What is a Supply Chain Strategy? – Definition
Supply chain management is the process by which an organization coordinates and optimizes the activities of its supply chain in order to meet organizational goals. Supply chain strategies are created in order to maximize efficiency, minimize costs and respond quickly to customer demands. But what exactly goes into a supply chain strategy? In this blog post, we will explore the definition of a supply chain strategy, different types of strategies and tips for developing your own. Read on to learn more about how your organization can develop a successful supply chain strategy.
What is a Supply Chain Strategy?
The supply chain strategy of a company is the overall game plan for how the company will manage its supply chain in order to achieve its business goals. The strategy includes decisions about which suppliers to use, which products to make or buy, how to move goods through the supply chain, and where to store materials. A good supply chain strategy takes into account the cost, quality, and speed of each link in the chain.
An effective supply chain strategy can be the difference between a company that thrives and one that struggles. A well-designed strategy can help a company save money, improve quality, and speed up delivery. A bad strategy can lead to missed opportunities, wasted resources, and unhappy customers.
A company’s supply chain strategy should be aligned with its overall business strategy. For example, if a company’s goal is to become the low-cost leader in its industry, then its supply chain strategy should focus on finding ways to reduce costs throughout the entire process. On the other hand, if a company wants to differentiate itself based on customer service, then its supply chain strategy should focus on finding ways to improve delivery times and flexibility.
The Three Types of Supply Chain Strategies
A supply chain strategy is a strategic plan that sets the overall direction for your supply chain and provides a framework for making decisions. The three main types of supply chain strategies are Make-to-Stock (MTS), Make-to-Order (MTO), and Engineer-to-Order (ETO).
MTS is the most common type of supply chain strategy and is used when demand can be predicted with reasonable accuracy. In an MTS system, products are manufactured in advance and stocked in warehouses until they are needed. This type of system is appropriate for products with relatively short shelf lives or when customer demand is not very volatile.
MTO is used when there is high customization or variability in customer demand. In an MTO system, products are not manufactured until an order is received from a customer. This type of system allows for more flexibility than MTS, but can result in longer lead times and higher inventory costs.
ETO is used when products are highly customized or made to order. In an ETO system, products are designed and engineered to meet the specific needs of each customer order. This type of system generally has the longest lead times and highest inventory costs, but it allows for the greatest degree of customization.
How to Develop a Supply Chain Strategy
In order to develop a successful supply chain strategy, businesses need to consider a number of factors. This includes understanding the needs of their customers and what they are looking for in terms of product quality and delivery times. They also need to understand the capabilities of their suppliers and how they can best meet the demands of the business. Another key consideration is the cost of goods and services, as this will have a direct impact on profitability. Once these factors have been taken into account, businesses can then start to develop a supply chain strategy that meets their specific needs.
Implementing a Supply Chain Strategy
1. What is the scope of the strategy? Will it encompass the entire supply chain, or just certain parts?
2. What are the goals of the strategy? What does your company hope to achieve by implementing a supply chain strategy?
3. Who will be responsible for implementing the strategy? This is an important decision, as it will determine who has the authority to make changes to the supply chain.
4. How will you go about implementing the strategy? Will you do it all at once, or phased in over time? And what resources will you need to implement it successfully?
5. What metrics will you use to measure success? This is important for setting goals and determining whether or not the strategy is working as intended.
In conclusion, a supply chain strategy is an integral part of any business’s operations. It provides businesses with the necessary tools to optimize their processes, reduce costs and increase productivity. As such, it’s important for companies to develop a comprehensive and well-thought-out supply chain strategy that takes into account all aspects of their operations in order to maximize efficiency, profitability and success.