What Does It Mean to be “Strategic” in Supply Chain, Anyway?

November 17, 2016

 

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Everywhere you look in the Supply Chain industry (including the Argentus blog), there’s lots of talk about how Supply Chains are becoming more strategic. It’s part of the big change taking place in the field – a shift that Supply Chain Management Review recently described as a “metamorphosis.” This function that – for decades – has specialized in bringing products to market on time, in the right quantity, is blooming into a much broader function with impact all over corporate organizations.

In short, Supply Chain is evolving from one concerned with tactics to one concerned with strategy.

But what exactly does it mean to be strategic rather than tactical in Supply Chain?

We don’t want strategy to be a buzzword – so we wanted to write this post to get a discussion going about what distinguishes strategy from tactics in Supply Chain.

As an entry point, here’s a quote from 19th-century military theorist Carl von Clausewitz:

“Tactics is the art of using troops in battle; strategy is the art of using battles to win the war.”

If you use this definition as an analogy for peacetime Supply Chains, the “troops” would a company’s production, air, rail, and freight resources. The “battle” would be the struggle to deliver products on-time in the right amount. But the “war” is the real question: how does a company use its Supply Chain to position itself to break into new markets, to launch new products, and market itself? That’s the key to understanding this shift.

From our perspective, “strategic Supply Chain” means that companies expect their Supply Chains to impact not only product delivery, but innovation, collaboration, sustainability, and corporate responsibility. It means designing an overall framework and philosophy that impacts the entire company and makes it more competitive, helping it win the “war” of profitability and innovation rather than just the “battle” of delivering products on time.

Here’s one lens to view this issue:

A study in Supply Chain Quarterly provides six models or “styles” of Supply Chain strategy, each suited to a different kind of industry: “efficient” Supply Chains, “fast” Supply Chains, “continuous-flow” Supply Chains, “agile” Supply Chains, “custom-configured” Supply Chains, and “flexible” Supply Chains. These names might seem like different terms for the same thing – and these words often get thrown around as buzzwords all over the industry. But the study’s author, Hernan David Perez, goes into deep detail about the differences in each strategic approach that shows the depth and complexity inherent in developing a truly strategic Supply Chain.

For example: a company making products for industrial clients with a high level of customization should adopt an “agile” Supply Chain strategy, with an emphasis on close collaboration with customers, as well as excess production capacity. A company producing trendy products on a short life-cycle might opt for a “fast” Supply Chain strategy that encourages affordable prices, emphasizing strong demand forecasting to schedule production according to a single batch per SKU (shop keeper’s unit) – and allowing for rapid iteration from idea to product launch.

People who can understand, implement, and adopt these different strategies aren’t only “getting products in the right place at the right time.” They’re driving innovation and competitiveness across the entire lifecycle of a product.

supplychainThis is just a high-level example of some of the strategic considerations at play in today’s Supply Chains beyond the linear, “products in the right place at the right time,” descriptions we tell our family and friends. But there are tons of other illustrations of this concept, and we’re curious to hear about any others that you find useful!

Strategy is a very relevant topic to anyone in the field, because it has huge repercussions for the who, how, and why of Supply Chain. It means that skill requirements are changing, and that makes it more difficult to hire (and potentially find a job) in the field. A great recent article (paywalled) in SCMR discusses this shift from tactics to strategy and its implications for the workforce. The big shocker? SCMR cites a recent survey showing that – in this more strategic Supply Chain world – only 38% of the field’s leaders have confidence that their organizations have enough talent to meet their objectives. And only 44% of Supply Chain leaders think that their organizations have the skills to meet their objectives 5 years from now. These executives said that a lack of individuals who can meaningfully direct Supply Chain on a strategic, rather than tactical level, is their number one concern going forward.

We’ve been writing about this looming “talent gap” in the field for quite a while, but what’s becoming more clear is that it’s a crisis of skills and approach more than it is a crisis of numbers of workers.

Finding someone who can work within your processes to make sure products arrive on time and in the right amount? There are lots of great Supply Chain professionals who can do that. But finding someone who can dictate the overall strategy of your Supply Chain, tailor it to your industry and category, and then execute on an organization-wide level to drive innovation and competitiveness? Those people are hard to come by. And as the expectations placed on Supply Chain professionals increase, they’ll only be harder to find.

But they’re out there. logo_icon

2 Comments

  1. Gary Newbury

    An excellent piece of editorial/research Argentus, showing a deep understanding of the challenges facing employers looking to leverage their supply chains for competitive advantage, closing down unprofitable markets and creating new opportunities and markets for it’s products and services.

    The supply chain is the corporate battlefield. Only those companies who understand how to attract the best (supply chain strategist) talent stand a chance to take advantage

    Reply
    • Argentus

      Thanks for your excellent comment Gary!

      Reply

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