International supply chains are a key component in the success or failure of an organisation. Optimised effectively, and they can be a genuine source of competitive advantage. But inefficient and expensive supply chains are a drain on resources, damaging growth prospects.
From managing logistics across continents to meeting changing consumer demands, supply chain managers face new challenges daily. In this environment, a solid supply chain strategy is vital. It’s about keeping operations running, staying competitive and ready to adapt to disruptions.
A good supply chain strategy needs to include several key elements, including what the supply chain goals are and how the business intends on meeting them.
In this guide, we’ll walk through a step-by-step process for developing a comprehensive supply chain strategy. We’ll also cover the priorities every supply chain manager and board-level executive should focus on to ensure long-term success.
Step 1: Assess the current state of your supply chain
Before diving into changes or improvements, you need to fully understand where your supply chain stands. Assessing the current state allows you to find inefficiencies, understand strengths and identify vulnerabilities.
The first section of a supply chain strategy needs to assess the current supply chain strengths, weaknesses, opportunities, and threats. From that position, it becomes very easy to establish the priorities moving forward.
Key priorities for a supply chain performance check:
- Supply chain mapping: Create a detailed map of your entire supply chain process, from sourcing raw materials to delivering finished products. This will help you identify bottlenecks and areas for improvement. A simple way to do this is with a flow chart, or it can be mapped on a world diagram if you have the in-house graphical capability.
- Data collection: Gather key performance information across your supply chain, including procurement, manufacturing, warehousing, transportation, and distribution.
- Performance metrics: Using this data, evaluate your supply chain’s performance against your critical KPIs like lead times, on-time delivery rates, cost-per-unit shipped, and sustainability.
- Stakeholder questionnaire: Gauging staff and other stakeholders' opinions on your supply chain functionality also has value as part of a supply chain strategy. While the KPIs might be on track, team members on the ground might be able to identify inefficiencies or provide qualitative insight that is missed in data.
Step 2: Definite supply chain objectives moving forwards
A key part of any strategy is objectives on which you can judge its success.
Set KPIs that align with your business priorities. Whether your aim is to cut costs, deliver products faster, or reduce your environmental impact, your supply chain strategy must align with those.
Look to build interim goals into the strategy, too, so you can benchmark progress at specific points. We see this all the time from governmental organisations when adopting new regulations, such as for emissions. There's no reason why businesses cannot adopt this approach.
“We see a lot of focus on minimising freight rate when people outline supply chain KPIs, but we would advise a wider focus on reducing total landed cost. This is a more all-encompassing metric for gauging cost minimisation in a supply chain."
John Sommer, Co-CEO, WTA
Key considerations when defining goals:
- Remove ambiguity: Take the opportunity to remove any unclear wording from KPIs. Set clearly defined goals on which success is easy to judge.
- Balancing cost and service level: Decide where your company stands on the spectrum between cost savings and customer service. A cost-cutting supply chain may come at the expense of speed or flexibility.
- Sustainability: More companies are incorporating sustainability into their objectives. If reducing your carbon footprint is a priority, it is only good if this is reflected in your supply chain KPIs.
Step 3: Build a framework for managing risk
Unfortunately, supply chain disruptions are inevitable. The last few years, with Covid-19 and the Red Sea diversion have only served to highlight this risk.
A 2023 survey found that 63% of businesses have experienced supply chain losses higher than expected over the prior 2 years. Which comes as no surprise.
Freak weather events and geopolitics are just two obvious examples of threats. There are any number of potential disruptors out there, and many analysts speculate they are amplifying in their intensity.
As part of your supply chain strategy, a strong risk management framework helps mitigate the impact of these disruptions.
You need to breakdown your supply chain into its steps and identify the known risks of each stage, then build contingency plans accordingly. McKinsey have a detailed piece on constructing a risk management framework here.
Step 4: Optimise procurement and stakeholder relationships
Supply chains are complex. Most agree with that. In fact, 70% do according to a Supply Chain Worldwide Survey. Therefore, collaboration is key and a solid supply chain strategy needs to evaluate stakeholder relationships, to ensure they are being maximised.
What do we mean by this?
Well, it needs to outline the procedure for communicating with your logistics providers, the preferred channels, and the point of contact.
“We would always advise a deeper relationship with a logistics provider. Beyond simply transactional. If you aren’t already, look to build in regular check-up meetings and have a clear procedure for communication in the event of an emergency. Lean on their expertise in international logistics and customs. They’re things we’re always happy to help with.”
Jade Blackburn, Head of Sales, WTA
Your stakeholder relationships can significantly influence the efficiency and cost-effectiveness of your supply chain. Building strong partnerships with suppliers and logistics partners can unlock innovation, flexibility, and cost savings.
Key considerations for stakeholder relationships:
- Supplier segmentation: Categorise your suppliers based on their importance, cost, and the critical nature of their products or services.
- Strategic partnerships: Invest in long-term relationships with key suppliers and logistics providers. These partnerships can lead to better terms, improved product quality, and collaborative innovation.
- Cost vs. value: Don’t focus solely on cutting costs—consider the overall value stakeholders provide. A low-cost supplier that causes frequent delays or quality issues could end up costing more in the long run.
Step 5: Outline how to leverage visibility tools
Building a supply chain strategy today must center on increased technological use. The tools available today are transforming the management and analysis of international supply chains globally.
This isn’t about seeing where your shipments are on a map. This is about greater use of data and analytics related to your supply chain. 81% of supply chain professionals say analytics will be important in reducing costs, and they’re right. With this insight, you can make vital optimisation decisions correctly.
They form a vital part of modern day supply chain strategy.
Our visibility tool is called the WTA Platform, which provides all our clients with a huge range of vital data points for analyzing and improving their supply chains. Book a free demo today.
Step 6: Outline key policies to be implemented in order to achieve goals
Finally, you need to summarise the strategy by laying out the key considerations to achieve the goals specified, including a timeframe for their implementation.
A good supply chain strategy needs actionable steps to be successful.
Research different techniques and case studies from other companies to provide inspiration on how to meet the objectives. The purpose of this final stage is to create a bitesize, actionable list which is easy for internal staff to digest.
Step 7: Encourage collaboration across the organisation
Supply chains don’t operate in isolation. Collaboration across departments, such as operations, finance, marketing and sales, is crucial for a strategy to succeed.
Once your supply chain strategy is complete, take the opportunity to present it internally to drive buy-in.
John Sommer, Co-CEO, WTA
Informing departments on the supply chain strategy will break down silos, encouraging communication and massively aid shared understanding—a vital component of success.
Remember, a supply chain strategy is about making life easier and more efficient for staff as well as customers.
Creating a good supply chain strategy takes time and requires plenty of critical thinking. But done correctly, following the steps in this article, businesses can deliver a strategy which will provide the steps for optimising their operations and position their companies for long-term success.
Our experts improve international logistics processes every day at WTA. We guide companies on a wide range of supply chain KPIs, from cutting raw costs to hitting sustainability targets. Reach out today for guidance on meeting your supply chain goals.
