In today's global marketplace, supply chain management has become an essential part of business success. A resilient supply chain can help companies respond quickly to changing market demands, reduce costs, and improve customer satisfaction.
But, according to Gartner, only 21% of supply chain leaders believe they have a highly resilient supply chain management process in place today. This indicates that many companies have significant room for improvement when it comes to building a resilient and efficient supply chain.
An effective supply chain strategy is essential for every organization, but deciding on the correct supply chain strategy to improve your business activities is considerably more difficult than it appears.
In this article, we will explore the concept of supply chain strategy and discuss some of the best practices that leading global companies have implemented to build a resilient supply chain. By studying these examples, you can gain insights into how you can optimize your own supply chain strategy and improve your competitive advantage in the market.
What Is A Supply Chain Strategy?
A supply chain strategy is a long-term plan developed by a company to effectively manage its supply chain operations in order to achieve its business goals. It involves designing and coordinating the flow of goods and services from suppliers to customers, including procurement, production, transportation, and distribution.
Strategic supply chain management typically considers factors such as the company's product portfolio, customer needs, market demand, available resources, and competitive landscape. The goal is to create a streamlined and efficient supply chain that delivers high-quality products or services to meet customer demand at a competitive cost while also maximizing profitability.
However, there’s no off-the-shelf strategy; developing a successful one requires careful analysis, planning, and execution. It involves collaboration with suppliers, logistics providers, and other stakeholders in the supply chain.
Key Components Of A Supply Chain Strategy
There are three main components to effective supply chain strategies.
- Strategy Design: This stage involves analyzing your existing systems and processes to determine if they’re still relevant. To be efficient, you must include a review of existing and potential suppliers. You also need to include an assessment of ideal warehouse locations and whether you need to invest in technology at various points of the supply chain.
- Strategy Planning: This stage involves outlining the nitty-gritty of the entire supply chain strategy, where you’d map out the entire process of reaching your goals and objectives. A supply chain planning template will help you create a structured approach necessary for a successful implementation.
- Strategy Execution: Finally, at this stage, your plan is ready, and it’s time to execute it. This requires involving key stakeholders, aligning the supply chain strategy with the overall business strategy, and constant tracking and monitoring of performance to make necessary adjustments. Communication is critical during this stage to execute the strategy successfully and reach company goals efficiently and cost-effectively.
📚 Recommended read: Supply Chain Strategic Planning: A 5-Step Process + Template
Types Of Supply Chain Strategies
There are several types of supply chain strategies that organizations can adopt to optimize their operations and improve efficiency. Here are some of the most common ones:
Demand-driven supply chain strategy
Focuses on creating a more customer-centric and efficient supply chain by integrating demand signals throughout the supply chain. It involves using technology to collect and analyze data to understand customer demand and then adjusting production and inventory levels accordingly.
Agile supply chain strategy
Focuses on flexibility and responsiveness to changes in demand or market conditions. It allows organizations to quickly adapt to changing circumstances by being able to make quick decisions, change production processes, and quickly move products to different locations.
Collaborative supply chain strategy
Involves collaborating with suppliers, customers, and other partners in the supply chain to improve efficiency, reduce costs, and increase customer satisfaction. This strategy involves sharing information, knowledge, and resources to create a more efficient and effective supply chain.
7 Successful Supply Chain Strategy Examples
1. Unilever’s Collaborative Planning, Forecasting, and Replenishment (CPFR) Strategy
Unilever is a leader in the consumer goods industry. It deals in packaged food, drinks, personal care items, and cleaning products with a customer base worldwide. In early 2000, Unilever initiated a five-year growth strategy, including a major restructure of its supply chain management.
It concentrated on governance, global procurement, supply chain managers, the engagement of suppliers, and technology. Consequently, Unilever generated savings of $14.24 billion from its efforts and became the epitome of technology adoption in the consumer goods industry.
Unilever’s logistics activities provide the most potential for streamlining its supply chain and boosting its ability to meet its ambitious growth targets. The company merged its almost 30 warehouses into five huge distribution hubs equipped to fulfill customer orders in as little as a day.
Much of the consolidation is due to retailers’ adoption of the zero-inventory policy, which necessitates the best utilization of diffusion and cross-docking in warehouses. Unilever established CPFR agreements with select retail clients to optimize asset utilization, cut inventory, and improve efficiency.
Because orders are frequently influenced by factors that are hard to predict, communication between the producer and retailer is essential to improve forecast accuracy.
Unilever’s logistics department is now witnessing stronger partnerships with retailers, improved accuracy in forecasts, and greater efficiency in managing promotions.
Source: Semantic Scholar
💡Key takeaways: Through its CPFR strategy, Unilever has improved its forecast accuracy by 10%, which resulted in a 10% reduction in inventory holding and a 5% boost in sales volume.
By enabling collaboration with suppliers and enhancing supply chain visibility, you can engage with customers, create trust, have greater insight into all aspects of the supply chain to drive changes, improve forecast accuracy, and respond to potential problems faster and more efficiently.
👉 Use the free Unilever Supply Chain Strategy Template to get inspired by Unilever's Supply Chain plan to build your own!
2. Starbucks’ vertically integrated supply chain
Following over 50 years of operations, Starbucks today has over 35,000 retail shops worldwide with over $32 billion in yearly revenues.
This entails distributing coffee to an extensively large network of retail stores, and Starbucks’ main formula for this efficient network is its incredibly efficient supply chain.
Starbucks has a vertically integrated supply chain, which means Starbucks is engaged in every stage of the supply chain operation, from the coffee bean to the cup of coffee served to customers.
By using a vertically integrated system, Starbucks is working with about 400,000 coffee producers globally. The firm argues that its direct interaction with growers guarantees that the same quality and taste standards apply to all its coffee beans.
Starbucks also collaborates with producers directly because they commit themselves to supply fair trade coffee that is responsibly sourced.
The corporation even has its own standards for Coffee and Farmer Equity (C.A.F.E.) Practices and ESG, which demand all suppliers comply with specified ethical, environmental, and quality criteria.
In order to guarantee its producers comply with these criteria, Starbucks utilizes a strict screening system.
Starbucks’ supply chain appears to be inherently complicated because of its size and complexity. However, in 2008, Peter Gibbons, the company’s vice president for global supply chain operations, transformed the company’s complex, ever-expanding supply chain into a simplified, cost-effective process founded on basic operational structures.
First, all the supply chain activities were categorized across four macro operations, i.e., plan, source, manufacture, and deliver. Following that, he created a highly centralized logistics system that enables the organization to effectively manage and organize its global network.
Finally, a binary “Scorecard System” has been put in place to evaluate all supply chain activities in four metrics:
- Operational safety
- On-time supply and order fulfillment rates
- The overall cost of the supply chain
- Financial performance in terms of cost-effectiveness
Starbucks’ streamlined supply chain structure, management tools, and the utilization of digital technologies enable the firm to attain a high degree of efficiency and responsiveness, which are essential to its organization’s success.
Source: Medium.com
💡Key Takeaways: Through its virtual integration and C.A.F.E. program, Starbucks has been able to ethically source 98.6% of its coffee. Starbucks’ efforts to streamline its supply chain processes are reflected in its increased sales revenue, which has been reported as a 5% increase worldwide.
Regardless of the size of your business, streamlining your supply chain processes into a simple structure can help build an agile supply chain that is flexible to cater to the changing customers’ demands.
Moreover, supply chain integration across all the stakeholders can give your business an added benefit by giving you effective control over sourcing and distribution.
👉 Get the free Starbucks Supply Chain Strategy Template to get inspired by Starbucks' strategy to build your own!
3. Walmart’s strategic vendor relationship & cross-docking
Over the last two decades, Walmart has established itself as a leader in the retail industry with the highest sales per square foot.
In its transformation from a regional store to a global powerhouse, the company has become famous for its effective management of the supply chain.
Walmart has built its operations around the notion that customers' demands need to be fulfilled in the shortest time possible. The organization has concentrated on building cost structures that enable them to offer lower prices.
Following that, Walmart focused on establishing a more organized and comprehensive supply chain management strategy in order to capitalize on and expand this strategic advantage and gain market leadership.
Walmart has long been involved in strategic sourcing to locate suppliers capable of meeting demand while offering the best price. The firm then forms strategic alliances with its vendors, promising them long-term and increased purchases in return for the cheapest possible pricing.
Walmart has revolutionized supply chain management by establishing communication networks with suppliers to strengthen the relationship in order to enhance material flow and reduce inventories.
The worldwide network of suppliers, warehouses, and retailers is regarded as nearly like a single company. Cross-docking is a logistic procedure that lies at the heart of Walmart’s strategy of efficiently replenishing stocks. Cross-docking decreases inventory and transport costs and saves transport time.
Source: RTD Logistics
💡Key Takeaways: Through its effective communication networks with suppliers, Walmart has reduced its out-of-stock occurrences by 16%.
Just like Walmart, you can also benefit tremendously through strategic vendor partnerships and implementing cross-docking as an inventory management strategy. Strategic relationships with the vendor can enable your business to access new markets and improve business operations.
Cross-docking is an inventory strategy where products are directly transported to retail stores without being stored at warehouses. It helps in lowering inventory management costs, transport costs, and transport time.
👉 Use the free Walmart Supply Chain Strategy Template to get inspired by Walmart's Supply Chain plan to build your own!
4. Amazon's robust supply chain strategy
Several factors have helped Amazon become the e-commerce giant it is today, but its highly efficient supply chain is the most significant part of its success.
Amazon’s effective supply chain management revolves around three fundamental elements:
- Its extensive warehouse and distribution network
- A diversified fleet
- Implementation of advanced technology in its supply chain operations
The firm now manages more than 2,373 active facilities worldwide, with over 200 fulfillment centers in North America alone. This makes Amazon one of the biggest global supply chains. Furthermore, Amazon has amassed approximately 319 million square feet in warehouse size in the US alone.
The worldwide presence, mainly in large urban areas, allows the firm to complete customer orders efficiently at affordable rates.
Sellers may utilize the massive shipping network that Amazon has to their benefit by participating in the Fulfill by Amazon (FBA) program, which requires them to send their items to Amazon’s fulfillment centers where Amazon handles their packing and delivery. It also offers necessary customer service.
Furthermore, Amazon provides its FBA Onsite program in which Amazon optimizes the seller’s processes by using its own warehouse management software.
Suppliers continue to retain their inventories at their locations while Amazon picks up orders from a supplier warehouse and determines the most cost-efficient fulfillment option.
Amazon employs robots in its warehouses and fulfillment centers to pick and pack orders and also load and store stock. This enables the company to accelerate its operations beyond human capacity.
Furthermore, Amazon recently introduced Scout: a six-wheeled automatic delivery robot meant to carry products to customers’ doors.
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Source: e-Seller Hub
💡Key Takeaways: Amazon has reported an inventory turnover of around 8.39 for the fiscal year ending December 2022, which is incredibly good considering the size and scale of Amazon’s operations and outgoing inventory.
A considerable amount of resources are required to create such a significant supply chain.
However, your business may accomplish the same results with the same agility, creativity, and customer-focused strategy.
By implementing these supply chain strategies and constantly enhancing your operational procedures, you can broaden your company’s network while also boosting client satisfaction and loyalty.
👉 Get the free Amazon Supply Chain Strategy Template to get inspired by Amazon's strategy to build your own!
5. Tesla's specialized supply chain strategy
The automobile industry has come a long way from the days of Henry Ford utilizing an assembly line manufacturing process to expedite the creation of a single-vehicle model.
Tesla is now producing revolutionary, tremendously popular, and elegant automobiles directly in California, a place with extremely expensive real estate, while other auto manufacturers are outsourcing their operations abroad to lower-cost locations.
We can evaluate Tesla’s supply chain strategy over time and discover certain distinct characteristics that set it apart from its competitors.
Tesla’s business model is based on a concept that has been fundamental to their success: a determination to take entire control of the supply chain, from raw materials to technological integration to the final user experience.
Instead of having an extensive supply chain network of low-cost part manufacturers, Tesla has a vertically integrated supply chain with a huge car plant close to its corporate headquarters. It also owns a big battery factory.
It designs, produces, sells, and services its own products through its own sales and service network. Tesla has served a significant role in the restructuring of the automobile industry, particularly in terms of customer relationships.
The company’s digital supply chain is even more intriguing, which involves releasing new software and algorithm upgrades to existing car owners utilizing cloud computing.
Source: SmartSheets
💡Key takeaways: Tesla's success in the automobile industry can be attributed to its vertically integrated supply chain strategy that includes direct control over the entire supply chain, from raw materials to customer experience. This approach has allowed Tesla to manufacture revolutionary electric cars directly in California, utilize cloud computing to provide software upgrades, and build strong customer relationships. Tesla's supply chain strategy has redefined the traditional automobile industry and set the bar for innovation in the digital era.
👉 Use the free Tesla Supply Chain Strategy Template to get inspired by Tesla's Supply Chain plan to build your own!
6. Nike’s unique and effective supply chain strategy
Nike is the world’s leading sportswear brand. The multinational giant, as one of the most famous names in the world, is perhaps the most significant player in the contemporary textile business.
Nike’s supply chain is extremely complicated, with millions of sneakers and other items sold each year.
Although there are clearly considerable challenges in managing such complex supply chains, Nike’s proactive strategy to supply chain management is a major contributor to its amazing success.
Nike’s supply chain strategy is centered around three basic principles:
- Outsourcing
- Diversity to reduce risk
- Corporate social responsibility to govern the company’s impact on the society in which it operates.
Its supply chain has been developed from these core principles to become one of the most successful supply chains globally.
Outsourcing and diversification are two fundamental elements guiding Nike’s supply chain strategy. Nike outsources all of its footwear and textile manufacturing to independent vendors. It was one of the first international corporations to use this strategy.
Outsourcing is inherently dangerous, but Nike effectively managed this risk from the start by diversifying its supply base considerably. Nike is less susceptible to unforeseeable situations like accidents and adverse weather events since it’s not entirely dependent on any one source.
Nike ensures continuous communication with its suppliers to ensure that its high-quality requirements are followed at every stage of manufacturing, offering support through resources and training to introduce suppliers in Total Quality Management (TQM) methodology.
Nike adopts an ambitious strategy to monitor the effects of its supply chain that highlight its forward-thinking. Nike procured 93% of its products and components from sustainably managed factories in 2019.
It has also ended its business with factories that force its employees to do excessive overtime. All these factors have contributed to Nike’s phenomenal success in the global market.
Source: Nike
💡Key Takeaways: As mentioned earlier, through its TQM approach and increased focus on sustainability, Nike has sourced 93% of its products from factories that are run sustainably.
Nike’s unique distribution model helps it to save $0.15 per unit. Considering the amount of stock Nike produces, a $0.15 saving in manufacturing overhead saves millions of dollars for Nike.
👉 Get the free Nike Supply Chain Strategy Template to get inspired by Nike's strategy to build your own!
7. Zara decentralized manufacturing and distribution facility
Zara is a global retail clothing brand known for its revolutionary strategy of bringing fast fashion to its consumers. The brand is valued at $25.4 billion as of 2022 ad has 1,939 stores worldwide. Its online shop receives 4 billion visitors annually.
Zara is a brand with a successful supply chain strategy, which is the most innovative part of the company. This strategy allows Zara stores to rotate stocks every two weeks—an unheard-of feat in the fashion industry.
In the early days, Zara relied on a centralized hub that manufactured all its clothes and used trains to distribute products to the stores. However, it proved inefficient as the chain grew. The centralized hub was reaching capacity limits, and issues of safety and security were becoming troubling.
Decentralization became a primary business strategy. Production and distribution centers were built close to where stores are located so that Zara can maintain the shortest stock rotation times in the industry. This allows the company to maintain its edge in the fast fashion industry and remain ahead of the competition.
Apart from investing in its logistics capability, the company also pursues excellence in its manufacturing practices. Zara’s production model regularly adopts the latest technological innovation, allowing it to directly manufacture over 50% of its own products.
This makes Zara the first clothing brand to achieve complete vertical integration, where the brand takes care of manufacturing, distribution, and retail. With an agile supply chain, there’s no doubt that Zara will continue to lead the pack in the years to come.
Source: CBInsights
💡Key takeaways: Zara's success in the fashion industry can be attributed to its innovative supply chain strategy that includes decentralization, technological advancements in production, and direct control over manufacturing, distribution, and retail. Its agile supply chain allows Zara to rotate stocks every two weeks and remain ahead of the competition in the fast fashion industry.
👉 Use the free Zara Supply Chain Strategy Template to get inspired by Zara's Supply Chain plan to build your own!
Differences in Supply Chain Strategy
On the one hand, Nike’s 100% outsourcing of its operations gives it a competitive advantage, and on the other hand, Tesla’s specialized vertically integrated supply chain works best for its success.
All this highlights one fact: there is no single formula for success when it comes to supply chain strategy.
No matter what strategy you may apply to your supply chain, due diligence, effective communication, and incorporation of the right technology at the right time is the key. Nike has benefited from a vast pool of suppliers when it diversified the risk and implemented strict quality control.
In contrast, Tesla has achieved market leadership in electric vehicles through its specialized, do-it-all-in-house strategy. In a similar vein, to reap the full potential of the abovementioned strategies and innovative technologies, you must adapt and alter your supply chain strategy to account for your business needs and market dynamics.
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