Base Your Business Strategy and Plan Around Your Supply Chain

The supply chain is the enabler of most other components of a business strategy, a good business strategy or sales strategy doesn’t mean anything if you don’t have a good supply chain strategy.

If something goes terribly wrong in your supply chain, then your whole business comes to a standstill. There are no other business strategy components that are as important or involved in all other components of a business as the supply chain.

Willem Bekker, Supply Chain Solutions Manager at Bidvest International Logistics

Linking your business plan to your supply chain strategy should start with the overall plan or vision which inspires the organisation. From there a strategy is put in place to determine how to build what the business needs to have in place to fulfill that vision. For example, if a business would like to have every type of product available in every type of sales channel immediately, such a business would need a supply chain tailored to those requirements, enabling it to realise its vision. And on the other hand, if a business wants to be the cheapest provider of a product or service, then again, the supply chain would need to be designed very differently in comparison to the first example.

“The world has really moved on from viewing the supply chain as just the cost of doing business”, explains Willem. The last couple of years in particular have really made that apparent, and many organisations have subsequently turned their supply chains into a competitive advantage. There are many examples in different industries that illustrate where this is the case.

A well-known company that uses its supply chain as a competitive advantage is Zara, the clothing retailer. Zara’s business model depends on being able to react to fickle changes in consumer demand faster than any competitors. That goal has underpinned its supply chain, which is an air freight driven supply chain designed to move stock from runway, to mass production, to delivery all over the world in a matter of days and weeks, not months or seasons like their competitors.

Another good example where the supply chain is being used as a competitive advantage would be Apple, whose CEO, Tim Cook, is a former supply chain executive. Apple set its supply chain up almost exactly like an automotive model, where it only produces what it needs and drains replenishment as required. Apple is very much demand driven, which is unique for a business of its type. 

By not first factoring in the supply chain you leave your organisation exposed to numerous risks. The supply chain is the enabler of most other business strategy components in your organisation, even if you have a brilliant sales strategy or a brilliant production strategy. These strategies could all fall completely flat if the supply chain design is not aligned to other areas of your business. By not first factoring the supply chain into your decision making, the risk is ultimately that everything else will be negatively impacted.

Some customers have been known to be more cost driven than optimisation driven when planning their supply chain. Although it has meant for them that they can, on occasion,  reduce the cost of certain phases of their supply chain, it more often than not results in a sub-optimal network overall, and a completely inflexible supply chain. The risk here is that although things go well when supply chains are running smoothly, it means that the slightest disruption to the normal order of things brings your business – not just the supply chain – to a complete standstill.

An example of this happening was a customer who shifted a lot of inbound production flow to rail, to save on costs, but as we know, rail in South Africa can be risky if used in the wrong context. The customer ended up with too much critical inventory stuck in the rail pipeline and, when there was a major rail issue, they weren’t able to move inventory to the production line. The production line came to a standstill, production capacity was cut, orders were missed, and those orders were then fulfilled by rival plants in other parts of the world. The consequence of this supply chain failure is that the customer is unlikely to ever again see the volumes that they previously had secured. In short, business decisions were made that resulted in a supply chain that was not agile or flexible, a strategy which has had a significant, negative impact on the business. 

The bottom line is, a business should base its strategy and planning around the supply chain because the supply chain enables the majority of other components forming part of the business strategy. If the supply chain is not specifically optimised to fulfil the needs of the business, the business could be exposed to risks that would otherwise not affect a flexible, adaptable supply chain. Besides the consideration of risk, the supply chain poses an opportunity – optimising the supply chain has been proven to offer a competitive advantage, and to ignore this opportunity could prove to be crippling down the line.