“Having a strategy is imperative in organizations. Before defining it, the various departments must know exactly the operations of storage, inventory, distribution, transportation and point of sale. Only in this way can there be an improvement in customer service and greater competitiveness.
At this point in the twenty-first century, we rarely find in companies an alignment between the supply chain strategy and the business strategy. But more worrying is the fact that supply chain tactics are not defined, as is often the case in both multinational and local organizations.
Today, it is worth remembering the basic concept of strategy proposed by Michael E. Porter in his classic What is strategy? (1996, What is strategy, Harvard Business Review), which defined it as the generation of a position in the market resulting from the execution of its own activities in a differentiated way, to deliver products and services of unique value to customers. Its purpose is to generate a competitive advantage, defined as a condition difficult to imitate by competitors and sustainable over time.
In addition, Porter explained that operational effectiveness is not the same as strategy, being a common and wrong condition in which many organizations fall to seek the desired productivity and operational efficiency, which usually translate into a reduction of costs.
Once these two concepts are differentiated, we are in a better position to define the supply chain strategy. There are essential activities that are done in most organizations such as: storage, processing, delivery, sales, distribution and after-sales service. These functions can be explained on a case-by-case basis, whether they relate to a service or manufacturing company. However, when talking about the supply chain, the approach must extend beyond the borders of the company, as well as incorporate suppliers and customers.
One of the foundations of the supply chain is the integration of key activities such as those mentioned above, in addition to collaboration and exchanges between the various links in the chain.
However, some organizations continue to work internally under a function-based approach, in which activities such as demand planning and production, purchasing, inventory control, storage, distribution and customer service work in isolation. This generates a disconnection in the processes, not to mention what happens with suppliers and key customers.
The consequences of the disintegration of supply chain processes are typically reflected by excessive purchases of products for sale or materials for production, high transportation costs, ruptures of inventories, inadequate spaces for storage and insufficient storage such as the loss of the level of service to customers, among others.
On the other hand, excessive or erroneous purchases generate inventories of slow movement, which causes a financial burden for the organizations, in addition to a greater risk such as the total loss of stocks due to obsolescence.
All of the above creates conflicts between the different areas of the company such as marketing, sales, manufacturing and finance. It is known that there are tools and methodologies that aim to integrate all these areas such as sales and operations planning (S & OP) and more recently integrated business planning (IBP). But before implementing these programs, the strategy must be defined.
Strategy is the first
When designing and defining the supply chain strategy, the following questions should be asked:
a) What criteria, policies and procedures will I use to select, evaluate and achieve an efficient supply from suppliers?
b) Will I work with few or many suppliers?
c) What are the most appropriate sources of supply in terms of cycle times?
d) What will be the policy to follow to define the amounts of replenishment and maintenance of inventories?
e) How will I do the last mile logistics: own fleet, subcontracted or hybrid?
f) Where and what method will I use to define the location of distribution centers?
g) How will I integrate the information systems of the key suppliers and my organization?
h) What technological tools will I use to achieve greater productivity and efficiency in inventory management?
i) How will I do the reverse logistics?
j) Do I have a roadmap or plan in case of disruptions in the supply of suppliers,
processing and / or shipments to customers?
These are just a few questions that the interested party can ask before designing their strategy. However, Martin Cristopher, in his work “”Logstica: Aspectos Estrat gicos”” (1992. Chapman & Hall), proposed the design of the logistics strategy in full terms, by visualizing the activities inside and outside the organization as a chain.
In addition, the author affirmed at that time that all that thought and its proposal would still be valid 20 years later, which is confirmed by current experience.
The lack of a supply chain strategy is a product of improvisation and accelerated growth of organizations, which generates many inefficiencies and deteriorates levels of customer service. This is reflected in the following scenarios:
- High rates of return of customers for defects, damages and errors.
- Deliveries late.
- More expensive items.”