a large capital investment, low-cost sourcing is probably the best option for this plan. Lower labour costs might help cover the investment costs. However, because the expensive cost of equipment is offset by decreased labour expenses and improved income, you could consider investing in it. (It is conceivable for a company to invest in automation while also relocating to a region with lower labour expenses). This selection would be based on factors such as volume, payback duration, and product life cycle. The supply chain strategy for startups is generally influenced by four factors:
- The value proposition of the company
- Internal mechanisms for making decisions
- Business objectives
As the global market gets more complicated, each company that converts raw materials into completed items must have supply chain strategies for startups ahead of time. Manufacturing, retail, construction, and wholesale or distribution are all examples of this.
4 supply chain strategies for startups for 2022
- Strategic placement of buffers: For optimally strategic supply chain management, buffers should be strategically placed across the supply chain to assist firms absorb the effects of unanticipated delays. You may use three different types of buffers in your supply chain:
- Inventory: To defend against delays or demand surges, have a safety stock or buffer stock on hand (this is the most common buffer since inventory can be easily tracked and controlled in real-time with inventory management software).
- Materials come ahead of schedule to safeguard an upstream or downstream process or delivery point.
- Utilize underutilised space, such as warehouses or industrial facilities, as a capacity buffer.
- Diversify your production and sourcing networks: As supply chain disruptions have become more common in recent years, procurement directors have realised that depending on a single supplier for items is dangerous. Natural catastrophes in Thailand and Japan, for example, stopped nearly-completed automobiles from being delivered overseas in 2011. Diversifying your network (also known as multisourcing) begins with classifying partners based on two criteria: current cost and financial effect if a partner fails to deliver due to unanticipated circumstances. Then you may form partnerships with new suppliers or a provider with various locations’ capabilities.
- Invest in demand forecasting: Demand forecasting is the practice of estimating material demand ahead of time using facts rather than gut impressions, so you don’t run out when it counts most. Demand forecasting accuracy reduces lead times, lowers costs, and boosts customer satisfaction. Consider it like your weather app: you know to bring an umbrella and dry clothing if there’s a probability of rain. Are there additional things to lug around? Sure, but you’d be disappointed if you ignored the weather report and ended up being drenched. Customers may be surveyed, social media can be monitored, historical data and trends can be reviewed, or a consultant can be hired to help estimate demand.
- Standardize your processes: The more reliable your supply chain activities are, the more consistent they are. This is especially true for businesses with suppliers and manufacturers located all over the globe. Templates for platforms, goods, and facilities ensure that manufacturing runs smoothly and that laws are followed. To coordinate their supply chain strategy, organisations in the automobile sector, for example, employ common vehicle platforms.
Benefits of a resilient supply chain strategy
- Improved productivity: Supply chain management executives enhanced their productivity as a result of robust supply chain systems, according to a McKinsey report from 2020. Furthermore, 93 percent of respondents intended to improve supply chain resilience by implementing measures such as multisourcing and increasing inventory levels.
- Less risk: There is no such thing as a supply chain that is “risk-free.” Supply networks are inherently sensitive to forces beyond the control of the company due to their complexity. Incorporating the following tactics into your planning process, on the other hand, can increase sustainability and reduce the impact of interference if and when it occurs.
- It’s a gateway to innovation: In supply chain management, when supply chain risk is reduced, executives may focus on other parts of the business, such as new technology and automation. According to a 2020 worldwide business research by Brian and Company, organisations that prioritise supply chain resilience increased output capacity by up to 25% and reduced product development cycles by up to 60%.
- The techniques employed to create competitive advantages are mirrored in the advantages themselves: When an organisation can provide the same benefits from a product or service at a lower cost than a competitor (low cost advantage), deliver benefits that exceed those of a competitor’s product or service (differentiation advantage), or create a product or service that is better suited to a specific customer segment than what the competition can offer (differentiation advantage), it has a competitive advantage (focus advantage). Superior value generation for the business and its clients is the outcome of this competitive advantage. If this advantage is properly deployed and advertised, profitability and market share should improve.
The main purpose of strategic supply chain management is to provide goods and services to consumers when they want them, at a competitive price, and in accordance with the organization’s and extended supply chain strategies. The firm, or a product line, may cease to exist if the supply chain fails to properly execute this supply chain strategy.