If you want to support your company’s overall business strategy, achieve excellence, and impress the C-suite, it is vital that you align strategy, service, and cost in your supply chain operations.
Let’s look briefly at each of the three pillars in turn.
Pillar 1: Supply Chain Service
To ensure your customers receive the right service levels at the right cost, three areas need a laser focus:
- Inventory: Hold enough stock to meet demands but not more than necessary, as this will impact operating costs and affect prices customers pay.
- Policies: Implement policies relating to inventory and service delivery that are clear to your customers.
- Planning: Effective supply chain planning will include elements such as S&OP, demand analysis, and the efficiency of manufacturing, purchasing, warehouse, and transportation functions.
Pillar 2: Supply Chain Financial Alignment
To align this pillar, you need to put the following four sectors under the microscope:
1). Distribution network costs: This involves a trade-off between warehouse and transportation costs and is all about having the right number of warehouses in the right locations.
2). Warehouse operational costs: The layout(s) of your warehouse(s) should be optimised for cost-efficiency while warehouse processes should continuously be tweaked to optimise performance.
3). Transportation costs: Lower your transportation costs by optimising the placement of your warehouses and distribution centres.
4). Procurement costs: Your primary aim here should be to extract value from every supplier relationship rather than to seek the lowest price possible per unit for every product or service purchased.
Pillar 3: Supply Chain Strategy Alignment
To maintain relevance, your supply chain strategy must be calibrated regularly. Misalignment of strategy tends to render supply chain service and cost performance a product of luck rather than design.
Most importantly, the key elements of your supply chain strategy should be clear to all, including lower management and the general workforce.
Align Your Way to Supply Chain Excellence
It all comes down to service, strategy, and financial alignment. When the three pillars are aligned, you’ll be well on your way to satisfying your customers, internal stakeholders, and shareholders alike.