How To Build a Great Supply Chain Strategy

June 06, 2024

by Jaidyn Farar

In recent years, economic, geopolitical, and weather-related disruptions have underscored the importance of having a resilient supply chain strategy. In this article, we’ll review what a supply chain strategy is, the benefits of having one, and several ideas for crafting a strategy that makes sense for your business.

What is a supply chain strategy?

A supply chain strategy is a plan for how you’ll produce goods and get them into your customers’ hands. It involves designing, managing, and monitoring every process involved in the supply chain, including procurement, production, warehousing, transportation, and distribution.

The goal of every supply chain strategy is to deliver high-quality products to customers as quickly and affordably as possible, eliminating inefficiencies and maximizing profitability.

Though they share a common goal, supply chain strategies aren’t cookie-cutter replicas of each other; every organization must build a strategy that aligns with its unique objectives. Many factors influence a company’s supply chain strategy including industry, products, customer needs, demand, and available resources.

Your supply chain strategy determines how you handle disruptions such as unexpected natural disasters or supplier shutdowns. With a solid strategy—including a strong network of suppliers and other partners—you’ll be able to pivot quickly when disaster strikes, keeping your supply chain up and running.

Benefits of a good supply chain strategy

A good supply chain strategy leads to significant benefits: greater efficiency, improved financial performance, and an increased capacity to respond to disruptions.

Improve efficiency and productivity. A well-designed supply chain strategy focuses on optimizing processes, which in turn reduces inefficiencies, minimizes downtime, and ultimately boosts productivity.
Better financial performance. Effective supply chain management not only reduces costs but also leads to increased revenues through better customer service.
Lower risk, higher resilience. A diversified and resilient supply chain strategy helps mitigate risks such as supplier issues, natural disasters, or geopolitical conflicts.
Increased agility. With a strong strategy in place, you can respond quickly to changes in demand, allowing you to stay competitive in the ever-shifting world of commerce.
A more innovative business. Collaborating closely with suppliers and partners fosters innovation within the supply chain, leading to the development of new products, processes, or business models.
Greater sustainability. With an efficient supply chain, you’ll be able to decrease carbon emissions and waste. Not only will you help the planet, but you’ll also attract eco-conscious consumers and win their trust.

How to build a great supply chain strategy

Building an effective supply chain strategy requires lots of analysis, planning, and coordination with various partners and stakeholders. We’ll keep things simple by breaking things down into three stages: design, planning, and execution.

Note: For a total supply chain strategy overhaul, consider bringing in consultants to observe your processes with fresh eyes and suggest changes to improve efficiency.

Supply chain strategy design

Before making major changes to your supply chain strategy, you need to understand your supply chain structure, processes, and performance. Dig into your supply chain data, identifying the strengths and weaknesses of your current logistics operations. Remember to take into account key factors such as your product types and the locations of your customers, warehouses, and suppliers. Review supplier performance data to see if they’re meeting service-level agreements (SLAs).

Next, determine goals and objectives for your supply chain strategy. These goals should align with the business’s overall aims and strategy. What do you hope to achieve? Most organizations aim to reduce costs, improve customer service, become more agile, manage risks more effectively, and—as the world faces increasing climate change—become more sustainable.

Supply chain strategy planning

Now it’s time to make specific plans for every segment of your supply chain. Get started by thinking about the following areas:

Inventory. Develop inventory planning strategies that allow you to accurately forecast demand and keep inventory holding costs low.
Suppliers. Determine which suppliers you’ll work with, ensuring that you’ll be able to align production schedules and delivery timelines.
Production. Optimize production processes to minimize lead times, reduce waste, and maximize efficiency.
Transportation and logistics. Optimize transportation routes, modes, and carriers to minimize costs and transit times.
Performance metrics. Define key performance indicators (KPIs) to measure the performance of your supply chain. Establish targets for metrics like on-time delivery, inventory turnover, fill rate, and cost to serve.

Supply chain strategy execution

Finally, you’re ready to put your strategy into action. This is when you implement the processes, systems, and technologies you’ve explored during the design and planning stages. For this stage to go smoothly, ensure that key stakeholders are on board, with each person knowing what they’re responsible for. You should also provide ongoing training and support to employees involved with your new supply chain strategy.

Gauge the success of your new strategy by monitoring supply chain performance using dashboards, analytics, and reporting tools. If things aren’t going to plan, take action to correct the problem and get back on track.

Remember to continuously strengthen relationships with suppliers and other partners. Rather than seeing partnerships as one-sided, look for ways to build trust and help both parties benefit. Communicate quickly when problems arise.

And of course, always be on the lookout for market changes that could disrupt your supply chain, whether these are simply seasonal demand fluctuations or major supply chain crises. If your strategy includes backup plans, you’ll be more resilient in the face of supply chain challenges.

Types of supply chain strategies

Every organization has specialized needs, concerns, and processes. Because of this, supply chain strategies come in many different varieties. In this section, we’ll highlight some of the most common supply chain strategies.

Continuous flow

This strategy emphasizes a smooth and uninterrupted movement of goods through the supply chain, which minimizes delays and bottlenecks. Industries like automotive manufacturing often use continuous flow to optimize production lines and minimize inventory.

Fast chain

Fast chain focuses on rapid delivery and response times, prioritizing speed over other factors. This strategy is often used in industries with quickly changing consumer demand and products with a short market life cycle, such as fashion.

Efficient chain

Efficiency is the primary focus of this strategy, with organizations aiming to maximize output while reducing resource consumption and costs. Industries such as consumer packaged goods often adopt efficient chain strategies to streamline operations and stay competitive in the market.

Agile

Agile supply chains are characterized by their ability to quickly adapt to changes in demand, supply, or market conditions. Technology and electronics industries often use agile strategies to swiftly respond to changing consumer preferences and technological advancements.

Custom-configured

This strategy is used when producing custom-designed products that meet specific customer requirements. Custom-configured supply chains are common in industries like aerospace and defense, where products are highly specialized. This strategy usually prioritizes flexibility and precision over speed.

Collaborative

Collaborative supply chains involve close cooperation and coordination among various partners in the supply network. Industries such as healthcare and pharmaceuticals often rely on collaborative supply chain strategies to make sure critical supplies and medications are delivered on time.

Green

Green supply chains prioritize environmental sustainability and minimize the ecological footprint of operations by recycling, reducing waste, and using renewable energy. Industries like food and beverage and fashion are increasingly adopting green supply chain strategies to meet consumer demand for eco-friendly products.

Lean

Lean supply chains focus on eliminating waste and maximizing efficiency in every aspect of operations, from production to distribution. Automotive and electronics industries frequently implement lean strategies to keep inventory levels—and the associated costs—low.

Characteristics of a good supply chain strategy

The best supply chain strategies share several characteristics.

Aligned with business objectives. A good supply chain strategy is always closely aligned with the overall objectives of the business and designed to support the company's mission, vision, and strategic priorities.
Flexible, adaptable, and resilient. The business world (in fact, the world in general) is ever-changing and unpredictable. Your supply chain strategy must be able to adapt to both gradual shifts and unexpected disruptions. With a flexible supply chain, you’ll be ready to adjust production, inventory, and distribution strategies in real time when change comes knocking.
Fully visible from end to end. End-to-end supply chain visibility paves the way for effective decision-making and performance management. Your technology should allow you to track the movement of materials, products, and information across the supply chain. Visibility is especially important with an omnichannel strategy where all your sales channels need to be seamlessly connected.
Collaborative. A strong supply chain strategy is built on your relationships with suppliers, customers, and other supply chain partners. By collaborating with partners, you can leverage their expertise, resources, and capabilities.
Digital. Embracing digital technologies is essential for modern supply chain strategies. This involves the integration of technologies such as IoT, AI, blockchain, and data analytics to drive data-driven decision-making.

Examples of great supply chain strategies

Gartner recently released its list of the best supply chains of 2023. The 25 organizations that made the cut do three things that set them apart:

Drive growth in a risk-filled landscape
Shift to “many-to-many ecosystems”
Connect solutions and people

We’ll take a look at a few of these companies and highlight some cool things they’re doing with technology and sustainability in their supply chains.

Scheider Electric

Schneider Electric has taken a strategic approach to achieving net zero emissions across their supply chain. When they first began pushing for sustainability, they set ambitious internal emission targets, including carbon neutrality across scopes 1 and 2 by 2025.

But they didn’t just want to decrease their direct carbon emissions. Recognizing that most of a company’s carbon emissions come from its supply chain, including suppliers and other partners, Schneider Electric was determined to make a difference in that area.

To accomplish this, they required their suppliers to establish emission targets and provided a comprehensive framework of tools, resources, and collaborative opportunities to support these efforts. By spring 2023, 1,015 suppliers were actively engaged in the program, collectively achieving a 10% reduction in emissions.

Colgate-Palmolive

Colgate-Palmolive has been involved in a deliberate supply chain transformation. This process includes a “systems and analytics overhaul” to share data across digital systems and ensure that people across the organization have access to the supply chain information they need.

Colgate-Palmolive has also integrated comprehensive sustainability practices across its operations. Their goals include achieving 100% renewable electricity in global operations and reducing scope 1 and scope 2 emissions by 42% by 2030. As part of their sustainability efforts, Colgate-Palmolive allocates at least 5% of capital spending to initiatives aimed at waste reduction and climate action.

Johnson & Johnson

Johnson & Johnson has embraced AI supply chain technology to ensure that critical therapies and medications reach hospitals and medical facilities. They use advanced machine learning algorithms to analyze vast datasets, predict fluctuations in demand, monitor supplier performance, and flag potential disruptions like severe weather or economic downturns.

Strengthen every segment of your supply chain

Developing strategies for supply chain management requires an in-depth understanding of your business, and the strength of your supply chain depends on many factors: your relationships with suppliers and other partners, inventory management and distribution strategies, shipping and transportation, and more.

The EasyPost Enterprise suite of solutions helps with many of these areas. We offer the following solutions:

Take your supply chain strategy to the next level with EasyPost Enterprise.