Six questions that are often overlooked in supply chain strategies
Supply chain management is a business area that can easily be misunderstood. Anyone who is not an expert in the matter, will likely think that supply chain management is about getting goods delivered as cost effectively and quickly as possible – preferably just in time, to minimize inventory costs.
That is not what supply chain management is about. Or better: not necessarily. To understand why, it is important to take a step back and look at the supply chain strategy. In other words, how can the supply chain contribute to achieving our business goals?
This question is often overlooked, but it is the essential thing you need to ask yourself when defining a supply chain strategy. During this process, other questions come up as well; let’s discuss a few.
What are my customer needs?
If the business strategy is ‘achieving operational excellence’, it might very well be that your organization should focus on efficiency and cost savings in its supply chain. For business that focus on customer intimacy, however, the availability of parts might be far more important than just-in-time delivery.
‘What are my customer needs?’ is a question that should lie at the very foundation of any supply chain strategy.
What is happening in the world (and how can it affect my business)?
This one has become more prevalent in recent years but is still often overlooked. The pandemic, the energy crisis, Ever Given; a lot is happening in the world that can have a direct or indirect impact on your supply chain. Identifying and mitigating risks and vulnerabilities is not a luxury, it is a necessity.
How long are customers willing to wait?
While configuring a supply chain, it is important to determine decoupling points; ‘A location in the product structure or distribution network where inventory is placed to create independence between processes or entities’, according to the American Production and Inventory Control Society (APICS) dictionary. The location of the decoupling point depends, among other things, on the predictability of demand and the willingness of customers to wait.
Do we really need to do everything ourselves?
As mentioned earlier, a central question in any supply chain strategy should be: “What does the customer need and, in this context, what added value do you want to deliver?” In other words, a supply chain strategy forces an organization to identify what is core in their business. Your definition of what is core and what can be outsourced eventually determines the supply chain strategy – and vice versa.
Where does our supply chain end?
Traditionally, supply chains would end at the delivery. However, if you want your business to operate in a circular way, you must also consider the return flow of materials for refurbishment, parts recovery, or recycling. This can contribute to decarbonizing your supply chain.
“A supply chain strategy starts with asking the right questions,” said Reinier Remmelink, Senior Consultant at Philips Engineering Solutions. “A recurring theme at our customers is a mismatch that exists between supply chain capabilities and business requirements. Customers’ expectations tend to change over time. But if the supply chain configuration is neither designed nor managed, but has evolved without formal planning processes or strategy, which is often the case, there is a strong need to bring the supply chain back in line with the business.”
To help organizations do that, Philips Engineering Solutions developed a 4-step approach to step up in supply chain maturity. The objective: to design a supply chain that actually contributes to delivering a competitive advantage.