In an ever-evolving business landscape, an effective supply chain strategy is crucial for any organisation intent on outperforming the competition.
Be it a formal document or a shared philosophy, the overarching supply chain strategy has wide-reaching implications; from embracing digital technologies to optimising inventory levels to fostering collaboration and sustainability.
This article explores some of the key considerations your business could embrace to strengthen your supply chain.
Align your strategy to the wider business
As companies grow, evolve, and change to meet new market conditions, their strategies will shift to better deal with new challenges. As internal and external factors exert themselves on the business, is your supply chain strategy adapting to your overall business challenges and goals?
Is the priority delivering growth or managing cost? Is the strategy focused on growing into wider markets, reducing costs, expanding product range, improving speed of delivery, or improving customer service/experience?
By ensuring that the supply chain strategy is fully aligned with business strategy, the right decisions, compromises, and tradeoffs can be made.
Listen to your customers
Customer needs can change fast. However, it is naïve to assume that they will always let you know directly when it happens.
Ask yourself how your business is engaging with its customers and collecting feedback. How long does it take for a new requirement to become fully integrated? When making supply chain improvements do you have a robust way to test your assumptions?
Changing customer habits should be seen as an opportunity. Are most sustainability-conscious clients willing to wait longer for deliveries, if the carbon saving is communicated? Can saving-savvy customers be incentivised to reduce the number of orders they return?
Understand your cost-to-serve
Cost-to-serve can be an illuminating, yet often overlooked way of understanding your supply chain.
By analysing the primary drivers of cost within your supply chain, your entire business can have better knowledge (and make better decisions) about changes and improvements.
For example, following a cost-to-serve analysis it is far easier to identify high cost-per-unit supply chain activities, which can then be further interrogated for potential cost-reduction opportunities.
Define the role of technology
Our relationship with technology is consistently evolving, and it’s important to continuously reassess its impact on the supply chain.
At a strategic level, the right technology can be used to formulate data-driven strategies, allowing for enhanced visibility, risk management, and decision-making processes.
Advanced technologies such as Artificial Intelligence (AI) and Machine Learning (ML) empower businesses to predict market trends, demand fluctuations, and potential disruptions, facilitating proactive strategy formulation.
On a tactical and operational level, technology enhances efficiency and productivity, but must be carefully balanced with human autonomy and intuition. Recognising the places at which human and technology intersect and overlap can often be fruitful areas to investigate more deeply.
Invest in automation
We don’t believe in “automation for automation’s sake”, but we do believe that it is something that should be regularly assessed.
As technologies improve, costs reduce, and consumer habits change, processes that were once very expensive to automate become more and more viable, freeing up skilled staff to move into higher performing roles and activities.
Not only this but implementing smart automated assets into your business can have positive tax implications, making use of various government subsidies and grants.
Refresh your inventory levels
Chances are you and your team spend a fair amount of time thinking about, forecasting, and planning around inventory. Beyond the day-to-day, what is your approach to inventory long-term, and are there activities you could perform now, that would pay dividends in the future.
One action, for example, might be refreshing the minimum and maximum inventory levels of your products. These safety systems are often ‘set and forget’, yet with semi-regular attention and clever data analysis, they can be a powerful tool in your arsenal.
Centralised or decentralised warehouse structure
When considering the optimal structure for a warehouse, businesses often weigh the advantages and disadvantages of a centralised versus a decentralised warehouse structure.
Understanding the cost-benefits of where the product enters the business is crucial—whether it is into a central warehouse, direct to stores, or drop-shipped directly to the customer. The best locations for warehouses are typically those that minimize total logistics costs, including transportation, warehousing, and inventory costs, while maximizing service levels to customers.
For instance, businesses might opt for centralized warehouses in regions with excellent transport links and lower operational costs, while decentralized structures might be preferable in areas with diverse consumer needs and preferences. These ‘hybrid’ approaches to fulfil different geographies and markets will become more common.
Test the extremes
Supply chain resilience is (for good reason) the buzzword of the post-covid supply chain. Ensuring your business has the flexibility to deal with unexpected events can be a real competitive advantage, not to mention offering stability and customer loyalty.
But how do we plan for scenarios which are, by definition unknown? With scenario modelling and simulation, we can test hypothesis, observe best and worst-case scenarios, and push out supply chain assumption to extremes to evaluate how truly resilient our processes and structures are.
Every supply chain is different…
Every supply chain strategy will be different. However, within the complexities of your unique business, we hope you will recognise and have a chance to reflect on the common themes and challenges discussed.
The best time to review a strategy is before it starts to feel ‘broken’, so take this as a sign to book in your next supply chain strategy review!
About the author
Jon’s client work extends across Manufacturers and Retailers with a scope that covers high-level supply chain strategy through to detailed operational reviews and performance improvement.