Supply Chain Strategy: The Six Distinct Thought Strategies

by Vector | Mar 16, 2021 7:01:56 AM

Supply-Chain-Strategy--An-Overview-of-6-Distinct-Strategies

“Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” —Pablo Picasso

The COVID-19 pandemic was a black swan event. We adapted, and we survived. The world continues to change. The supply chain continues to evolve toward digitization. The COVID-19 black swan placed increased scrutiny on global and local supply chains. In this article, we'll look at several distinct supply chain strategies to help us optimize our businesses, welcome digitization, and maintain continuous improvement.

Perhaps you've seen supply chain strategies that appear to merely consist of beating up your suppliers, carriers, and outsourcers downstream. This of course would be in preparation to get beat up yourself by the supplier and customers upstream. Do we shrug our shoulders, mutter "that's business," and join in the hand-to-hand combat? Or is there a better way?

Let's take a step back and take a high-level view of the battlefield. Granted, only you know the specifics of your niche. But here's a thought experiment that might provide another angle. Let's talk about supply chain strategy by working backward. After all, regardless of your industry, every supply chain has one ultimate goal in common: customer delight!

Customer delight is the end game. But why start at the end game? Icons of business, chess masters, self-help gurus, and professional athletes preach about the end game. Focusing on the end game is a lot like goal setting. And as the iconic supply chain strategist Andrew Carnegie once said:

“If you want to be happy, set a goal that commands your thoughts, liberates your energy, and inspires your hopes."

Welcome to an R&D Session About Supply Chain Strategy

That said, in an attempt to delight you, our reader, we'll try to provide more than just a recap. Put another way, our goal is that you'll think of this article like a research and development session on supply chain strategy. In other words, let's focus more on fresh than refresh!

Here are the seven distinct ideas we'll look at today to inform your supply chain strategy:

  1. Fresh: Why to consider the end game, and the Platinum Rule
  2. Refresher: The lean supply chain strategy
  3. Refresher: The agile supply chain strategy
  4. Fresh: The resilient supply chain strategy
  5. Fresh: Digitization, contactless, and the internal supply chain
  6. Refresher: Moore's Law and front-running the paradigm shift

Work Backward From the Ultimate Goal in Business, Customer Delight

For starters, the end game is customer delight, right? Study.com's Beth Hendricks defines it this way:

"Customer delight differs from customer satisfaction in one very crucial way: it's about exceeding a customer's expectations, or going above and beyond, rather than just simply providing a satisfactory experience that met expectations."

That being said, your specific definition of customer delight depends on your industry. We're talking about supply and demand. You know the demands of your industry better that anyone, so rely on your imagination to fill in the specifics.

The core tenets actually remain the same regardless of industry. Customers want us to fulfill the requirements of the contract. But everyone yearns to find someone who exceeds expectations. How do we know this?

From a business perspective, the Platinum Rule is another thought exercise that forces you to put yourself in your customers' shoes. The Golden Rule says to treat others as you would want to be treated, but the Platinum Rule says to treat others as they want to be treated—even if that's not what you would prefer.

Try it. Play devil's advocate, use your emotional intelligence, turn around, and look at your business through your customers' eyes. Be open and honest about the thoughts that pop into your head. Those flashes of insight can be deeply informative for your supply chain strategy.

In short, when we talk about supply and demand, let's first understand what the customer is demanding.

The Lean Supply Chain Strategy

Lean methods have dominated major manufacturing industries for decades. The lean concepts perfected within the Toyota Production System (TPS) established the pillars of the lean supply chain strategy.

To this day, we recognize and practice many of these strategies. To summarize TPS and lean, simply eliminate waste from every step of the supply chain. And this includes steps as in physical paces made by workers (wasted steps = wasted time = wasted money).

As a refresher, the lean supply chain for dummies list of strategies includes:

  • Transportation: Any time you ship something from one place to another, you're consuming time and money. The less you need to ship a product, the better.
  • Inventory: Any time you have products sitting around in inventory, you're wasting money by tying up space and working capital.
  • Motion: Any time you move something (or someone) when it isn’t necessary, or when it isn’t somehow making your product more valuable to a customer, you're wasting time and money.
  • Waiting: Any time you have to wait for one thing to happen before you can do something else, you're wasting time and money.
  • Overproduction: Any time you make too much of a product, or make a product before you can sell it or use it, you’ve wasted time and money.

All of these concepts are great. Many factories, warehouses, and business have achieved untold levels of excellence by getting lean. But to borrow another key phrase from lean supply chain strategy, we're also after continuous improvement.

In other words, the world has been hit with new challenges. Therefore, lean's continuous improvement strategy inevitably turned its gaze inward on the lean supply chain strategy itself.

The Agile Supply Chain Strategy

Lean strategies rely on forecasting and are best suited for steady markets that don't vary. Unfortunately, in the 2020s tastes, trends, and markets swing wildly. Thus, the development of the agile supply chain strategy arose to prioritize adaptability, efficiency, and speed.

Put another way, lean is a cruise ship. It's way more efficient way to ship hundreds or thousands of people across the sea, but it takes a while, and it's difficult and expensive to alter the schedule. On the other hand, agile is a speedboat. It's faster, and it can change course easily, but it only seats four.

That said, according to Next Process' website, the core attributes to the agile supply chain strategy are:

  1. Quick, controlled purchases
  2. Automating the supply chain
  3. Streamlined purchase order processing
  4. Data for planning
  5. Real-time information visibility

In essence, the data that drives the agile supply chain strategy helps businesses anticipate fluctuations in demand. This a buffer against volatile market demand patterns. When suppliers manage their own demand data, they aren't married to the forecast.

As you may be realizing, certain aspects of both lean and agile supply chain strategies have merit, depending on your business. But they also can leave your business exposed to risk—especially in times of uncertainty.

Resilient Supply Chain Strategy

That brings us to the resilient supply chain strategy. Lean strategy drives for consolidation and single-sourcing. That leaves you exposed to disruption and black swans, not to mention longer lead times. And an agile strategy tends to cost more.

Thus, resilient is the combination of both strategies, in a way that strengthens your supply chain against shock. Only you will know which elements of each to cherry-pick. But according to Spend Matters, the primary elements of the resilient supply chain are:

  1. Dual source/deconsolidation
  2. Nearshoring
  3. Real-time visibility
  4. Digitized data

Having multiple sources of supply may defy lean principles, but it will hedge you against geopolitical uncertainty.

That said, we can't control much of the uncertainty in the world. But what we can control is usually closest to home.

Consider Your Internal Supply Chain and Customers (in Other Words, Your Employees)

Let's turn inward again and consider your internal customers. Why does this help? Because you're a customer in every other walk of life. You know what you want and how you want to be treated!

Here's another tip. To take this thought exercise one step further, expand your customer list. Specifically, include your in-house customers. In other words, what are you doing to delight your employees?

What are the types of things you want out of a job? It's no different for your in-house customers. Bonuses and incentives help people engage. Have potlucks when it's safe to do so. Modernize your tech features.

Adopting digitized, contactless technology allows factory floor employees, loading dock workers, and drivers to feel confident they aren't spreading germs.

Digitization and the paperless office are a lean strategist's delight because this tech streamlines everyone's workflow. Talk about removing waste! Get rid of the filing cabinets and banker's boxes (there are those wasted steps again). Instead, store your digitized paperwork in the cloud and reduce the wasted time of an audit.

Consider your company internally through the lens of lean, agile, and resilient supply chain strategy.

Refresh: Moore's Law and Front-Running the Paradigm Shift

Moore's law states that technology doubles every 18 months. Unfortunately, that means that if you've sat on your hands for six years, you're four cycles behind in the tech department. But it's possible to catch up quickly!

The one constant between each of the supply chain strategies we've looked at today is data. The information age in business begins with and is driven by digitized documents. That puts digitized document software providers at the tip of the spear.

Every supply chain strategy session should look inward. If you haven't digitized yet, that's where I'd start your next supply chain strategy conversation.

Thanks for reading, and I hope you've found this delightful!

 

This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.

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