Last updated on March 19th, 2024 at 09:41 am
Strategic supply chain decisions are a key factor in the success and efficiency of an organisation's supply chain management. These choices affect many aspects of the supply chain, such as creating networks, contracts, and supply chains.
Organisations may connect their supply chain with their bigger organisational aims and deliver value to customers and investors by making high-level strategic decisions.
In today's competitive market, enrolling in the senior leadership program on strategic supply chain management is essential for leaders aiming to stay ahead of industry trends. This article will discuss the significance of strategic supply chain decisions and how they affect the overall efficacy of supply chain management within an organisation.
Designing Supply Chain Networks
Supply chain network design is the process of constructing and modelling a supply chain to better understand the costs and time associated with getting items to market given the resources and locations available.
It is a vital part of supply chain management that helps firms optimise inventory, working capital, and logistical expenses, while also boosting visibility, recognising possibilities for cost reductions, and lowering possible hazards.
Benefits of supply chain network design
- Lack of flexibility: Centralisation can lead to a lack of flexibility and longer decision-making processes since all choices need to go via top-level management.
- Confined local autonomy: Lower-level employees may feel confined in their decision-making power and may be unable to make judgements best suited for their conditions.
- Communication challenges: Communication can be difficult in a centralised company since information needs to go through numerous levels of management before reaching the lower levels.
Importance of supply chain network design
A well-designed and streamlined supply chain is related to location data and may greatly influence any organisation.
Supply chain network design is a continuous sequence of actions that supports organisational excellence.
An effective supply chain may enhance customer satisfaction, which can be of tremendous value in the channels.
Types of supply chain network design
- Strategic Network Design: Designing the network
- Strategic Network Adaptation: Crafting the network to align with evolving market demands
- Routine Network Configuration: Structuring the network to fulfil daily market requirements
Contributing factors of supply chain network design
- Determine goals and objectives and create buy-in
- Putting together a competent supply chain design team
- Define the existing supply chain network
- Develop a baseline model
- Collect and analyse data
- Develop and evaluate alternatives
- Conduct sensitivity analysis
- Implement the optimal network design
- Monitor and adjust the network design
Strategic Supply Chain Management
Strategic supply chain management is a critical process that handles networks and services between suppliers and enterprises, assuring efficiency, optimising logistics, enhancing quality, and providing value to consumers.
It is crucial for firms to meet demand, establish a strong network, boost revenues, and minimise expenses. To build and implement a supply chain strategy, firms must construct a set of Key Performance Indicators (KPIs), set quantifiable targets, and acquire buy-in from key personnel.
Supply chain management functions at three levels: strategic, tactical, and operational. At the strategic level, firm management makes high-level strategic choices that establish the course for the whole business.
Supply chain strategic planning comprises designing and implementing a robust supply chain strategy, employing scenario planning to analyse and solve market demands, and creating insight into crucial supply networks.
By connecting a supply chain strategy with the organisation's business goals, firms may provide the maximum potential value for consumers and investors.
Designing Contracts
Supply chain management is a key feature of every organisation, and creating contracts is an essential part of strategic supply chain decision-making.
The first step in creating supply chain contracts is to verify they correspond with the organisation's business goals. The contract should be tailored to harness the organisation's key skills to reach high-level objectives.
A supply chain not led by any plan is destined to fail. If the objective is to be the lowest-cost supplier, then the supply chain should be built to cut costs
Other key factors are:
- Define clear expectations
Contracts should outline clear expectations for both parties. They should specify the duties and obligations of each party, including delivery timelines, quality criteria, and payment conditions.
Proper supplier contracts might assist in reducing materials and quality concerns.
- Include key provisions
Certain provisions should be staples of supply-chain contracts. Following are five key clauses that should rarely, if ever, be excluded:
- Define the scope of the contract.
- Detail your materials and quality requirements.
- Establish pricing and payment terms.
- Include provisions for dispute resolution.
Plan for the end of your contract.
- Build in contingencies
Disruption is always a reality of life in supply chain management. When making decisions concerning supply chain management, it is excellent practice to build in margin to allow for the unanticipated.
Each choice should contain a backup plan in case events you can't anticipate render your initial strategy impossible or inefficient.
Major Decision Areas in Supply Chain Management
The decision areas in supply chain management entail making decisions regarding the entire process of transferring items from the supplier to the customer.
The major objective is to save costs and optimise resources while maintaining timely delivery. The primary decision areas in supply chain management include:
- Location Decision: This entails determining where to site facilities such as warehouses, distribution centers, and manufacturing plants. The site selection should take into account issues like as transportation expenses, labor costs, and closeness to suppliers and consumers.
- Production Decision: This entails determining how much to create, when, and where to produce. The production choice should take into consideration elements such as demand projections, capacity limits, and inventory levels.
- Inventory Decision: This entails determining how much inventory to store, where to hold it, and when to restock. The inventory decision should take into account aspects such as demand fluctuations, lead times, and inventory costs.
- Transportation Decision: This entails determining how to move items from the source to the customer. The transportation decision should take into account aspects such as transportation prices, transit times, and mode of transportation.
Conclusion
Strategic supply chain choices are crucial for developing supply chains, networks, and contracts that maximise resources, minimise costs, and assure timely delivery.
The fundamental parts of supply chain strategy are network architecture, contract design, and risk management. The primary decision areas in supply chain management are site decision, production decision, inventory decision, and transportation decision.
By making educated judgements in these areas, organisations may build a competitive edge and give value to their consumers.
Imarticus Learning offers a Global Senior Leadership Programme in a collaboration with the Indian Institute of Management (IIM) Lucknow.
The IIM course for working professionals is designed for high-potential company leaders who aim to become C-suite executives. The training is taught by renowned industry professionals. Upon completion of the program, learners obtain a certificate from Imarticus.
