Your business strategy helps you to use your organisation’s core skills to achieve a high-level goal. It helps you to decide what to offer and where and when to offer it. For example, you want to sell boots, and you decide to offer them in high-end department stores in the winter.
Inevitably, you need suppliers to help you achieve this objective – more than one of them in fact, catering for different needs of the business. That constitutes your supply chain, and you need a supply chain strategy to help you map out the best use of these suppliers to get you to your business goal.
Supply chain strategies are very important, even though many SMEs are unlikely to have one in place. A successful supply chain strategy helps to drive down operational costs while maximising efficiency. In doing so, it can help a business to retain a competitive edge. Supply chain strategies help businesses to map out the ‘how’ of their daily business – how they work with suppliers, distributors, customers and even your customers’ customers. With an eye on getting value at every turn, a supply chain strategy can help you to get the best out of each relationship.
By now you’ll realise that you need to put a supply chain strategy in place if you haven’t done so already. You’ll also need to choose your strategy wisely. There are a number of different supply chain strategy models, so how to develop yours?
Ask yourself first: how does your business wish to compete in the marketplace? For example, do you want to be the fastest, or the cheapest? Your supply chain should never stand alone; it exists to serve these business goals. If you want to be a low cost provider, your supply chain strategy must focus on this by helping you to strategically source parts at an equally low price.
Unfortunately most SMEs who have a supply chain strategy develop it after defining their business strategy. This is not the most valuable approach. It’s important to consider your business and supply chain strategies at the same time. Together, they will help you to discern what you can realistically do, and what you can do well. The right supply chain strategy can inform and improve business strategy. By mapping out both strategies simultaneously, you’ll find out pretty quickly whether you’re really able to source cheap parts. Your supply chain strategy will expose any holes in your plan and may direct you towards a better way forward. Both strategies will share objectives, and you’ll be able to identify opportunities to save time and money.
In a changing marketplace, the need to think strategically about one’s supply chain has never been more important. Supply chains continue to evolve and are moving now from a focus on costs to a focus on customers. One thing remains constant though: the fact that the success of a strategy is only as good as an organisation’s ability to execute it well. And when it’s done well, that spells success not just for the organisation, but also for its partners and customers.
By Ioannis Dermitzakis, senior lecturer, DeBroc School of Business