How many organizations use a supply chain strategy to create competitive advantage? In my experience, most small to medium size companies ignore the fact that a well-designed supply chain strategy can create many benefits including a competitive advantage. The properly executed supply chain strategy has far reaching effects from the suppliers to the end customers and allows limited resources to focus on their core business function. Direct cost reductions are just part of the benefits. Indirect benefits can also include shorter lead times, lower cost of ownership and ultimately a competitive advantage.
Here are 5 reasons why it is important to create a supply chain strategy.
- Supply chain strategy sets the overall guiding foundational principles of the entire supply chain organization. It helps define the directional strategies from people, partnerships, supplier base, capital investments, processes and goals. Without such well-defined directional guidance your organization may find itself running down unknown, dark, dangerous paths and possibly out of control.
- A well-designed supply chain strategy helps to properly align the supply chain team in an efficient, creative and a collaborative environment from executives, buyers, logistics and the supplier network. This alignment helps provide the framework to ensure all other supply chain initiatives fit together properly and are working for the same goals. If you don’t have this comprehensive alignment, then you cannot expect very much from your supply chain team when it needs to respond to unforeseen challenges and to quickly to come up with innovative solutions or new ideas.
- The strategic plan is based on the needs of the whole organization. The supply chain strategy must support the overall goals of the organizations and should extend all throughout the supply chain including the supplier network. For example, if your company markets itself as a local provider of goods, sourcing from overseas is probably not a good fit.
- The proper supply chain strategy allows organizations to focus on their core business internally while at the same time allowing their suppliers to focus on their business. This may seem simple, but too often companies lose sight of their core and begin to dictate to suppliers requirements that add no value and only increase costs. Due to limited resources everyone must deal with, focusing on your strengths creates an amazing collaborative environment that can create win-win solutions. This directly leads to cost reductions across the supply chain both internally and externally. Any organization that lacks a true strategy will likely find its’ limited resources chasing projects that do not fit into the greater strategy.
- Well executed supply chain strategies can be used to differentiate your company from the competition. Does your competition focus on low cost solutions? Then maybe providing value added services such as vendor managed inventories may separate you from the competition. Will a shorter delivery time differentiate you from the competition? How about using environmentally friendly supply chain? Or maybe a technology driven solution will help you stand out from the competition. Most companies that do not have supply chain strategy fail to distinguish themselves in the industry.
If your company is ready to explore with an expert how creating a supply chain strategy can help provide competitive advantages in your industry, feel free to call or email me at your earliest convenience for a free, no-obligation supply chain assessment.