Last updated on April 6th, 2024 at 02:04 am
In this article, we will discuss The Supply Chain Strategy. Along with the what is Supply Chain Strategy, we will learn about the Supply chain process and why it is needed i.e. its importance and key factors of Supply Chain Strategy.
What is The Supply Chain Strategy?
A supply chain is an organization’s routes and methods used to supply and deliver goods. A supply chain consists of 3 main factors, they are the customer, supplier and logistics.
A Supply Chain Strategy/management is a combination of all three components of the supply chain. The Supply Chain Strategy is the management of all 3 factors. The aim of the Supply Chain Strategy/Management is to align all the factors and minimize cost and increase efficiency.
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Process of the Supply Chain Strategy/ Management
The Supply Chain Strategy/ Supply Chain Management consist of 3 main factors – Customer, Logistic and Suppliers. The process of Supply Chain Strategy/ SCM revolves around these 3 factors.
Demand
The first step in the Supply Chain Strategy starts when a customer demands for the product at the retail shop or to the distributor. Then the retail shop informs the distributor, who in turn sends the product requirement to the manufacturing company.
Supplier
The second phase of the Supply Chain Strategy is Supplying.
Once the manufacturing company receives the order, the company sends Purchase requisition to their suppliers. Depending on the company’s requirement, they select a supplier and send a purchase order to the supplier.
Company’s requirement could be anything depending on their priority, it could be fast delivery, high quality, low cost. Once the PR is sent, the supplier then departs the raw material for the company’s warehouse.
Manufacturing
Once the raw material has been delivered, the company starts working on the production process. This is the third phase in The Supply Chain Strategy.
Once the production process is completed the manufacturing company dispatches the product to the distributor.
Customer
The distributors then dispatch the product for delivery to either the retail shop or the customer directly. In some cases, the company delivers directly to the customer if it is possible, it reduces the cost of the middle man.
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Importance of The Supply Chain Strategy
Let’s see why The Supply Chain Strategy is needed by every manufacturing related organization.
In today’s era, customers expect that their product should be delivered as soon as possible. The reason for such expectation is technological advancement and competition. Take Amazon for example, with prime, the delivery will be done within 24 hours. Even though they aren’t a manufacturing company, due to their 1 day service, customers start to expect the same of others, or else they can quickly shift to another brand who offers quicker delivery.
It offers to optimize the flow of goods and services systems. It will not only help the company deliver fast, but also help you to figure out techniques to reduce costs.
The most important advantage of The Supply Chain Strategy is competitive advantage. Using the Supply Chain Strategy, you can have knowledge about what competitive edges you can have over others.
Types of Decision in Supply Chain Strategy
There are 3 Broad categories. Based on the time span, these Decisions are categorized into Strategic Level, Tactical and Operational level.
Strategic Level Decisions
The first level of decisions for The Supply Chain Strategy is The Strategic Level. These decisions are taken only by the top management. The strategic level involves decisions for long term plans of the organization. You can say that these are the foundational decisions for the organization.
These decisions involve decisions like Selection of suppliers. It depends upon the organizational goal, the time taken for delivery, the capacity of raw material, the quality, the location of operation. All these things are considered while selecting a Supplier. Many more similar decisions are to be considered which comes under the Strategic level decisions.
Operational Level Decisions
Operational Level decisions are short term decisions. Operation Level decisions are taken for the day to day operations such as production which are carried out in the organization. For this level, the low-level managers collaborate with the middle level managers to make decisions. The low level managers provide data and updates about the day to day operation which will help to take a precise and effective Supply Chain Strategy decision.
In Operational level, decisions are to be taken on the basis of data that is regularly changed. It included the inventory count, Logistical monitoring, damages, received material, number of manufactured products and so on. The data provided is then used to make decisions about the next day.
Tactical Level Decisions
Tactical level decisions are usually where the top and middle level management collaborate together to make decisions. This can be considered as the middle level decision for Supply Chain Strategy.
Here, short term as well as long term decisions are taken. Decisions such as deciding on logistical techniques, how to reduce cost, how to improve quality, and how to reduce time for delivery, these are the types of decisions taken here.
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What are supply chain strategy?
A Supply Chain Strategy can be defined as a plan where the decisions regarding how the supply chain will function, regarding the flow of goods, is manifested.
What is the three 3 components of SCM?
The 3 main Components of SCM are Supplier, logistics and distribution.
Final words
I hope you were able to understand the types of decisions taken for Supply Chain Strategy. Each decision has its own criteria and time basis on which the decision is taken.
I hope this article was helpful to you. If you have any queries or suggestions to add, let me know in the comment box.