Recently, most supply chain professionals have had conversations about moving from Tactical to Strategic Supply Chain Management which involves Planning, People and Processes.
Supply Chain Management (SCM) is essentially an integrative and collaborative process that looks to optimise the flow of products or services through a business and it’s operations until it gets to the final consumer. We can then say that demand triggers a supply chain right? No consumer, no supply chain. It is 100% information based. This process can be divided into Planning, Sourcing, Manufacturing, Storing & Distribution. The steps absolutely depend on your business model, needs and strategy. You see the word “strategy”, it’s very key so please stay with me. Don’t leave me.
No matter how big/small a business is, it is imperative to have a working supply chain strategy. The strategy has to ensure links between Suppliers, Manufacturers, Distributors, Retailers and Customers. For a supply chain to be strategic, the communication flow among these stakeholders should flaunt schedule coordination, materials requirement planning, Operational Flexibility, Demand Management and Risk Management. These give birth to the four Rs as we know – Reliability, Responsiveness, Relationships and Resilience.
The three levels in SCM are Operational, Tactical and Strategic levels.
Let’s take some time to discuss Tactical vs Strategic supply chain management
Tactical SCM is mostly transactional and short term. With this, deep knowledge of the overall company requirements for the future and vendor capabilities are not fully achieved. It’s mostly reactive but can exhibit some proactivity in procurement by ensuring optimal price negotiation, quality assurance and good delivery lead times. Many small to medium enterprises have remained tactical as it fits into their processes but one mistake they make is stopping there. With how complex supply chains are becoming, the C-level and top managers should be involved in strategic planning and not tactical SCM. Tactical procedures are a managerial/supervisory responsibility.
On the other hand, Strategic SCM is systematic, wholistic and long term. This takes into consideration the current and future needs of an organisation and helps to attain low supply line risk and low total cost of ownership (TCO).
Lapses at the operations level are detected when strategic planning is omitted. This is because the C-level executives take up tactical responsibilities and then supervisors and junior officers take up operational responsibilities and so no form of strategic planning is done. Strategic SCM is a C-level or Top Management activity.
Closer looks at many organisations still reveal tactical SCM and not strategic SCM and this is due to capacity or a decision to just “survive” the harsh global business environment full of uncertainties and potential disruptions.
“Non-Strategic” Supply Chain Management (i.e. tactical or operational SCM) does two things:
• Presents no competitive advantage in global and regional supply chains.
• Ignores critical risk factors associated with supply chain processes.
Strategic SCM positions businesses to be resilient and more efficient. It ensures better integration and collaboration, innovation and continuous improvement. Think of the latest technology and supply chain trends (and not spreadsheets for inventory management in 2020. Haha!), reverse logistics, big data analytics and IoT.
While some are still wondering if a core Supply Chain faction is important for their business, the difference between success and “not so good“ is the strategic connection/integration of research & development, procurement, operations management, inventory management, finance and logistics. This my dear friends will put any organisation in a very strong financial position and improve customer satisfaction. We must be ready to go hard or go home.
