The global economy is going through hectic times and nothing seems certain yet. Global developments such as the Brexit, trade conflicts and the climate crisis affect everyone. How does your company stay afloat in all these changes? Tijmen Muijs, senior supply chain specialist, argues that a solid business strategy and supply chain strategy are especially important now. 'Well thought-out choices are the foundation for healthy margins and prevent you from being taken by surprise.' How do you build such an all-weather strategy?
Global storm
'Every day something happens that could affect your business: the Brexit is still not here yet but has been casting its shadow for a long time. Trade conflicts between America and the rest of the world presage hefty price developments, new regulations and even product scarcity. The climate crisis leads to drastic legislative measures, but also to changes in public opinion and consumer behaviour. What's more: these developments are moving beyond factual discussion and are increasingly driven by emotion. This makes the effects even more unpredictable and the risks even greater. It may seem paradoxical, but precisely in times of high unpredictability, a clear course offers the most important chances of survival. Indeed, by being more agile than competitors, you can even increase your competitive edge.'
Staying on course means making choices
'There are many fancy terms for it, but a good strategy basically revolves around one key question: where are you putting your money and what is the return on it? It is always important to have that clear, not just in times of crisis. Yet few companies take the time to consciously think about this. This is understandable: you start a business, expand, see opportunities, grow, add products, attract new customers - it all feels like progress. And yet, it is important to take a step back once in a while and look at what your business is all about and for whom. Every hour and every euro can only be spent once. Are you spending it on the customers and products that yield the most? Are you investing in the things that will earn you the most in the long run? Those questions become even more pressing as the world around you becomes more unpredictable.'
Why is a supply chain strategy needed right now?
'In times of great change, you want to keep a grip on the things you do have influence over: your own strategy. Business strategy and supply chain strategy go hand in hand. The business strategy determines what you want to do, for whom and in which markets. The supply chain strategy determines how you will do that: which product-market combinations do you distinguish and how will you serve them? Depending on customer requirements per segment and the importance of each segment for your business, you define things like service levels, quality requirements, marketing efforts, the degree of customisation and service. Procurement and product development are also part of this. That way, you invest your money and energy in the things that yield the most: 'the biggest bang for the buck.' Incidentally, this goes further than just money: things like sustainability can also be part of your desired returns.'
Start today
'There are several methods for creating a supply chain strategy. I have covered a few in previous articles. It doesn't matter so much which method you use. The most important thing is to make conscious choices. With clients, I often start with a simple initial analysis of a few key figures: what contribution do certain products or customers make to costs, turnover and inventory utilisation? This often gives a clear first insight and it becomes clear that sometimes too much money and energy is unconsciously spent on things that are not worth it (anymore). Then we move on to further analysis and segmentation and can make targeted choices that are translated into activities.'
Firmly at the helm
'A sound supply chain strategy has two very important benefits:
First, you can be sure that you are spending your time and money on the things that yield the most. Your margins are healthy, stocks are aligned with what is needed, investments are well thought out and diversification ensures a healthy spread of risk. Your basics are in order, the ship is firmly in the water.
Second, you will not be surprised by developments that affect your market. You have made clear choices and you have insight into the results. So it is easy to monitor the market and your performance in a focused way. However hectic the market is and whatever developments take place, you don't get taken by surprise and can adjust course in time if necessary.'
Want to know more?
On 6 November, Tijmen Muijs will give a presentation on this topic in the Supply Chain Theatre during ICT & Logistiek. He will show how to design a supply chain strategy, how to use it to give direction to your operations and what that yields in terms of returns.
Michel van Buren, CEO BLMC Supply Chain Optimisation gives this presentation at the Supply Chain Theatre on 5 November.
You can attend this presentation free of charge but places are limited. Register here to be assured of a place.
