Supply Chain Strategy: The Ultimate Guide

Due to common misconceptions around agility, over 30% of executives wrongly believe that they can’t afford to be agile and have refrained from agility investments as part of supply chain planning. And unfortunately, when a significant disruption inevitably happens, their organization lacks the “insurance” that agility offers and must pay to stabilize business.

Supply chain agility is the ability to quickly and reliably sense and respond to disruptions through supply chain risk management — without sacrificing quality or cost optimization goals. Agility is critical because, in most industries, both demand and supply fluctuate more rapidly and widely than in the past, and this impacts supply chain planning.

Measuring the impact of supply chain agility means understanding how effectively supply chain performance is maintained when things don’t go as planned. To compare baseline performance with current performance, you will need to combine several key metrics, including order fulfillment cycle time, total cost to serve, upside supply chain flexibility and perfect order fulfillment. Then, associate performance variations with the supply chain risk management response. This analysis will help determine which agility capabilities should be activated or deactivated to impact business performance.

There are six categories of agility capability:

• Planning: Supply chain risk management, end‑to‑end supply chain planning, scenario planning, predictive analytics

• Visibility: Orchestrating a transparent and intelligent end-to-end supply chain, establishing a control tower, breaking organizational and information silos

• Network: Diversifying the supply base, “nearshoring,” segmentation, expediting, supplier collaboration, inventory management

• Operations: Supporting adaptability, flexibility and automation in manufacturing, distribution and logistics

• Products: Product platforming, postponement for variability

• People: Fostering an agile culture among employees

Chief supply chain officers (CSCOs) have every reason to be exhausted after the disruptions and shortages of the recent past, and to be concerned about the future of supply chain. Many CSCOs are asking, “How do I conserve organizational energy while increasing impact?”

CSCOs must diagnose and translate business impacts and constraints into specific supply chain responses that maintain network performance for appropriate balance between short-term cash pressure and longer-term growth aspirations. Timely and effective supply chain cost optimization actions raise the supply chain leadership profile and create the opportunity for expanded collaboration and influence on strategic design choices for even greater performance impact. 

Identify four themes to respond to business disruptions with targeted supply chain cost optimization actions.

First, leverage scenario analysis and situational decision governance in response to disruption events. When disruptions occur in the market, the relevance of budgets, forecasts and plans must be evaluated and appropriately discounted to reflect the new reality. As part of supply chain planning, assess changes to demand drivers and supply enablers and gather sufficient information to revise your supply chain costs.

Second, pursue alternative supply and enable profitable demand balancing in response to constrained resources.  As the past decade has demonstrated, the supply chain planning process must now account for resource constraints beyond asset capacity. All primary resource categories — including equipment, labor, energy, materials and freight — have experienced challenges. Maintaining optimized network performance amid these constraints requires not only supply chain cost optimization but also proactive integrated business planning practices.

Third, improve alignment and reduce complexity in response to constrained margins. Supply chain has the primary responsibility for ensuring reliable, efficient product availability and service delivery to fulfill demand. This includes applying supply chain cost optimization techniques such as avoiding the costs of product quality or service delivery failures, and minimizing the level of operating inefficiencies, waste and losses. When market dynamics create constrained margins that cannot be remedied by competitive price increases to customers or relief from suppliers, CSCOs can make proposals that would increase operating efficiency (e.g., better alignment, reduced complexity).