A few weeks ago, we posted about the differences between tactics and strategy in Supply Chain Management. Companies are expecting more strategic advantages from their Supply Chains than ever. And lots of companies and professionals talk a big game about being strategic, but we wanted to start a conversation about what it actually means to be strategic rather than tactical or transactional. How do you use Supply Chain practices to not only get materials and products in the right place, at the right time, in the right quantity – which have become something of a minimum requirement – but to also help a company launch new products faster, break into new markets, and become more competitive overall?
We offered some thoughts in the post – which we encourage you to check out – but we also received some excellent comments from Supply Chain professionals in our network. Here are two of the most detailed and thoughtful comments we received:
Howard Thaw, a senior Supply Chain consultant within the Oil / Gas and Mining industries:
Supply chain leaders need to be Strategic in their approach to work on every level. But what does this mean–it means looking at what creates value for the organization. It means thinking out of the box and being innovative in your approach to supply chain. It means reviewing such thinkers of creating value as Michael Porter for this analysis in my opinion. It means always working on your relationships internally and externally to create this value. It means negotiating every deal to ensure a win/win approach. Everything you do needs to be measured and analysed to look for improvement on a continual basis. So these are my thoughts on this matter.
Let me give you an example, I was just working at a mine site and we were being supplied a chemical which we use on a daily basis. The firm supplying the chemical was a leading firm in the industry but when I started with the team at this site I told everyone that we need to bench mark the cost of each item we purchase and then decide whether we want to extend contracts or look for a better supply. This product was being overcharged by 70% to the market but it was hard to bring into this country.
So what we decided to do was to create a strategic alliance with a European firm and a local company to open a new plant to produce this product. In the end we will save over ten million dollars over 5 years and we reduced our costs by 100% and created 25 jobs in the process for a city. Also as a note I did try to renegotiate the current agreement with the existing firm but they felt they should not reduce the price since they has a foothold or a monopoly in country but as you can see this was not exactly true since we did find a solution by thinking outside of the box.
My team was taught to think strategic in everything they do. It starts in my opinion by building it into the culture of the department or organization. It needs to be embedded into your policies and procedures so your processes include them.
So these are my thoughts on the matter and look foreword to hearing others.
Ahmed El Zohiry, an established Strategic Sourcing Professional:
It’s a very interesting topic and I agree with its direction.
In my opinion supply chain management is also concerned with the corporate strategy and operational risk it’s now beyond supply and cost. In the services sector and mainly in banking, our indirect spend is way greater than our direct spend categories so it’s beyond supply chain. Being strategic is referring to the thought process that starts by analyzing the transactions and the category of spend (spend analysis and drive from that and opportunity analysis) to capitalize on optimization opportunities.
So it’s now called strategic because it uses historical data, benchmarking and risk assessments to enhance the current state and give a competitive advantage which should align with the corporate strategy.
Being strategic means that risk management, supplier relationship management, macro and micro economic factors are considered in any category strategy that plan for the next 5 years. In the end the complexity of this function will only increase given trends like reliance on outsourcing and the rapidly changing technology. For all the above I find the term strategic sourcing is much more relevant because the scope is greater than direct supply of product or raw materials.
A big thank you to Howard and Ahmed for taking the time to share their comments! We’re very interested in any other observations you have about the difference between tactics and strategy in Supply Chain, so don’t hesitate to comment below!