Supply chain management is the process of planning, organizing, and coordinating the flow of materials and information among the various stages of a business to meet customer demand. It is a critical element of any company that wants to grow and maintain its competitive edge.
KEY Takeaways
Supply chain management is the process of managing the flow of materials and products through an organization from their source to their final destination. Supply chain management aims to ensure that products are delivered on time, cost-effectively, and in the proper condition.
The 3 Levels of Supply Chain Management: Strategic, tactical and operational
The three levels of supply chain management are strategic, tactical and operational.
1. Strategic Planning
This level of supply chain management is responsible for developing long-term plans that outline the company's overall objectives and goals. It includes identifying and assessing the company's strengths and weaknesses, making strategic decisions about where to focus resources, and creating a vision for the future.
This level of planning looks at the big picture and focuses on long-term decisions. This includes decisions such as:
- Single sources vs multiple suppliers
- Technology sharing
- Location decisions
2. Tactical Planning
Tactical planning involves developing specific plans to achieve specific objectives within the scope of the strategic plan. These plans may include setting targets, establishing priorities, and designing strategies to achieve those targets.
Tactical planning is focused on specific goals and objectives. This includes:
- Purchasing strategies
- Transportation
- Warehouse locations and distribution centers
- Distribution channels
3. Operational Execution
Operational execution is responsible for implementing the tactical plans into action to achieve them. This includes coordinating with various departments within the company, setting up systems and procedures to support execution, and ensuring that all stakeholders are kept informed of progress throughout the process.
Operational planning is focused on day-to-day tasks and details how these tasks should be carried out to achieve the company's objectives. This includes:
- Setting schedules
- Maintaining inventory levels
- Coordinating resources
- Ensuring quality, on-time delivery and cost
Effective supply chain management is essential for any business. By understanding the three levels and how to implement them, you can ensure your company's success. Each level has its own set of challenges and priorities, which must be balanced to achieve success. Failure to do so can lead to wasted resources and lost profits.
Summary:
| Characteristics | Strategic | Tactical | Operational |
|---|---|---|---|
| Time Horizon | Long-term (3-5 years or more) | Medium-term (1-2 years) | Short-term (daily to 1 year) |
| Focus | Direction and vision | Implementation of strategy | Execution of tactical plans |
| Scope | End-to-end supply chain, network design | Procurement, inventory optimization, capacity planning | Order processing, transportation, warehousing, quality control |
| Examples | Sourcing strategy, supplier selection, supplier relationship management | Demand forecasting, production planning, transportation route optimization | Inventory management, warehouse layout, shipment tracking, order picking |
| Frequency of Review | Periodic (annually or bi-annually) | Ongoing (quarterly or semi-annually) | Frequent (daily or weekly) |
| Level of Detail | High-level, broad goals that align with overall business strategy | Specific objectives that support supply chain goals and initiatives | Granular details of day-to-day supply chain processes and procedures |
| Involvement of Leadership | Top-level leadership, including C-suite executives and board members | Middle management, including supply chain directors and managers | Lower-level management and employees who execute supply chain tasks and activities |
| Level of Risk | High, strategic decisions with long-term implications for supply chain performance and business success | Moderate, tactical decisions with shorter-term implications for supply chain performance and business success | Low, operational decisions with immediate impact on supply chain performance and customer satisfaction |
| Degree of Flexibility | Low, as strategic decisions may require long-term commitments and significant resources | Moderate, as tactical decisions can be adjusted as needed based on changing business needs and supply chain performance | High, as operational decisions may require immediate adjustments to ensure supply chain performance and customer satisfaction |
| Level of Coordination | High, as decisions impact the entire supply chain and require collaboration among multiple stakeholders | Moderate, as decisions impact specific supply chain functions and require coordination among various teams and departments | Low, as decisions impact specific supply chain tasks and activities and require coordination among individual employees and teams. |