10 Minute Supply Chain & Logistics Strategy

Summary

The speaker addresses the surprising scarcity of supply chain strategies in businesses despite their importance. They offer a concise guide to creating a strategy, emphasizing the need for alignment between business, financial, and service strategies to satisfy shareholders, customers, and the team. The focus should be on three clear objectives, derived from the business's goals, and translated into actionable tactics and measurable KPIs. The presentation aims to simplify the process, proving that a supply chain strategy can be straightforward and effective.

Takeaways

• 📈 Few businesses have a supply chain strategy, which has not changed much over the last 20 years.
• 📝 Developing a supply chain strategy is not difficult and can be done quickly.
• 🗣 Businesses often have a clear vision and mission, but these do not always translate to actionable strategies for supply chain staff.
• 🔍 Many businesses lack a documented supply chain strategy, leading to significant impacts on business performance.
• 📉 Glitches in the supply chain can cause an average fall of 8.6% in shareholder value.
• 🔄 Aligning business strategy, financial strategy, and service strategy is crucial for supply chain success.
• 🎯 Effective supply chain strategies should have clear, simple objectives (typically three or four).
• 🏆 Key components of a successful supply chain strategy include warehousing, transport, procurement, customer service, inventory policy, and planning process.
• 🛠 Objectives should be meaningful and easy to understand for all employees, from top management to warehouse staff.
• 📊 Once objectives are set, tactics and key performance indicators (KPIs) should be developed to support and measure the achievement of these objectives.

Q & A

Why do many businesses struggle to put a supply chain strategy together?

Many businesses struggle because they often develop a high-level vision and mission that doesn't effectively translate to the operational level, where the actual supply chain work is done.

What is the significance of having a supply chain strategy?

A supply chain strategy is crucial for aligning business, financial, and service strategies to ensure happy shareholders, customers, and a motivated team. It also helps to prevent supply chain glitches that can negatively impact shareholder value.

What is the average fall in shareholder value due to supply chain glitches according to the study mentioned in the script?

The study identified that glitches in the supply chain cause an average fall of 8.6% in shareholder value.

What percentage of businesses actually have a documented supply chain strategy?

Only 39% of businesses have a documented supply chain strategy that is understood by their people.

How does the lack of a supply chain strategy impact business performance according to the surveys conducted?

65% of the businesses that do not have a supply chain strategy believe that it impacts their business performance negatively.

What are the three key components of a supply chain strategy as depicted in the Venn diagram?

The three key components are business strategy, financial strategy, and service strategy, and their alignment is essential for a successful supply chain.

Why is it important to have a clear and simple objective for the supply chain strategy?

Clear and simple objectives help to focus the organization on doing the right things and are easier for all levels of the organization to understand and act upon.

What are the recommended number of objectives for a supply chain strategy?

It is recommended to have three or four objectives for a supply chain strategy, focusing on cost, service, quality, and often safety in certain industries.

What is the first step in developing a supply chain strategy according to the script?

The first step is to come up with three clear objectives for the supply chain that align with the overarching business objectives.

Why is it necessary to develop tactics and measures after establishing the objectives?

Developing tactics and measures ensures that the objectives are actionable and that there are clear indicators to measure progress and success towards the objectives.

What is the recommended approach for articulating supply chain objectives to ensure they are meaningful to all levels of the organization?

The objectives should be articulated in simple catchphrases that convey the purpose behind them, making them relatable and understandable to everyone, including those working at the operational level.

Outlines

00:00

🤔 The Challenge of Implementing Supply Chain Strategy

The speaker expresses surprise at the lack of supply chain strategies in businesses over the past 20 years and aims to show viewers how to quickly develop a strategy. They share a presentation given at a conference, emphasizing the frustration with businesses struggling to create a strategy, which they believe is not complex. The speaker highlights the disconnect between a company's vision and the understanding of those working in the supply chain, using the analogy of geese flying in formation to represent executive alignment but questioning if workers like 'Jim' in the warehouse understand the company's goals. The importance of a supply chain strategy is underscored by its impact on shareholder value and the speaker promises to guide viewers through the strategy development process.

05:00

📈 Developing a Supply Chain Strategy for Top Performance

The speaker outlines a method for developing effective supply chain strategies, focusing on alignment between business, financial, and service strategies. They use a Venn diagram to illustrate the importance of these three areas overlapping to ensure happy shareholders, customers, and a cohesive team. The speaker simplifies the strategy into three main components: clarity in business strategy, focus on warehousing, transport, and procurement for financial alignment, and establishment of customer service, inventory, and planning policies for service alignment. They argue that focusing on these nine elements is crucial for a supply chain to be in the top 2% of performers. The speaker encourages starting from the top with clear objectives and working down to actionable tactics and measures, stressing the importance of keeping objectives simple and meaningful for all levels of the organization.

10:00

📝 Simplifying Supply Chain Strategy with Clear Objectives and Measures

The speaker advises on setting three to four clear objectives for the supply chain, derived from organizational and business goals. They recommend focusing on cost, service, quality, and possibly safety, depending on the industry. The speaker emphasizes the need for these objectives to be articulated in a way that resonates with everyone in the organization, including warehouse workers. They provide examples of objectives such as 'always in stock' and 'lowest prices' and discuss the tactics and key performance indicators (KPIs) that support these objectives. The speaker stresses the importance of starting with clear objectives before considering any new systems or processes, ensuring that all initiatives directly support the defined goals. The summary concludes with a reminder of the simplicity of creating a supply chain strategy and invites viewers to explore further resources on the topic.

Keywords

💡Supply Chain Strategy

Supply Chain Strategy refers to a comprehensive plan that outlines how a company will manage its supply chain to meet its business objectives. In the video, the lack of a supply chain strategy is highlighted as a common issue among businesses, affecting their performance and shareholder value. The script emphasizes the importance of developing a clear strategy to align business, financial, and service goals, ensuring a best-in-class supply chain.

💡Business Performance

Business Performance is a measure of how well a company achieves its objectives and generates value. The script mentions that 65 percent of businesses without a documented supply chain strategy believe it impacts their business performance negatively. This underscores the need for a strategic approach to supply chain management to improve overall business outcomes.

💡Alignment

Alignment in the context of the video refers to the harmonization of various strategies within a company to ensure they work together effectively. The script discusses the importance of aligning the business strategy, financial strategy, and service strategy to achieve a happy team, satisfied customers, and content shareholders.

💡Shareholder Value

Shareholder Value is the economic value that a company provides to its shareholders. The script cites a study indicating that supply chain glitches can cause an average fall of 8.6% in shareholder value, highlighting the direct impact of supply chain efficiency on the financial health of a company.

💡Tactics

Tactics are specific actions or steps taken to achieve strategic objectives. In the script, tactics are discussed as the second step in developing a supply chain strategy, following the establishment of clear objectives. Examples given include inventory management and sales and operations planning to achieve the objective of 'always in stock.'

💡Key Performance Indicators (KPIs)

KPIs are quantifiable measures used to track performance against objectives. The script suggests that having a limited number of KPIs under each objective is crucial for measuring the effectiveness of supply chain strategies. For instance, 'on-shelf availability' and 'supplier performance' are proposed as KPIs for the objective of 'always in stock.'

💡Inventory Management

Inventory Management is the process of overseeing and controlling the stock of goods an organization holds. The script emphasizes the importance of good inventory management practices as part of the tactics to achieve supply chain objectives, such as ensuring 'never any back orders.'

💡Procurement

Procurement is the process of acquiring goods or services from an external source. In the script, procurement is identified as one of the three big-ticket items for financial alignment in a supply chain strategy, highlighting its role in cost management and the overall efficiency of the supply chain.

💡Objectives

Objectives are goals or targets that a company aims to achieve as part of its strategy. The video script suggests that a supply chain strategy should start with defining three to four clear objectives, such as cost reduction, service improvement, and quality enhancement, which should be meaningful to all levels of the organization.

💡Service Alignment

Service Alignment refers to ensuring that the services provided by a company meet the needs and expectations of its customers. The script discusses the importance of having a customer service policy, inventory policy, and a good planning process as part of service alignment to achieve happy customers.

💡Financial Strategy

Financial Strategy is the plan for managing a company's finances to support its business goals. In the context of the video, financial strategy is one of the three interlocking circles in the Venn diagram, emphasizing its importance in achieving a well-aligned supply chain strategy that satisfies shareholders.

Highlights

Speaker expresses frustration over the lack of supply chain strategies in businesses over the past 20 years.

A short presentation from a recent conference is shared to demonstrate the ease of creating a supply chain strategy.

Many businesses have a clear vision and mission but fail to translate this down to supply chain workers.

A study identified that supply chain glitches cause an average 8.6% fall in shareholder value.

Only 39% of businesses have a documented and understood supply chain strategy.

65% of businesses without a supply chain strategy believe it impacts their performance.

Supply chain strategies should focus on alignment between business, financial, and service strategies.

Alignment of strategies results in happy shareholders, customers, and a cohesive team.

Three key elements for each strategy component are identified: clarity, cost, service, and quality.

Speaker emphasizes the importance of having only 3-4 supply chain objectives for focus.

Objectives should be derived from top-level business goals and be meaningful to all employees.

Examples of simple, actionable objectives include 'always in stock' and 'lowest prices'.

Tactics should be developed after objectives to ensure they directly support the strategy.

Key Performance Indicators (KPIs) should be aligned with objectives, not exceeding three per objective.

The process of creating a supply chain strategy is simplified to a manageable and effective approach.

Additional resources on supply chain strategy are available on the speaker's blog.

Engagement is encouraged through comments, likes, shares, and subscription for further insights.

Transcripts

okay so why do so few businesses have a

supply chain strategy i'm amazed that

hasn't changed much over the last 20

years what i'm going to show you this

week is how to put a strategy together

really quickly and that's coming right

up

okay so what i'm going to share this

week is actually a short presentation

that i gave at a recent conference

because it's really frustrating i see so

many businesses that struggle to put a

supply chain strategy together and it's

actually not that hard so i'm going to

race through this there's quite a bit of

content

but there's going to be enough here for

you to actually put a strategy together

so first of all

what i often see in businesses is that

they have a great vision and mission

and you know very often there's these

photographs of people looking out over

the landscape or breaching whales or

something like that and it's all about

the great things they're going to do in

the world and the great things they're

bringing to the market but that doesn't

always translate down to the people

actually working in supply chain so here

we've got a whole bunch of geese

greyland geese i think they are

flying in a neat formation it's rather

like the senior executive team coming

back from a three-day off-site and

they've actually worked out the vision

and mission and the objectives for the

business and they know exactly what's

happening but i suppose the question in

my mind is does jim who does the product

picking in the warehouse really

understand what's happening and that's

the big gap in supply chain strategies

people you know develop it way up here

and it's very conceptual and it's hard

for people to understand lower down in

the organization at the coal face so let

me show you how i develop strategies

that really do work and i do this for a

lot of our consulting clients so first

of all

let me just point out that a lot of

businesses are burning money in the

supply chain without having a strategy

there was a study done

years ago that actually identified that

glitches in the supply chain

cause an average fall of 8.6

in shareholder value so you know a

strategy so important to keep people

focused on doing the right things so

that you don't get these supply chain

glitches and in recent surveys that

we've done those results have been the

same over about the last 20 years or so

we ask people does your business have a

supply chain strategy and if you don't

do you think it impacts your business

performance and if we look at these only

these charts only 39 of businesses

actually have a supply chain strategy

it's documented people understand it

and of all of those people who don't

have one guess what 65 percent yup it's

65 percent believe that that impacts the

performance of their business well

put one together

you know it's not rocket science

so

there's a couple of uh tips that i'll

give you on on putting a strategy

together but first of all i'd just like

to share what i believe are the really

important components of supply chain and

why a strategy is so important

and let me just build this diagram for

you so it's venn diagram we've got three

interlocking circles here and it's about

getting alignment between the business

strategy the financial financial

strategy and the service strategy and

why is that so important well where

these circles interlocked you see if we

get the strategy aligned business

strategy aligned and the financial

alignment we get very happy shareholders

if we get the service and financial

alignment right we get very happy

customers and if we get the strategic

and service alignment right we get a

happy team because they know what

they're supposed to be doing

and i've just simplified it by putting

three things against each of these

elements of the strategy in terms of the

business strategy we've got to have

clarity around that we've got to develop

it if it's it's you know immature and

we've got to constantly calibrate it and

circle back and make sure that it's

right in terms of the financial

alignment you know from a supply chain

perspective i think there's three big

ticket items there one is warehousing

one is transport and one is procurement

and then on the service alignment the

three things there to focus on are

having a customer service policy an

inventory policy having a good planning

process and making sure that we have

good inventory management practices in

place so look we can have a list of 50

things that you have to get right in the

supply chain but i reckon those three

interlocking circles with nine elements

around the outside are the crux of it

and if you get those right not only will

your supply chain actually be you know

in best of best in breed best in class

which is the top 20

of performers but we see amongst our

clients if they get this right they're

in the top two percent that's really the

cream of the cream

and so the simple way that i explain

this at a recent conference is that you

have to start from the top you work down

and you come up with three simple

objectives for your supply chain not

eight not twelve

i see so many supply chain strategies

that have you know 16 pillars that we're

going to focus on

why do why do i think that's too much

well it's just too much for people to

focus on you know we can't

we can't be trying to keep 16 balls in

the air at once so three or four

is generally the number that i recommend

and we want to come from the top down

and how do we decide those three

objectives well what are what's the

organizational objectives what's the

business objectives

what does the business expect of our

supply chain and when i'm helping

clients put supply chain strategies

together i actually start with the

senior executive team and go around and

understand what the business strategy is

and what they expect of the supply chain

and what they believe the supply chain

performance is like and what they'd like

it to be and so

with that overarching business objective

it's not then too hard to drop down a

level and work out what should be three

or four supply chain objectives now i'll

give you a tip there's generally one

around cost there's generally one around

service and there's probably one around

quality and very often i say to people

uh in many industries there are there's

definitely a fourth and if i said you

know mining or heavy industry you know

immediately what i meant and that is

safety so three or four objectives

should be enough for most businesses

now the trick here is to articulate

these objectives in such a way that

they're really meaningful to jim who's

picking the product in the warehouse it

shouldn't be something too conceptual

so let's think about

cost for a moment

what could we have as a simple objective

around cost it might be

lowest total cost always

what could we have as an objective

around service

never any back orders

so think about that for a moment what

does that mean to people working in the

supply chain never any back orders if

i'm working in inventory it means i've

got to have my inventory accuracy right

i've got to get the cycle counting right

if i'm working in procurement or

inventory management i've got to make

sure that we've always got the right

amount of stock if i'm picking in the

warehouse or dispatching i've got to

make sure that the orders are always you

know 100

in full

so coming up with these little sort of

catch phrases around the objectives that

really articulate the purpose behind

them is so important for people right

you know up and down the organization to

fully understand so step one is to come

up with those three objectives

so here i've got some examples always in

stock lowest prices and quality products

once we've done that then we can start

developing the tactics now what i see in

so many businesses is they kind of start

at this level oh we need a new transport

management system we need a new

warehouse management system we need new

warehouses

why

you need to work out the objectives

first and then if those things actually

directly support achieving those

objectives then they make sense but

otherwise they don't so that's why we've

got to start from the top so always in

stock what what sort of things what sort

of enablers or

initiatives do you think we'd have to

focus on to make sure that we're always

in stock

great inventory management

sales and operations planning you know

great inventory accuracy you know

there's three things that we might focus

on what about lowest prices if we want

the lowest prices to to our customers

what do we have to focus on we have to

buy well

so when we're buying product in or

manufacturing it we've got to make sure

that we get that price down we've got to

have the movement through the supply

chain as low cost as possible so you see

then how we're really focusing in on

what matters

from a tactical perspective and then of

course the final thing

is that once we've developed the tactics

we need to develop the measures

so you don't need hundreds of kpis in

your supply chain you probably need

under each of those objectives maybe

three

and so let's have a think about always

in stock what might be the kpis that we

measure

okay if you're a retailer you'd be

measuring on shelf availability or will

you be counting gaps on the

shelves

you'd be

monitoring your availability in the

warehouse you'd be monitoring your

supplier performance in full on time

delivery so again it's all aligned

if we if we've got an objective of

always being in stock then we need to

have some enabling processes and

technologies to make sure that we're

doing that and we've got to measure the

right things to ensure that we're

achieving that as well so look

in a nutshell that is how simple it is

to put a supply chain strategy together

it's not difficult you can do it on a

page so i hope that's been helpful to

you if you jump onto our blog i'll put

links below there's other videos here on

the channel about supply chain strategy

there's definitely some articles so i'll

put a link below in the blog a link to

the blog

and of course you know how it works uh

do comment i i personally reply to all

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[Music]

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