Strategic supply chain management may refer either to the use of supply chain management as a function to support larger organizational goals, or to implementing big-picture direction and vision in supply chain management itself.
In a sense, all supply chain management is strategic in nature. That comes from the built-in scope of looking at logistics, operations, planning, and finance considerations. When you see it as part of one big, long chain from supplier to consumer, like supply chain management teaches, that’s taking a strategic perspective.
Supply chain management in practice trains you to look at the big picture of what the organization intends to accomplish, the resources it has to do it, and how those are obtained, moved, modified, and finally delivered toward the end goal.
But there’s also strategy that is conceived and executed within supply chain management itself. The decisions that supply chain managers make regarding procurement, transportation, storage, and distribution should all be aligned with larger objectives and plans.
Those objectives and plans are the concrete results of strategies developed by executives based on their analysis and knowledge. Bringing in a deep understanding of processes, resources, and organizational goals helps them create strategic plans that lead to success or competitive advantage.
Still, while the phrase strategic supply chain management is easy enough to type or say, it’s a difficult concept to wrap your head around. It’s even harder to execute reliably.
Clearing up What Strategic Supply Chain Management Actually Is
The confusion between strategic and tactical—and, if you really dive into the weeds, operational—considerations is legion.
It’s worth turning back to the birthplace of both logistics and strategy to get some official definitions. Both concepts originated with the military; to the military we can turn for explanation.
According to the Department of Defense Dictionary of Military and Associated Terms, strategy is a prudent idea or set of ideas for employing the instruments of power in a synchronized and integrated fashion to achieve major objectives. It is the big picture stuff of planning required to achieve goals against obstacles or uncertainty. Strategy requires a view of all the pieces on the board. A good strategy considers every potential or imaginable concern impacting the objective.
Tactics are the employment and ordered arrangement of those instruments in relation to one another. These are the on-the-ground actions required to achieve the steps outlined by strategic plans. A tactic tries to overcome a specific challenge, using a technique executed by an individual or small business unit.
The final, most squishy layer is operations. An operation is a sequence of tactical actions with a common purpose or unifying theme, or the carrying out of a set of tasks to accomplish a specific mission. Operations evolved as a connection between strategy and tactics, and is the military practice most closely associated with logistics functions. Operational considerations revolve around time, space, and means, which are also the major elements involved in supply chain management.
It’s also worth considering the purpose for delineating these different levels of thought. They are designed to focus thinkers and doers on the tasks at hand. They help design and coordinate activities, clarify allocation of resources, and assign work to the appropriate individuals or groups.
How Strategic Supply Chain Management Supports Larger Corporate Strategies
The supply chain itself is only a component of larger strategic plans in most organizations. It’s a vital one, however, that can serve as a key competitive advantage.
This requires aligning supply chain operations with the overall corporate strategic goals. This is bread-and-butter stuff for senior supply chain executives. Their roles in the upper ranks of their organization puts them at the high table where overall corporate strategies are developed. They will have input into those strategic plans and offer insight into supply chain considerations.
These can be major decisions with repercussions throughout the company and across industry. Strategic moves might include plans such as:
- Deciding to reshore production capacity to increase control and minimize delivery times, at the expense of greater labor and material costs
- Switching critical manufacturing processes to a just-in-time delivery model to reduce inventory overhead
- Investing in product redesign to use fewer parts with easier or less expensive sourcing
Any of these can result in competitive advantages for the organization—if they are done right.
Supply Chain Strategy in Action: Starbucks Revamps the Supply Chain to Fuel Further Growth
By the time the Great Recession hit in 2008, Starbucks was a global behemoth in the coffee business. Serving 50 million customers in more than 50 countries every week, the company was riding high from its start as a tiny cafe in Seattle’s Pike Place Market.
But expensive espresso drinks were one of the first things hard-hit consumers stopped buying when the layoffs came. By late 2008, sales were dropping… but operational costs were still going up. Something dramatic had to happen.
That was a massive reorg in the company’s supply chain organization. The structure was dramatically simplified, into planning, sourcing, producing, and delivering units. The company added a new production plant in South Carolina; despite the expense, regional production would reduce transportation costs and lead times.
At the same time, the company looked abroad. Building out a map of global transportation links and costs allowed the company to find efficiencies, and to better evaluate their 3PL logistics providers. Those that didn’t make the cut got dropped.
Not only did the supply chain strategy save money, it made the company more nimble. Later efforts to become more sustainable, expand into new markets, and innovate within the product line were all made possible by better strategic supply chain management.
Once those high-level corporate strategic plans are made, it falls to those same managers to execute them within the logistics organization of the company.
Strategic Planning Itself Supports Supply Chain Operations
That’s where strategic management within the logistics team comes into play. While this is an operational matter from the perspective of the larger organization, it’s still a strategic process for supply chain leaders.
Supply chain management strategies will consider activities such as:
- Deciding on the structure and format of the logistics train
- Evaluating and choosing from different procurement strategies
- Locating logistics hubs
- Deciding on transportation modes to be used to move items through the chain
- Developing the communications, infrastructure, and other support structures need to execute supply chain functions
All these decisions will require a balanced allocation of available resources, communicating priorities, and understanding the external and internal forces in play.
Supply Chain Strategy Without Education Is Nearly Impossible
Strategy is hard. There’s a reason that senior executives in supply chain management often pursue advanced degrees. Understanding and learning how to develop strategy is a big part of it.
So, programs like a Master of Science in Supply Chain Management and Logistics, or a Master of Business Administration with a Supply Chain concentration are built around developing skills needed to plan and execute strategy. That includes lessons in:
- Evaluating economic considerations in production and procurement
- Understanding the impact of inventory levels on profitability
- Developing insights from market information
- Synthesizing data from a wide variety of sources for accurate perspectives
Such degrees also hone skills that are critical in strategic planning. Students learn about:
- Project management and scheduling
- Resource allocation techniques
- Strategic communication skills
They typically come with internships or other experiential learning projects that allow observing how the strategic sausage gets made in logistics organizations. That kind of real-world experience is important since the first iteration of a strategy rarely survives first contact with the market. Adjustment and adaptation are critical abilities for strategic supply chain management.
Organizations that find the right strategy to achieve their goals with the resources available will always have an edge in the market. That means that every company is on the lookout for managers who can develop and execute supply chain strategy successfully.