For many, a supply chain strategy is an elusive enigma: something they know they need, but are still uncertain on how to go about it. To help, we answer the following questions.

What is it? 

Supply chain strategy projects start and end with business strategy. Here is the primary question to answer: What is the optimal supply chain design (processes, number of supply chains, talent, the nature of the actual and required response of each supply chain, market dynamics, organization, relationships, and value network construct) to actualize the business strategy?

The output is a framework that is used to assess current and future states while detailing a roadmap to build capabilities and a system of metrics that help drive continuous improvement.

The plan details relationship strategies and processes for demand, supply, and innovation over 5 to 10 years to actualize business strategy. In good design, this reflects changes in market dynamics, power shifts in relationships, risk assessments, and emerging system constraints (workforce, sustainability program goals, logistics, and governmental regulations, for example). The plan also outlines a clear organizational design with supporting processes mapped out for a period of time with clear milestones.

For the reader of the supply chain strategy, the goal is clear and actionable. It assesses the right balance of risk, complexity, and opportunity. The business case leads the plan, one that details the intersection between corporate and local responsibilities for sell, make, move, deliver, and buy processes for planning, execution, and supporting transactional processes.

What it is not

To flush out misconceptions, here’s a look at what the strategy should not be:

• Focused solely on supply or company operations—Supply chain strategy is not just about supply, operations, or manufacturing. It is a holistic view of demand, product, and supply processes aimed at maximizing opportunity and mitigating risk.
• Inward-facing—A good strategy looks beyond the company borders, analyzing the supporting ecosystem to bring business strategy objectives to fruition.
• Point in time—It’s not a point in time, but a multiyear plan that builds the capabilities to carry out the strategy.
• Focused only on your company—No company is an island, so a good plan focuses on the ecosystem, market dynamics, and power shifts in relationships. It details how these shifts can be used to better support the business strategy.
• Technology centered—It is not a technology project or the output of a network design optimization project. While technology supports the business processes in the supply chain strategy work, it should never be confused with the development of a supply chain strategy.
• A substitute for business strategy—A company can only have a successful supply chain strategy if, and only if, its purpose is to support the business strategy.
• A financial plan—The financial impact of the supply chain strategy is one output, but should not be confused with the development of a financial plan.
• Buzzword bingo—A good plan defines each term to make it actionable: flexibility, agility, demand driven. It is void of over-hyped phrases.

What does a good one look like?

A good plan is realistic and clear. It is actionable, and has the approval of the board and the leadership team. The plan is based on market performance, emerging market dynamics, and how well it supports the business strategy.

How do you start?

With a clear understanding of the business strategy, the supply chain strategy begins by determining the number and characteristics of existing value networks and the projected changes in them over the lifetime of the business strategy. 

Important elements to consider include the following:

• Holistic design—Look at product, service, and business platforms as a whole to determine the impact on total supply chain costs, service delivered at the point of consumption, and product commercialization.
• Process evolution—How are processes and technologies changing, and how does this change what is possible?
• Talent—What staff and staff needs best support the supply chain strategy, and how do you best use your partners to accomplish goals?
• Shifts in power today and tomorrow—The plan looks from the outside in, so how are channel and supplier relationships changing, and how do these shifts in power change the requirements of the supply chain strategy?
• Key relationships—Determine key relationships and map how they change. What is the role of required relationships at each node of the design and how does this change the required organizational structure and capabilities? The required technologies?
• Relationships translating into networks—How are demand, supply, and design networks coalescing? How do they support the business strategy, and how do you use them to redefine value?
• Simulate and test—Use scenarios to test the supply chain response of what is being recommended as compared to competitor networks. Under these scenarios, does the value network deliver the right and consistent quality, cost, and customer service? Simulation and network modeling tools can be used to do this type of market assessment.

Where to go for help

Here is the dilemma. Choose between the following two groups:

• Business strategists—These companies, like Bain, Booz Allen Hamilton, Boston Consulting Group, and McKinsey, know business strategy, but generally lack expertise in the area of supply chain strategy.
• Global supply chain practice consultants—Accenture, IBM Business Consulting, Deloitte, and such firms have built comfort zones for themselves, acting as process implementers in support of technology projects with localized pockets of excellence.

But why not technology providers or third-party logistics (3PL) agencies? Technology firms aren’t good choices because a software or hardware provider has a vested interest in selling their product. And while 3PLs are sometimes used as low-cost providers, we seldom see them successful in this type of work. 

Taking advantage of the right expertise

During this transitional period in the market, success is about selecting the right individual consultants, not the firm. The ideal team has business and supply chain strategy experience and is actively working in supply chain strategy. Here are some considerations when choosing a consultant:

• Offers relevant case studies—We recently saw five consulting companies present Dell and Zara as case studies to companies formulating a supply chain strategy. Let’s face it—the Zara and Dell models are old news, and not a good fit for most industries. Look for relevant case studies that are current.
• Uses the right research—If you are active in supply chain management, you are current on most analyst and industry research. The consultant team you want knows how to use the right research at the right time.
• Has global presence parallel to global scope—If globalization is an important piece of your strategy, seek consulting expertise with a firm foundation and understanding in the geographical regions of the world fundamental to your business strategy.
• Is open to the outcome versus knowing predetermined answers—Supply strategy work is 80% discovery. It is hard to require a team that can devote time and be open to alternatives. The more the consultant has predetermined answers, the less the firm will be able to help you.
• Knows your industry, but also the industry practices of others—A good resource in this area knows both. Leading practices and supply chain strategies come from a good grasp of what is possible in the industry and how other industry processes are morphing.

This is just the first in a series on supply chain strategies. Next time we’ll define a series of supporting frameworks. In the meantime, let us know if we can help in this emerging world of supply chain strategy—lcecere@amrresearch.com.

Related research 

Organizations

• “Three Factors To Improve Success in Supply Chain Organizations”
• “Designing a Demand-Driven Supply Management Organization”
• “Do You Need a Supply Chain Center of Excellence?”

Metrics

• “The Hierarchy of Supply Chain Metrics: Diagnosing Your Supply Chain Health”
• “Product Launch Dashboards, Part 1: The Hierarchy of Product Metrics”

Design of value networks

• “Outsourced Manufacturing in Consumer Products: Redesign To Improve Value”
• “Defining the Consumer Products Value Network”
• “Designing the Consumer Products Value Network”
• “Contract Manufacturing at a Crossroads: Brand Owner Need for Visibility”
• “Strategic Manufacturing Outsourcing: How To Achieve a Return on Relationship Investment”
• “How To Add Contract Manufacturing to the Pharma Recipe for DDSN”

AMR Research® is a registered trademark of AMR Research, Inc.