How to develop a supply chain strategy
What’s a supply chain strategy?
A supply chain strategy is a roadmap that highlights how a company gets its products to customers. This strategy aims to reduce costs and speed up the process by optimising every phase of the supply chain, from sourcing materials and manufacturers to managing logistics and delivery.
There’s no one-size-fits-all strategy when it comes to supply chains. The steps you take and the touch points you need to optimise depend on your:
Creating and executing a supply chain management strategy will help you oversee the movement of products throughout the cycle to maximise profitability.
Why do businesses need a supply chain strategy?
Increase customer satisfaction
Supply chain management is crucial for optimising price and delivery and meeting customer expectations.
Reduce material costs
Researching suppliers as part of your strategy can help you find the best prices on materials and products.
Supply chain planning improves operations by standardising repetitive procedures.
Keep up with demand
Having an in-depth understanding of your supply chain will help you plan for and respond to spikes in demand.
Optimise your top and bottom lines
A supply chain strategy helps you avoid stock shortages and over-forecasting demand.
Reduce risk and disruption
A comprehensive overview of your supply chain will help you foresee and avoid potential disruption.
What are the 3 phases of supply chain strategy?
During the design phase, companies should identify their strategic objectives and KPIs. It’s a good time to review your supplier database and decide what kind of software might help optimise your supply chain.
To get started, ask yourself:
What’s working well in the supply chain?
Where are the biggest problems (or potential problems)?
What do we want to achieve or improve within the supply chain?
If you have access to big data, use this to analyse each part of the supply chain and highlight areas of improvement.
Once you know what you want to achieve, it’s time to plan how you’ll get there. There are four key areas to think about during this phase:
Make sure all stakeholders participating in the planning process can easily share information. An integrated system that tracks information in real-time keeps all stakeholders in the loop.
When planning the logistics of your supply chain, consider factors that could affect delivery — for example, the location of the supplier, or market instability in the supplier’s home country.
Use real-time data to build smooth operational processes. Respond to peaks and troughs in the supply chain by using the information you have to understand demand. Effectively managing your operations will keep inventory levels lean and provide a buffer in the event of disruption.
It’s a balancing act trying to determine what to buy and when — get it wrong, and you risk under or over-stocking. It helps to use demand forecasting software to monitor stock levels in real time and automate inventory management.
Supply chain management outlines how you execute your supply chain strategy. It’s the actions you take to optimise and improve each stage of the chain, like:
coordinating and communicating with suppliers
implementing inventory checks to meet customer demand.
Regularly review your supply chain to identify any new inefficiencies or bottlenecks, and stay on top of trends, issues and seasonal fluctuations.
What are the key steps in a supply chain strategy?
1. Forecast demand
Forecasting demand is crucial to understanding how much stock you need to meet your customers’ needs. This is integral to keeping the rest of your supply chain flowing smoothly. To accurately forecast demand, you can look at:
historical customer behaviour
projected sales compared with actual sales
current market conditions.
Use predictive analytics to get hard data on a product’s demand before estimating the internal demands at each stage of the supply chain.
2. Source supplies
Find trusted sources for the materials, components and software you need to make your products. Your supply chain strategy should include a clear list of specifications and standards for suppliers, plus an efficient way to order from them.
3. Manage production
Once you’ve sourced your materials, it’s time to plan the production process.
You should consider:
what machinery you need
staff numbers and capacity
how much you can realistically produce in a certain timeframe.
4. Oversee inventory
How you manage your inventory can mean the difference between a well-oiled supply chain and a malfunctioning one. Plan how you’ll keep stock at an optimal level. It’s helpful to implement an inventory management system to determine the performance levels of products in real-time and trigger reorders when necessary.
5. Determine pricing
Pricing must balance profitability and competitiveness. It hinges on supply and demand and constantly needs reviewing to ensure it reflects the current market rates. Consider how you’ll track, manage and change prices to reach your goals. For example, you might implement price cuts or discount codes during periods of low demand to stimulate growth.
Any minor glitch in the supply chain can cause huge problems further down. Identify where potential issues might arise. Look for supply chain risks at every stage and develop backup plans for each.
7. Integrate business planning
Business planning connects your supply chain strategy with the rest of your business goals and ties it to your sales and operations. It provides a big-picture view of what’s going on in your business. You can use predictive analytics to see how it fits together.
Software to help organise your supply chain
With MYOB's inventory management software, you can get control of your stock and gain insights into your supply chain to inform your strategy and reduce or eliminate expenses.
Principles of supply chain management (SCM) for beginners
Demand forecast: a beginner's guide
How to choose the best inventory management software