Aligning your Supply Chain Management Strategies to Your Business Strategies

supply chain management strategiesSuccessful organizations with operations across the globe manage their supply chains in such a way that they support their market-leading positions and allow them to deliver superior value. As a result, many companies have come to understand the importance of aligning their supply chain management strategies to their business strategies. Supply chain management becomes a powerful tool that can be adjusted in such a way that it serves the goal that the business is pursuing.

Supply chain management strategies may at times involve sacrificing certain capabilities in order to maximize others that are more aligned with core business strategies and your value proposition. It would not be the best idea to focus on innovation and sustainability if a retailer’s core business is following an everyday, low-cost positioning. In such a case, the retailer should in fact concentrate on building supply chain management strategies that result in minimum costs and maximum inventory turns. Unfortunately, many companies fail to see their priorities in supply chain management strategies and end up experiencing lower financial and market share results. At the same time, they fail in their efforts to realize their business goals simply because they keep retaining supply chains that are not synchronized with their respective goals.

Strategic congruency is not easy to achieve. Getting your supply chain management strategies to support your business strategies involves a unique blend of analytics, organizational redesign, and strategic planning. Misalignment can happen for a variety of reasons, such as weak centralized management control, convoluted supply chain design, bloated product portfolio, and more. Another important factor is the lack of a consistent strategic position in their marketplaces. Consequently, many organizations depend on short-term market conditions to make their supply chain decisions. Instead, they should be focusing on sustaining a differentiated market position.

The fact is that supply chain management strategies need to be aligned with core business strategies in order for the company to be successful in their sector. The dangers of strategic misalignment may include customer satisfaction problems, losing revenue, high cost-to-serve expenses, and more. A thorough analysis of the causes and effects of misaligning supply chain management strategies with business goals will reveal whether the problem lies in the logistics group or in the design of the supply chain. Finding the root cause of strategic misalignment is only the first step. The next steps are crucial and involve organizational redesign and also strategic planning. However, the benefits of aligning supply chain management strategies with your core business strategies are well worth the efforts.

Senior management needs to focus on three major steps: clarify, prioritize, and measure. The goal is to develop the right supply chain and capabilities for their respective business strategy and maintain it. The first step is to clarify which strategy should be pursued, focusing on particular capabilities instead of undertaking a hodge-podge of strategies. Prioritizing is the second step, where short term management decisions should not be allowed to undercut the optimal supply chain model. Finally, measuring the right metrics is essential towards adopting the right supply chain management strategies to reinforce business strategies. The focus is on key performance indicators that measure the link between corporate strategy and supply chain design that reflects strategic coherence.

Mike Earle