Chapter 3
Logistics and supply chain
strategy planning
Chapter 11: Strategic Leadership
Contents
•
•
•
•
•
Introduction
Strategy and strategic management
Organisational strategy
The strategy formulation process
Developing a logistics and supply chain
strategy
• Implementing a logistics and supply chain
strategy
• Concluding remarks
Chapter 11: Strategic Leadership
Learning outcomes
• Understand what strategy means and how
it applies to an organisation
• Understand the importance and nature of
strategic management
• Understand the cascading levels of
strategies in an organisation
• Understand how a logistics and supply
chain strategy is derived from a business
strategy
• Describe the major elements and
processes involved in developing a
logistics and supply chain strategy
Chapter 11: Strategic Leadership
Learning outcomes (continued)
• Identify logistics and supply chain strategic
focus areas
• Know what the content of a supply chain
strategy document should comprise and
how to summarise it in a strategy map
• Understand the importance of proper
strategy implementation
• Know how to use a scorecard and action
plans to drive implementation
Chapter 11: Strategic Leadership
Introduction
• Competitive environment
• Pressure for organisational change
• Business strategy and supply chain
strategy
• Planning for effective supply chains
• Implementing and executing supply
chain strategy
Chapter 11: Strategic Leadership
Strategy and strategic
management
‘Strategy is a long-term plan of action designed to
achieve a particular objective or goal. Strategies are
used to make future challenges easier to deal with.’
Business strategy is concerned with:
• Where is the business trying to get to in the long
term? (direction)
• What products or services will be offered?
• Which markets should a business compete in?
(markets; scope)
• What kinds of activities are involved in these
markets?
Chapter 11: Strategic Leadership
Strategy and strategic
management (continued)
• How can the business outperform the competition?
(advantage)
• What resources are required? (skills; assets;
finance; relationships; technical competence;
facilities)
• What are the external environmental factors?
(environment)
• What are the values and expectations of all parties
involved in the business? (stakeholders)
Chapter 11: Strategic Leadership
Strategy and strategic
management (continued)
Key aspects and issues covered:
• Vision
• Purpose
• Values
• Objectives
• Goals
• Strategic actions
• Programmes and initiatives
Chapter 11: Strategic Leadership
Strategy and strategic
management (continued)
Chapter 11: Strategic Leadership
Organisational strategy
Strategies exist at several levels:
Corporate strategy
• overall purpose and scope of the organisation
• guide strategic decision-making
• corporate directives
Business unit strategy
• how a business competes successfully in the market
• decisions about products; markets; customers
Operational strategy
• each part of the business and its operations
• very narrow in focus
• operational issues: resources, processes, people etc.
Chapter 11: Strategic Leadership
Strategy formulation process
A process at the very heart of strategic planning:
• Strategy formulation
• Implementation
• Evaluation
[insert figure 3.2]
Strategy formulation process
Chapter 11: Strategic Leadership
Strategy formulation process
(continued)
Strategy map and balanced scorecard provide common
understanding of the strategy
Chapter 11: Strategic Leadership
Strategy formulation process
(continued)
A business’s strategy should cover the
following:
• Assessment of the business's current situation (i.e.
‘as is’)
• Vision of the business in a couple of years’ time (i.e.
‘to be’ )
• Mission/purpose statement
• Statement of corporate values and beliefs
• Determining key objectives and goals
• Identifying key strategies and major focus areas
• Defining strategic action plans
Chapter 11: Strategic Leadership
Developing a supply chain
strategy
Typical steps to follow in linking
supply chain and business strategies:
• Understanding the business context and strategy
• Defining the role the supply chain needs to play
• Identifying and prioritising improvement
opportunities
• Defining supply chain objectives and goals
• Developing detailed plans to achieve these goals
• Conducting regular supply chain performance
reviews
• Executing plans to achieve results
• Monitoring progress and making necessary
adjustments
Chapter 11: Strategic Leadership
Supply chain strategy
development and
implementation
Chapter 11: Strategic Leadership
Understanding
organisational context
Marketing strategy – basis for business
competition:
• What products or services should the firm sell?
• What customer segments should the firm serve?
• In what geographical markets should the firm
operate?
Business’s competitive requirements:
• Innovation; reduced time to market;
responsiveness; service excellence; cost leadership;
high quality; flexibility; reliability
Chapter 11: Strategic Leadership
Identifying supply chains
Chapter 11: Strategic Leadership
Deriving supply chain drivers
Deriving from the imperatives for business
competitiveness, supply chain drivers are the key
building blocks for developing a supply chain
strategy.
Major supply chain drivers relate to:
• flexibility;
• responsiveness;
• reliability;
• availability;
• lowest delivery cost; and
• asset optimisation.
Chapter 11: Strategic Leadership
Deriving supply chain drivers
(continued)
Supply and demand uncertainties influence the
supply chain drivers.
Chapter 11: Strategic Leadership
Supply chain vision and
purpose
Vision statement: a clear picture of where the supply
chain should be in the next five to ten years.
Written in the present tense, it creates the motivation
to change from the current state to this new state.
Example:
‘A globally competitive, profitable business that
delivers consumer satisfaction through efficient and
effective supply chains.’
Chapter 11: Strategic Leadership
Supply chain vision and
purpose (continued)
The purpose statement describes the role that the
supply chain should fulfil within the business.
Relates to a mission; has the primary purpose of
focusing the supply chain stakeholders on their
various roles in support of the supply chain intent.
Example:
‘To create competitive advantage through
purchasing, manufacturing and distributing products
and services that provide superior value to our
customers.’
Chapter 11: Strategic Leadership
SWOT analysis
A simple tool for understanding the current position and making
best use of the opportunities available.
Chapter 11: Strategic Leadership
Strategic objectives
• Supply chain strategy requires translating
competitive imperatives into achievable objectives.
• Relates to strategic aspirations, gaps identified and
improvement opportunities.
• From SWOT Analysis - strengths to be turned into
enduring capabilities to sustain the supply chain.
Any weaknesses must be eliminated/reduced.
• Plans to achieve these objectives must be
articulated with appropriate measures (KPIs).
• Objectives must be SMART (Specific, Measurable,
Achievable, Realistic and Time-bound).
Chapter 11: Strategic Leadership
Major generic strategic
focus areas
• Network integration
• Operational efficiency and effectiveness
• Reverse logistics
• Inventory optimisation
• Risk management
• Relationship management
• Procurement management
• Organisation and people capability
• Supply chain planning
• Information management
Chapter 11: Strategic Leadership
Major strategic focus area
Example: network integration
Objective: to ensure supply chain networks are
optimised and provide the required capability (e.g.
adequate infrastructure and capacity) to service a
business’s segmented markets.
Typical strategies and actions:
• Develop and evaluate alternative supply chain
networks.
• Carry out cost-benefit trade-offs of the alternatives
available.
Chapter 11: Strategic Leadership
Major strategic focus area
(continued)
Example: network integration
• Assess proactively business growth for the
organisation and the logistics infrastructure
requirements.
• Leverage supply chain network synergies.
Typical KPIs: return on supply chain fixed assets;
supply chain flexibility; supply chain management
costs.
Chapter 11: Strategic Leadership
Strategy map of focus areas
• Used for clarification and alignment of parties
involved.
• Portrays a balanced view of the supply chain focus
areas across four perspectives of a balanced
scorecard.
Chapter 11: Strategic Leadership
Implementing a supply chain
strategy
Less than 10 per cent of effectively
formulated strategies are implemented
successfully.
Many reasons why strategic plans fail:
• Failure to define objectives correctly
• Lack of focus
• Overestimation of resource competence
Chapter 11: Strategic Leadership
Implementing a supply chain
strategy (continued)
• Failure to co-ordinate
• Failure to obtain employee commitment
• Underestimation of time requirements
• Failure to follow the plan
• Failure to manage change
• Poor communications
Chapter 11: Strategic Leadership
Balanced scorecard and action
plans; initiatives and strategic
actions
• Implementation drives the achievement of the
specific objectives.
• Used for communication and progress tracking
Chapter 11: Strategic Leadership
Change management
Chapter 11: Strategic Leadership
Concluding remarks
• Importance of developing and implementing a
comprehensive logistics and supply chain strategy
that is linked and aligned with overall business
strategy.
• Process to follow for the development of a logistics
and supply chain strategy.
• Strategic focus areas help to focus, clarify priorities
and make strategy more manageable.
• The success of a logistics and supply chain strategy
is only as good as the organisation’s ability to
implement and execute it.
• Balanced scorecards; action plans; well-managed
initiatives; performance tracking; and sound change
management are required.
Chapter 11: Strategic Leadership