If you've ever uttered the words "I can't think about long-term planning today; I'm too busy doing my job!" you're not alone. For supply chain managers wrestling with soaring costs and escalating customer demands, it's all too easy to get wrapped up in the day-to-day battles and forget about the strategic part of the equation. But, if we're to believe the pundits, supply chain management is supposed to be strategic—a differentiator that can set us apart from our competitors in the marketplace.
Is that just a lot of hot air? Not at all. Well, not completely, anyway. The fact is, you do need a strategy. Operating without one is like going to sea without navigation tools: You may end up where you want to go, but it's far more likely you'll end up somewhere altogether different.
But, there's a huge caveat. Those SCM visions, strategies, transformations—whatever the high-flown label may be—cannot stand on their own. They'll prove to be of limited use and less value unless they're aligned with the corporate strategy.
Which comes first, the corporate strategy or the supply chain strategy? The easy, and generally correct, answer is the corporate strategy. Yet the president of a large specialty distributor recently told us that he's taking the opposite tack. The reason: He can't begin to get specific about the details of corporate strategy (and its execution) until he's confident that he has the supply chain infrastructure in place that will allow that chain to perform, grow and adapt as the business evolves.
That distributor's experience notwithstanding, the corporate strategy typically provides the jumping off point for supply chain strategizing. That is, corporate objectives for marketplace position, customer relationships and service levels, and cost performance will provide the foundation for the supply chain strategy. And those objectives will vary from industry to industry. A company that, say, manufactures and distributes complex customized products will require a very different type of supply chain from one that specializes in low-value, high-density products.
Recognizing fundamental differences in core business is just the beginning, however. The supply chain strategy will also be largely determined by the company's position in the supply chain. A retailer's comprehensive strategy is not going to look anything like a supplier's. A manufacturer's won't look anything like a distributor's or a third-party logistics service provider's.
Another major, but less widely acknowledged, consideration is how much power the company wields within that supply chain. Irrespective of its type of business or position in the supply chain, the company that is the dominant force in that chain is the one that will be able to design a comprehensive solution—nearer to the ideal of "end to end"—and help its trading partners fit into its grand plan. That dominant force can be a retailer, and often is these days. It can also be a manufacturer, as it often was 10 years ago.
The weaker or more incidental player cannot hope to drive the end-to-end strategic design—and shouldn't even try. The reality is, the party that holds the power makes the rules. Nonetheless, every supply chain professional has a responsibility to develop a supply chain strategy that's right for his or her company (just as the corporation's management has a responsibility to develop a winning business strategy).
Keep an eye on the goal
That said, it's important to acknowledge that when it comes to strategy, companies will take different philosophical approaches to the details. And a supply chain executive who ignored those details in favor of pursuing some abstract vision of the ideal supply chain would be a fool. If the company aims to be the lowestcost provider in the market, a manager who insists on operating a high-cost, high-service supply chain will find himself or herself in constant conflict with top management. Similarly, if the company has chosen to compete based on customer service, a supply chain group that slashes costs at every opportunity will quickly become the company's own worst enemy.
And there are additional considerations. For example, what if the corporation is committed to growth through acquisition? In that case, it will need a supply chain strategy that's geared toward integrating products and customers—and maybe even facilities—into the network with minimal disruption and expense.
What if the objective is to become a national, rather than a regional, player? In that case, the people responsible for developing the supply chain strategy must contemplate how the organization might redeploy or add facilities, how it would reconfigure facility missions, and what the transportation consequences might be.
Ready for anything
It almost goes without saying, a good supply chain strategy is also a flexible strategy. You need to be prepared for the unexpected—whether good or bad.
Truth is, planning strategies for success is relatively easy. We're good at anticipating how to handle growth—even the explosive kind.
But, bad stuff happens too. The supply chain organization needs to be ready to support strategies for shrinking operations and should have contingency plans in place in the event of disaster.
For example, a corporate strategy might shift, with a decision to "fire" its "C" customers and concentrate on doing business with a select top level. In an extreme case, senior management might elect to forego high-demand, low-margin business with a big box retailer in order to concentrate on more profitable business—a decision that would have staggering consequences for the supply chain.
Then, there are always the worst-case scenarios. The big box might fire you before you can fire it. Or your competitor might beat you to market with an enhanced product and capture 20 percent of your business overnight. Your strategic plans—again, both corporate and supply chain— must take these possibilities into account.
See, strategy's not as easy as it might appear from a distance, nor as fun. But, having a living, growing, evolving supply chain strategy—that adapts to and with the corporate strategy—is elemental to long-term success.