Five Steps to Align Business Strategy With Supply Chain Capabilities

Chief supply chain officers (CSCOs) must link business strategy with supply chain segmentation and functional capabilities, however, in reality few supply chain management professionals are aware of who is responsible for end-to-end and functional supply chain segmentation. They don’t understand how segmentation can impact the trade-offs and functional capabilities, including supply management processes, necessary to support the business.

“Supply chain leadership must learn to decode demand-driven customer value and business strategy to drive supply chain strategy and identify key capabilities required for profitable fulfilment,” said Ray Barger, research director at Gartner.

“Offerings valued by external customers drive supply chain strategy and trade-offs. Supply management leaders must communicate these trade-offs to functional teams, so they thoroughly understand them,” Mr. Barger said “They must be able to translate them into specific functional strategies that support cost, speed, service or other supply chain segmentation outcomes.”

There are five essential steps to connect supply chain strategy and segmentation with the centers of excellence (COE) and functional execution capabilities and processes. This five-step flow will enhance supply management value:

1. Refine the supply chain strategy and segmentation: This involves defining or refining your supply chain strategy to drive segmentation and make key trade-offs around cost, speed and service.
2. Link supply chain segmentation attributes to functional capabilities: This involves creating linkages between cost, speed and service attributes and core functional capabilities (for example, supply management cost-efficiency or agility).
3. Use capabilities to map/configure processes: This involves mapping and configuring the needed capabilities to supply management processes (for example, efficient bulk buys and locked volumes). Consider using a cost-to-serve model to understand the cost and working capital implications of different supply chain services and processes that support trade-offs to deliver customer value.
4. Align internal stakeholders to execute processes: This involves supply management leadership communication and collaboration to align internal stakeholders on the specific processes, actions and appropriate metrics necessary to successfully execute and deliver value.
5. Align external stakeholders on processes and actions to execute and deliver value: This also requires leadership engagement to ensure that suppliers are clear on, and aligned with, the actions and performance expectations necessary to support cost, speed and service attributes.