The Basics of Strategic Supply Chain Management

The entities in your supply network that are linked together in the chain fit into one or more of the following categories:

·         Suppliers

·         Vendors, consultants, and internal teams

·         Warehousing

·         Logistics

·         Fulfillment

The part of the supply chain people think about the most is purchasing and shipping, but every aspect of product development is a part of the chain. If a step provides resources or adds value, they are part of the chain. The most common functions in the supply chain are product development, marketing, operations, distribution, finance, procurement, and customer service.

Sometimes, these entities are companies or consultants you hire.

Sometimes, they are people or teams within your own company.

The important thing to remember is each of these links comes together to get your product produced and sold. Supply chain planning involves finding the proper entities, setting priorities for procurement, tracking their progress, monitoring supplier performance and making improvements along the way.

6 Types of Supply Chain Strategies

The good news is that almost every one of the supply chain strategies out there fits into one of the six basic types:

1. Efficient Flow

For products with steady and predictable demand, you want to use a strategy where everything works together and all pieces of the supply chain work at the same speed to deliver the product at the required time to the right place.

Inventory management and demand forecasting are critical, and if done right, your inventory levels are always at the right level. You communicate up and down the network constantly. Vendors are chosen because they collaborate well with everyone in the network, building partnerships up and down the chain. You make enough to stock what customers want.

This approach prioritizes customer value, especially availability.

2. Efficient Cost

This is where you maximize the price at every step. The bottom line is in charge. Go with the low-cost provider, manufacturing, and logistics. Change the design to lower the production cost. Price is number one in your market, so you focus on that at every point. You make as many products as possible at one time to keep costs down, so forecasting is critical.

This approach prioritizes cost savings.

3. Efficient Speed

Use this agile supply chain strategy when time to market and adding product variation are critical for your industry. Supply chain costs are less important, and the ability to quickly change your product, manufacturing, and shipping dominates your decision on who to work with. You may work with multiple vendors to optimize scheduling.

This approach prioritizes the schedule.

4. Responsive to Customization

This approach is the way to go if you have a product that requires customization or customer configuration.

You pick your vendors by their ability to deal with unique, low-volume production. They should use automation and advanced manufacturing to integrate customization efficiently into the manufacturing process. The cost is higher, but customer value is high as well. Standard parts are kept in inventory, so customization is quick.

This approach maximizes the ability to customize your product.

5. Responsive to Demand Fluctuation

In industries with variable demand, you want a strategy that allows you to speed up or slow down the entire supply chain quickly and efficiently. This strategy often carries more inventory at every step, so you can spool up fast. Your vendors need to be able to work with short lead times.

This approach maximizes the ability to scale up and down with the market.

6. Responsive to Customer Problems

You use this last strategy when customers look to your products to solve their problems. Customer satisfaction is about doing what other providers can not. Demand is unpredictable, but when customers need what you have, they need it now and they need it with unique features. You don’t make anything until you know exactly what they want. Design and manufacturing work hand-in-hand. You work with vendors who are fast, responsive and communicate clearly. Instead of inventory, you build up capacity.