Chances are you've heard the term supply chain strategy. Used informally, it is often confused with supply chain management, where supply chain operations are controlled to reduce costs. There's some truth to this definition, but supply chain strategy really is broader; it defines how the supply chain should operate in order to compete. Supply chain strategy is an iterative process that evaluates the cost- benefit trade-offs of operational components.
A well executed supply chain strategy results in value creation for the organization.
Business strategy involves leveraging the core competencies of the organization to achieve a defined high-level goal or objective. It also includes the analytic and decision-making process surrounding what to offer (e.g., products and services), when to offer (timing, business cycles, etc), and where to offer (e.g., markets and segments) as a competitive plan.
While the business strategy constitutes the overall direction that an organization wishes to go, the supply chain strategy constitutes the actual operations of that organization and the extended supply chain to meet a specific supply chain objective.
That being said, most companies have a business strategy, but are unlikely to have overtly designed a supply chain strategy. So, why is a supply chain strategy so important? Well, one good reason is to operationalize and support your business strategy. At some point, a business strategy must be executed and typically this is done through the operational components of a company. Supply chain strategy also focuses on driving down operational costs and maximizing efficiencies. For example, an organization may choose a strategy directed at supplier management as a way to remain competitive. By providing a clear purpose, the organization keeps sight of the strategy and is able to devise tactical steps to achieve these goals. Another reason for having a supply chain strategy is to establish how you work with your supply chain partners, including suppliers, distributors, customers, and even your customers' customers. As the marketplace becomes more competitive, it is critical to reinforce existing relationships and work together. And for all these reasons, a well executed supply chain strategy results in value creation for the organization.