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Understanding the concepts of Supply Chain Management Strategy

Understanding the concepts of Supply Chain Management Strategy

Q: 1. What are the different levels of supply chain management strategy?

Majorly, the three levels that SCM can be of are strategic, tactical, and operational. Strategic supply chain management works with the entire supply chain processes and networks. It identifies the firm’s long-term strategies by laying out the essential elements. On the other hand, a tactical supply chain management strategy is oriented to work on executing the strategy regardless of its categories which could be logistics, production, or software. Unlike the above two, the operational supply chain management strategy revolves around the day-to-day functions of the SCM. Operational tasks could include production scheduling, forecasting, invoicing, and shipping.

Q: 2. What are the different challenges of strategic supply chain management?

SCM could initially seem to be a complicated process, and executing it could be difficult too. Therefore, complexity will be the primary challenge for the ones practicing it. Some of the other challenges that have been identified in addition to complexity are talent, threats, and increased costs. In terms of talent, hiring intellects with complete mastery over professional industry knowledge can be quite tricky and concerning. Plus, threats come from risks, natural disasters, incomplete planning, and product recall add on to the existing pressure. Apart from these, increased cost and pricing problems due to the constantly fluctuating market in various industries like pharmaceuticals, healthcare, hospitality, etc., pressure suppliers to reduce costs.

Q: 3. Is there a relationship between supply chain and business strategies?

Businesses often know how to separate supply chain strategy from business chain strategy. For instance, every company defines its growth strategy, but on the contrary, it might have undefined supply chain goals. This can turn out to be a disaster for the company and they might have to bear a cost-cutting strategy alongside. Thus, with the right sort of adjustment and balance between the business and supply chain strategies, these hardships could be left behind. The key adjustments you could make would be to increase the volume of the products sold and reserve a large contract.

By Sandeep Pereira

Updated on Nov 25, 2022 | 6 min read | 5.6k views

Table of Contents

Introduction

Supply Chain Management, also termed SCM, revolves mainly around products and supplies originating from suppliers and extending to distributors. Furthermore, strategic supply chain management intends to maximize profit between the various supply chain stages, and thus, to do so, it regulates information and product flow between these stages.

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There are multiple functions in supply chain management like product development, distribution, accession of raw materials, finance, and customer services. Customers play a significant role in SCM.

Supply networks serve the company’s primary objective to maximize the value of deliverables and increase its profits. Value and profit in a supply chain are interrelated. Earnings in a supply chain are defined by the overall revenue generated.

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The different strategies of a supply chain are:

Finding the most suitable location and capacity for the facility.
Identifying the various transportation modes and the primary source from where the information is extracted.
Figuring out the products that need to be processed, followed by locations where you will be storing these products.
Deciding the different activities that need to be performed in the supply chain stages.

Usually, supply chain management projects are time-consuming. Therefore, there is a dire need to plan everything beforehand to manage the company’s time and resources well.

Supply Chain Management Strategy – Understanding the concepts

What is the first thing that strikes your mind when you hear the word “strategy”? From one person to another, the term might have its own meaning; however, the essence of the word remains the same.

If you add the word strategic before any business product or process, it suddenly gains weight and, more so, depicts importance. There are plenty of ways to acquire strategic objectives, and we need to figure them out by following the right approach.

Strategic planning has the upper hand over the traditional planning method. The former is more systematic, powerful, and sophisticated. From a business perspective, strategy is essential to compete in the marketplace. In fact, over 57% of companies believe that strategizing their SCM operations gave them an edge over their peers in the market.

If supply chain strategies aren’t aligned properly, the business model could fall. Therefore, all decisions taken must be linked to one another on a global level. The two different types of strategies are business and organizational. Moreover, strategic supply chain management works on strategic, tactical, and operational levels. Every level operates on its own set of rules designed by them.

Managing a supply chain strategy could be excruciating trouble, and therefore, onboarding and training programs should be updated whenever possible. Development programs should also embed the supply chain strategy process. Since SCM requires a significant amount of time, money, and resource investment and integration, it needs to be made the topmost priority for every business.

Explaining the Different Supply Chain Management Strategy

Defining the right supply chain strategy could always prove beneficial for any business as it further enhances the business’s relationship with suppliers and distributors in the long run.

As a business owner, the four main strategies that you should build your foundation on are:

Total Visibility

For business owners, effectively managing a supply chain is crucial. They need to look after every operation and role and have to follow complete visibility to ensure the same. Additionally, the owners need to extend their attention to product delivery, and movement and ensure that products are delivered frequently.

Postponement

Postponement in the supply chain is by far the best supply chain strategy. The foremost reason to implement this kind of strategy is to minimize cost and magnificently improve the company’s service level. The need for postponement in the supply chain also helps add delays until customer requirements have been accomplished.

Intelligent Automation

Automation in SCM has become an integral part of every business. Nowadays, every business is trying to integrate automation using forklift trucks, drones to deliver products directly to customers, and rapid software to facilitate management. Smart automation is currently the need of every business as it helps in increasing the potential. Furthermore, automation allows flexibility, thus making the process of manufacturing hassle-free. This results in a drastic growth in sales and revenue. Additionally, using automation, businesses can fulfill the on-demand needs of their customer base and manufacture further according to their needs.

Customer-Centric

The following supply chain strategy is entirely based on the customers’ needs, preferences, and interests. To ensure that the customers’ demands are met, business owners must improve their forecasting accuracy related to requests using data science and predictive analysis techniques. To accurately identify demand forecasting accuracy, businesses can use inventory management software to analyze the current trends and demands in sales. The most significant advantage of using this software is how they provide real-time sales numbers and other records like revenue, performance, employees, etc.

Predictive Business

This final supply chain strategy is predictive business. One can never avoid natural disasters such as malfunctions, defective shipments, etc. They are bound to occur from time to time. Hence, to prevent such tragic and unpredictable incidents, businesses can use the latest technology to address these issues as soon as they take place. Using predictive technology, businesses can also draw benefits and have visibility of their products, assets, and equipment.

Conclusion

Implementing, developing, and managing a supply chain strategy is extremely helpful. For some businesses, drafting their supply chain strategy works, whereas for some others, outsourcing it to a third party might. One of the primary aspects that most businesses don’t focus on is “customers.” What your customer wants at any given time should be given the most attention while developing a supply chain strategy that works efficiently.

Furthermore, strategic supply chain management should be both customer-focused and demand-driven. If you struggle to figure out your customers’ desires, supply chain analytics could be a helpful tool. Around 70% of industry experts feel that SCM will be the main reason customer service will see improvement soon.

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