Supply Chain Strategy
The Importance of Aligning Your Strategies
UPS Supply Chain SolutionsSM
Copyright © 2005 United Parcel Service of America, Inc. All Rights Reserved.
No part of this publication may be reproduced without the prior written permission of UPS Supply Chain Solutions.
A UPS Supply Chain Solutions
Chances are you’ve heard the term supply chain strategy. Used informally, it is
often confused with supply chain management, where supply chain operations are
controlled to reduce costs. There’s some truth to this definition, but supply chain
strategy really is broader; it defines how the supply chain should operate in order
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chain strategy also focuses on driving down operational costs and maximizing
efficiencies. For example, an organization may choose a strategy directed at
supplier management as a way to remain competitive. By providing
a clear purpose, the organization keeps sight of the strategy and is able to devise
tactical steps to achieve these goals. Another reason for having a supply chain
strategy is to establish how you work with your supply chain partners, including
suppliers, distributors, customers, and even your customers’ customers. As the
marketplace becomes more competitive, it is critical to reinforce existing
relationships and work together. And for all these reasons, a well executed
supply chain strategy results in value creation for the organization.
Developing a Supply Chain Strategy
Understand the Business Strategy
The first step is for supply chain executives to clearly understand how the
enterprise chooses to compete. This is important not only for the obvious reason
of working off the “same play book,” but also for the reason that it forces the
supply chain operation to see itself as a customer facing entity serving the
competitive goals of the enterprise—not merely an operational department.
Supply chain strategy is not simply a linear derivative of the business strategy.
At best, supply chain strategy can be the enabler of the business strategy. If the
business strategy is to be the low cost provider, the supply chain strategy should
support this. And just like when developing a business strategy, look to your core
competencies, focus, and means of differentiation when developing a supply chain
strategy. Being able to strategically source parts at an attractive price may support
UPS Supply Chain Solutions
both your supply chain strategy and business strategy, but only if you have the
capabilities to do so effectively. Look to your supply chain competencies and
leverage what you do well. You may want to focus on a particular market or
segment in which to gain supply chain efficiencies. Or you may want to
differentiate your organization operationally by providing lower costs to
customers or providing services that other industry players are unable to do.
Assess the Extended Supply Chain
A formal supply chain
assessment by a non-biased
outside party may assist
you in better understanding
The next step is to conduct a detailed, realistic assessment of the capabilities that
exist within the organization and even the extended supply chain. Begin by closely
scrutinizing your organization’s assets and evaluate how well they support the
strategy. Old machinery and disparate systems may mean high operational
overhead and costly process inefficiencies and redundancies – clearly not
supportive of a low cost provider strategy. A formal supply chain assessment by a
non-biased outside party may assist you in better understanding your operational...