Understanding Supply Chain And Logistics Strategy are crucial to properly implement it. Supply Chain Management also called ‘SCM‘ that allows businesses and companies to build, develop and execute the process of efficient flow of – Suppliers, Manufacturers, Distributors, and Customers.
So, that the production and distribution are achieved cost-effectively.
It’s much more difficult than it sounds. Most of the supply chain and logistics businesses and companies around the world face the situation and struggle to achieve success a top-level supply chain and logistic management.
To accomplish the mission of building the supply chain and logistics strategy and implementing the process which is a challenging task. Any supply chain and logistics company can consider the basic SCM Strategies as well logistics strategies into consideration and implement them into their business process
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Before going deep dive into understanding and building Supply Chain and Logistics strategy for the industry, you need to separate the ‘Supply Chain‘ And ‘Logistics‘. Because if you’ve been in this field for while, then you are well aware of both as a distinctive entity.
And also this is going to enable you or the marketing team to build proficient strategies for both.
A logistics strategy basically means finding the most efficient manner of distributing goods across national boundaries or international boundaries, along with maintaining a higher level of integrity and services.
Talking about SCM Strategy or Logistics Strategies, it is important to keep in mind is that there can be several strategies to incorporate the process of supply chain and logistics.
But introducing the marketing team to study the supply chain and logistics process, to derive what works best for the company. And how anything in a business can be achieved efficiently.
Supply Chain And Logistics Strategy are highly influenced by several factors. So, keeping in mind all those factors is really important and beneficial to make good strategies, that work.
What are those factors that influence the supply chain and logistics strategies in a business?
Make sure you’ve acknowledged all the factors that generally influence the supply chain and logistics strategy in the industry. I’ll be certainly writing a separate post about it. So, you may like to subscribe.
Why do so few businesses have a supply chain and logistics strategy?
This hasn’t changed much over the last 20 years. It’s really frustrating to see so many SCM & Logistics businesses that struggle to put a supply chain and logistics together but it’s not that hard.
What I’m going to show you in this blog – is how to put a Supply Chain And Logistics Strategy together and really quickly?
In this blog, I’m going to race through this, there’s quite a bit of content but it is going to be enough here for you to actually put working SCM strategies.
Understanding Big Gap In Supply Chain And Logistics Strategy
The best way to understand and come across a really balanced supply chain and logistics strategies are to put the effort into finding a big gap in supply chain and logistics strategies because that’s where everything starts.
The executive team actually worked out the vision of the mission and the objectives for the business and they know exactly what’s happening. The senior executive person who does the product picking in the warehouse really understands that’s happening and that’s the big ga[p in supply chain strategies
People you know, develop it way up here and it’s very conceptual and it’s hard for people to understand lower down in the organization.
Importance Of SCM And Logistics Strategy
A lot of businesses are burning money in the supply chain without having a well-explained and implemented supply and logistics strategy. There was a study done years ago that actually identified that glitches in the supply chain.
The found glitches caused an average fall of 8.6% in shareholder value.
So, you know a strategy is so important to keep people focused on doing the right things so that you don’t get these supply chain glitches.
And you might be surprised that, in the recent repeated survey, those results have been the same over about the last twenty years or so.
We ask people does their business has a supply chain strategy and if you don’t.
Do you think it impacts your business performance?
If we look at only these charts below, only thirty 9% of businesses actually have supply chain strategies.
Documented people understand it and of all of those people who don’t have one guess what 65%.
Yes, that’s 65% believe that impacts the performance of their business well put one together, it’s not rocket science.
Supply Chain Management Model
So there’s a couple of tips that I’ll share this you on putting a strategy together in your business, regardless of how big the corporate is. You can implement these strategies in your business too.
Components Of The Supply Chain
We’ve got three interlocking circles in the image above –
- The Strategic
- The Financial
- The Service
And why is that so important?
Well, these circles interlock, you see if we get,
The Strategic aligns with The Financial. Then we get very happy shareholders.
If we get The Service aligns with The Financial, then we get very happy customers.
And if we get The Strategic and The Service alignment right, we get a happy team because they know what they’re supposed to be doing.
I’ve just simplified it by putting three things against each of these elements of the strategy in terms of the business strategy.
And then on the service alignment of these 3 things, to focus on having customer service policy and inventory policy, having a good planning process, and making sure that we have good inventory management practices are in place.
So, we can have a list of 50 things that you have to get right in the supply chain but I reckon those three interlocking circles with 9 elements around. If you get those right, not only will your supply chain actually be known in the best of best which is the top 20% of performers?
But we see amongst many companies if they get this right there in the top 2%. So the simple way that I used to explain this, that you have to start from the top view work down, and come up with three simple objectives for your supply chain.
- How do we decide on those three objectives?
- What are the organizational objectives?
- What are the business objectives?
- What does the business expectations of our supply chain?
And When I’m helping clients, businesses, and companies to put supply chain strategies together I actually start with the senior executive team and go around and understand what the business strategy is and what they expect of the supply chain, and what they believe the supply chain performance is like and what they’d like it to be and so with that overarching business objectives.
It’s not then too hard to drop down a level and work out.
Tips In Creating Objectives Before Building Supply Chain And Logistics Strategy
What should be 3 supply chain objectives?
Now, I’ll give you a tip here, there’s generally one around cost. There’s generally, one around service and there’s probably one around quality.
Three objectives should be enough for most businesses. Now the trick here is to articulate these objectives in such a way that they’re really leading four to the concerned individual who’s picking the product in the warehouse.
It shouldn’t be something too conceptual so let’s think about the cost for a moment. What could we have as a simple objective around cost?
It might be the lowest total cost always. What could we have as an objective around service? Think about that for a moment – What does that mean to people working in the supply chain? If I’m working in inventory, it means I have my immature accuracy right. I’ve got to get the cycle counting right if I’m working in procurements or inventory management.
I’ve got to make sure that we’ve always got the right amount of stock if I’m picking in the warehouse or dispatching. I’ve got to make sure that the orders are always 100% in the fall, so coming up with this little sort of catchphrases around the objectives really articulate the purpose behind them. So, important for people’s rights.
You know up and down the organization to fully understand, so step one is to come up with those three objectives so here.
Tactics That Works In Supply Chain And Logistics
I’ve got some examples always in stock lowest prices and the quality products. Once we’ve done that then we can start developing the tactics.
Now what I see, so many businesses and companies are without using properly tested strategies.
- We need a new transport management system.
- We need a new warehouse management system.
- We need to make new warehouses.
Why do you need to work out the objectives first and then if those
things actually directly support achieving those objectives then they make sense but otherwise, they don’t so?
That’s why we’ve got to start from the top, so always in stock.
What sort of things. What sort of enablers or initiatives do you think we’d have to focus on making sure that we’re always in stock with great inventory management sales and operations planning.
There are three things that we might focus on. What about the lowest prices? If we want the lowest prices for our customers what do we have to focus on?
We have to buy well so when we’re buying the product in or manufacturing it, we’ve got to make sure that we get that price down.
We’ve got to have the movement through the supply chain at as a low cost as possible. What matters from a tactical perspective and then of course the final thing is that, once we’ve developed the tactics.
It’s time to develop a measure.
How To Measure Your Supply Chain And Logistics Strategies Using KPIs?
KPI are ‘Key Performance Indicator‘. Every strategy has some kind of KPI.
In supply chain and logistics, you don’t need hundreds of KPIs to monitor performance. You probably need under each of those objectives maybe three.
So let’s think always in stock and what might be the KPIs that we measure.
If you’re a retailer you’d be measuring on-shelf availability or will
you are counting gaps in the retail shelves. You’d be monitoring your
availability in the warehouse. You’d be monitoring your supplier performance in full on-time delivery.
So, again it’s all aligned if we’ve got an objective of always being in stock. Then we need to have some enabling processes and technologies to make sure that we’re doing that and we’ve got to measure the right things to ensure that we’re achieving that as well.
So, look in a nutshell that is how simple it is to put a supply chain strategy together.
It’s not difficult you can do it on a page, so I hope that’s been helpful to your supply chain and logistics business.
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