Supply Chain Excellence: Series 4 – Supply Chain Strategy by Vishnu Rayapeddi

The 4 elements of supply chain strategy:

1. The industry framework (the marketplace)
2. The organization's unique value proposition (its competitive positioning)
3. The organization's internal processes (supply chain processes) and
4. The organization's managerial focus (the linkage among supply chain processes and business strategy).

Align the Supply Chain Strategy with the Business Strategy

Most companies develop a supply chain strategy after the business strategy has been defined. While this approach can deliver some value, it does not support the infusion into the business strategy development of very powerful supply chain model options, which could significantly improve the business strategy. A supply chain strategy should always support the intent of the business strategy

Developing a Supply Chain Strategy

In his book, Supply Chain Transformation: Building and Executing an integrated supply chain strategy, J Paul Dittmann lays out a nine-step plan for building a supply chain strategy as below:
1. Start with customers' current and future needs
2. Assess current supply chain capabilities relative to best in class
3. Evaluate supply chain "game changers" (what megatrends will impact customers and the supply chain?)
4. Analyze the competition
5. Survey technology - what is new in the market and would it help if deployed?
6. Deal with supply chain risk - risk management needs to be part of the strategy document
7. Develop new supply chain capability requirements and create a plan to get there
8. Evaluate current supply chain organizational structure, people, and metrics
9. Develop a business case and get buy-in

Executing Supply Chain Strategy

Fortune Magazine reported in a study that CEO strategy failures (estimated 70%) occurred primarily because of failure in execution, not with the vision and strategy development. “The real problem isn’t the high-concept boners the boffins love to talk about. It’s bad execution. As simple as that: not getting things done, being indecisive, not delivering on commitments.”

Performance Management

Execution involves closely following your implementation plan and applying good project governance. You can improve your chances of success by managing performance throughout implementation and beyond. Tracking performance allows an organization to measure how successful it is in realizing the goals of a strategy. It also makes people understand their contribution and responsibilities, creating a more cohesive, in tune, organization.

Performance management works best when people are rewarded for their performance and reporting is conducted on a regular basis. Moreover, performance goals should be used to communicate business expectations to outside entities as well. The more the extended supply chain is involved, the more the supply chain strategy is supported and reinforced.

Iterate the Cost – Benefit Evaluation Process

On a periodic basis (annually) you should formally revisit your supply chain strategy. Did you meet the goals of the business strategy? Have the needs of your supply chain partners changed? How has the industry changed i.e., new competitors, business practices, products, technology? At this time, you may even want to reassess your supply chain organization, if the changes are significant enough to warrant it. Also, use this effort to look for new opportunities to further position your organization for success.

Keep Communicating with Your Partners

Executing a supply chain strategy means dealing with many different entities, both internally and externally. Just as it is crucial to align the supply chain strategy with the business strategy, it is equally important to execute in a manner consistent with these different groups or stakeholders.

The goals of your supply chain components and those that you deal with must be similar and conducted at the same speed. Your organization may be able to move at speeds other supply chain entities are unable to maintain, resulting in misalignment and poor efficiencies. And some of your supply chain partners may not have the resources to commit to realizing these goals. Good communication can keep the extended supply chain in sync.

This article is written by Vishnu Rayapeddi, a Lean Manufacturing & Supply Chain Operations Specialist, who works as a volunteer Executive Committee Member of NZPICS, the only Premier Channel Partner of APICS in New Zealand. NZPICS Offers the following courses in Supply Chain in affiliation with APICS: CPIM (Certified in Production & Inventory Management, CSCP (Certified Supply Chain Professional) and Principles of Operations Management, which is a fully customisable solution to businesses. For further information, please visit www.nzpics.org.nz or call on 09-525 1525.