To succeed in selling physical goods, you need an effective supply chain strategy. No matter how great your product is, you simply cannot deliver it at scale without efficient supply chain operations.
There’s more than one way to structure your organization’s supply chain strategy, but it helps to work from a successful template. Two notable success stories, Dominion City Brewing and Great Wrap, provide perfect examples. Learn from their founders’ insights to craft your own successful supply chain strategy.
What is a supply chain strategy?
A supply chain strategy is a road map for efficiently managing the flow of goods and services from raw materials all the way to the final customer. It encompasses all activities involved in bringing a product to market, including sourcing, procurement, production, transportation, and distribution.
Benefits of a good supply chain strategy
- Increased efficiency and reduced supply chain costs
- Improved customer satisfaction
- Risk mitigation
- Competitive advantage
- Sustainability
Here’s why a well-defined supply chain strategy is crucial:
Increased efficiency and reduced supply chain costs
Strategic supply chain management helps you identify and eliminate bottlenecks in your supply chains, streamlining operations and reducing costs. Finding suppliers who offer quick turnaround times can help you avoid stockouts, and supply chain route optimization can help you minimize the likelihood that deliveries are disrupted.
Improved customer satisfaction
Careful supply chain planning ensures products are delivered on time and in good condition. Reliable supply chain processes help you meet customer demand and build loyalty.
Risk mitigation
Supply chain strategies incorporate risk management to anticipate and mitigate potential disruptions, such as supplier breakdowns, labor shortages, natural disasters, or geopolitical instability. Crucial aspects of supply chain risk management include diversifying suppliers, maintaining safety stock, and implementing robust contingency plans.
Competitive advantage
In today’s global marketplace, effective supply chain management strategies can give you a crucial competitive advantage. Companies without strategic planning can be thrown off by external factors like unexpected demand surges or fluke supply chain disruptions. By investing in a resilient supply chain and developing contingency plans, you can minimize mishaps and consistently meet customer demand.
Sustainability
Supply chain managers increasingly focus on sustainability initiatives to minimize environmental impact, reduce carbon footprints, and promote ethical sourcing and manufacturing practices. This aligns with changing market demands, as more customers seek environmentally sustainable products. Adopting sustainability as one of your business goals can help you meet regulatory requirements, enhance brand reputation, and attract environmentally conscious customers.
Key capabilities to consider for supply chain strategies
Here are the five key capabilities that supply chain leaders consider when designing their company’s logistics operations:
1. Demand sense
Demand sense means understanding and anticipating customer needs through market research, sales forecasting, and analyzing customer buying patterns. By accurately predicting demand, you can optimize inventory levels, production schedules, and resource allocation in your supply chain activities.
2. Supply sense
Supply sense is knowing what your supply chain can realistically deliver. It involves understanding supplier performance, production capacity, lead times for materials, and overall logistics capabilities. Having a clear picture of your supply limitations helps you make more informed decisions about sourcing, production planning, and managing customer expectations.
3. Decision-making
At the intersection of demand and supply sense lies decision-making, taking account of resource allocation, workforce management, and inventory optimization. It’s a key part of your operations planning, especially if you have direct control over your production facilities and distribution centers. Effective decision making means finding the right balance between meeting customer needs and maintaining operational efficiency.
4. Demand response
Demand response is your ability to fulfill demand from your customer base. As part of an agile supply chain strategy, demand planning means having the flexibility to adjust production schedules, source materials from alternative suppliers, or implement dynamic pricing strategies. A responsive supply chain can minimize the impact of unexpected demand fluctuations and ensure customer satisfaction amid shifting market dynamics.
5. Supply response
How your supply chain adjusts to changing circumstances is the final component. Supply response requires strong relationships with suppliers, diversified sourcing options, and the ability to quickly adapt production processes. A responsive supply chain mitigates disruptions from supplier issues, material shortages, or unexpected events, and allows agile responses to market demands.
How to create and implement a supply chain strategy
- Define your goals and objectives
- Map your current supply chain
- Analyze demand and supply
- Design your ideal supply chain
- Choose an implementation plan and your KPIs
- Communicate and collaborate on plan implementation
If you’re looking to adopt a supply chain strategy or make significant supply chain strategy changes, you need to create and implement a plan. Here’s how:
1. Define your goals and objectives
Finding the right supply chain strategy starts with clearly outlining your desired outcomes. Do you want to reduce costs, deliver products faster, enhance sustainability, or something else entirely? Identifying specific goals helps tailor your strategy and measure its effectiveness.
2. Map your current supply chain
Gain a comprehensive understanding of your existing network by identifying all suppliers, logistics providers, production facilities, distribution centers, and transportation routes. Mapping the current state helps pinpoint areas for improvement and potential risks.
3. Analyze demand and supply
Here’s where supply sense and demand sense come in. Analyze historical data with respect to sales, market trends, and customer feedback to understand demand patterns. This also requires monitoring supplier performance, lead times, and potential risks to understand your supply limitations.
4. Design your ideal supply chain
Based on your goals and analysis, design an optimal supply chain for your business by streamlining logistics networks, diversifying suppliers, sourcing goods from the global market, or implementing new technologies like inventory management systems.
You may opt for a just-in-time model, where goods spend minimal time in warehouses, or a modified version called a just-in-case model—a popular option in the post-pandemic world. Perhaps you’ll embrace old-fashioned warehousing. Choose the best fit for your situation and only make compromises if necessary.
5. Choose an implementation plan and your KPIs
Create a roadmap for transitioning to your target state. This plan should include budget allocation, resource requirements, and a timeline for implementation. Define key performance indicators (KPIs)—like cost reduction, on-time delivery rates, size of the supply base, or inventory turnover—to track progress and measure the success of your strategy.
6. Communicate and collaborate on plan implementation
Collaboration on key processes helps ensure long-term success. The best supply chain professionals offer clear communication with all key stakeholders involved in the supply chain, including internal teams, suppliers, and distributors.
Examples of a successful supply chain strategy
Great Wrap
To see a smart supply chain strategy in action, consider Great Wrap, a company transforming potatoes into compostable stretch wrap. Founders Julia and Jordy Kay launched the business to cut down on plastic waste in the global supply chain and promote sustainability. In doing so, they soon realized it was most effective to produce the wrap in-house.
“We’ve all heard of greenwashing and kind of what can happen there,” Julia says. “We learned really quickly when we were working with a production partner.” That partner wasn’t trying to deceive them, she says, yet she felt the partner wasn’t fulfilling the scope of its promises.
“It’s hard to control another business’s operating practices as a customer,” she says. “If you wanna make a product that you have true control over what goes into it, it’s just gonna be easier to set up a manufacturing facility.”
Having their own facility helped Julia and Jordy be a better supplier to their own partners. “We’ve kind of interrogated our processes and realized that within all of the inputs that we have and the way we are doing things, there are a lot of cost savings that we can make so that we can bring our prices down for the consumer,” Julia says.
Dominion City Brewing
For Ottawa-based Dominion City Brewing cofounder Josh McJannett, an expansion into non-alcoholic seltzer was partly facilitated by Canada’s streamlined distribution practices.
“We had a very direct relationship with the bars and the restaurants that took our product,” McJannett explains. “You know, in the way beer sales work here, unlike in a lot of places, the United States, especially, we don’t have this kind of middle distributor. You’re actually able to sell a keg of beer and drop it off to the bar that buys it directly. So that’s been in our DNA.”
In this relationship, Dominion City is integrated into the bars’ supply chain. By cutting out intermediaries, the brewery could serve as a better resource for its clients’ demand planning and set the stage for long term success.
Supply chain strategy FAQ
What makes a good supply chain strategy?
A good supply chain strategy integrates robust capabilities in supply and demand sensing, responsive decision-making, and agile supply chain operations. This combination lets your business efficiently meet customer needs while minimizing risks and costs.
How do shipping disruptions affect supply chain strategies?
Shipping disruptions can significantly impact supply chain strategies by causing delays in product delivery, increasing transportation costs, disrupting inventory management, and prompting the need for agile response teams to remedy problems.
How can you improve your supply chain strategy?
You can improve your supply chain strategy by enhancing visibility, agility, and collaboration across your entire supply chain network. Leverage data-driven insights for informed decision-making, and continuously optimize your processes to meet evolving market conditions.
