Mastering the Art of SCM: The 3 Levels Explained

Effective supply chain management is essential for business operations as it ensures that goods and services are produced and delivered to customers at the right time, in the right quantity, and at the right cost.

It helps businesses to reduce costs, improve efficiency, and increase customer satisfaction. Effective supply chain management also helps businesses to respond quickly to changes in customer demand, market trends, and other external factors. We have broken down supplier chain management into 3 different levels and given examples of well known companies and how they incorporate these into their operations processes. 

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Level 1: Strategic Supply Chain Management

Strategic supply chain management has a long term horizon, from the development and implementation and aligns with the overall business goals and objectives. It involves the coordination and management of all activities involved in the production and delivery of goods and services to end consumers.

Strategic supply chain management helps businesses to align their supply chain strategies with their overall business goals and objectives. It serves to identify opportunities for growth, reduce costs, and improve efficiency. Strategic supply chain management also focuses on developing partnerships with suppliers and other stakeholders to improve supply chain performance.

The key components of strategic supply chain management are: supplier relationship management, demand forecasting, capacity planning, and risk management.

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Examples of Companies that have Successfully Implemented Strategic Supply Chain Management:

Companies that have successfully implemented strategic supply chain management include Amazon, Walmart, and Procter & Gamble. These companies have developed long-term plans and strategies that align with their overall business goals and objectives. They have also developed partnerships with suppliers and other stakeholders to improve supply chain performance.

1. Amazon: Amazon has been successful in implementing strategic supply chain management by investing heavily in technology and automation. They developed a vast logistics network that includes fulfillment centers, distribution centers, and transportation services. They have implemented a sophisticated inventory management system that allows them to track inventory levels in real-time and optimize their supply chain operations. In addition, Amazon developed partnerships with suppliers and carriers to ensure timely delivery of products to customers.

2. Walmart: Walmart leverages its scale and purchasing power to negotiate favorable terms with suppliers. They have invested heavily in technology to improve supply chain visibility and efficiency. Walmart has implemented a sophisticated inventory management system that allows them to track inventory levels across their stores and warehouses, and they have developed a network of distribution centers and transportation services to ensure timely delivery of products to customers.

3. Procter & Gamble: Procter & Gamble developed partnerships with suppliers and other stakeholders to improve supply chain performance. They implemented a collaborative planning process that allows them to work closely with suppliers to forecast demand and plan production schedules. They have also implemented a sophisticated logistics network that includes distribution centers and transportation services to ensure timely delivery of products to customers. In addition, Procter & Gamble invested heavily in technology to improve supply chain visibility and efficiency.

All 3 companies  have in common: investment in technology for real time visibility, strong supplier relationship and focus on optimizing delivery to customers. 

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Level 2: Tactical Supply Chain Management

Tactical supply chain management however focuses on short-term plans and strategies that align with the overall business goals and objectives. It also takes into consideration  the coordination and management of all activities involved in the production and delivery of goods and services to customers. This level enables businesses to respond quickly to changes in customer demand, market trends, and other external factors. Tactical supply chain management helps businesses to optimize their supply chain performance and reduce costs.

The key components of tactical supply chain management are: demand planning, inventory management, production planning, logistics management, and supplier performance management.

Examples of Companies that have Successfully Implemented Tactical Supply Chain Management:

Companies that have successfully implemented tactical supply chain management are Coca-Cola, Toyota, and Dell. 

1. Coca-Cola has implemented a tactical supply chain management strategy that focuses on reducing costs and improving efficiency. The company implemented a just-in-time (JIT) inventory system that allows them to keep inventory levels low and reduce waste. They have also implemented a vendor-managed inventory (VMI) system that helps them reduce inventory holding costs and improve supply chain visibility.

2. Toyota has uses  lean manufacturing strategy that focuses on reducing waste and improving efficiency in their supply chain. The company implemented a pull-based production system that allows them to produce only what is needed, when it is needed. They have also implemented a kanban system that helps them manage inventory levels and reduce waste.

3. Dell implemented a direct-to-customer supply chain model that allows them to reduce costs and improve efficiency. The company has implemented a build-to-order production system that allows them to produce customized products quickly and efficiently. They have also implemented a real-time inventory management system that helps them manage inventory levels and reduce waste.

All 3 companies have in common: working with JIT to keep low inventory  in order to reduce cost as well as reduce waste. 

‍Learn more on how to reduce lead time here. 

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Level 3: Operational Supply Chain Management

Operational supply chain management focuses on the day-to-day management of all activities involved in the production and delivery of goods and services to customers.

The key components of operational supply chain management are: production scheduling, order processing, transportation management, quality control, and customer service.

Examples of Companies that have Successfully Implemented Operational Supply Chain Management:

Companies that have successfully implemented operational supply chain management include Apple, Nike, and Nestle. These companies have optimized their supply chain performance, reduced costs, and improved efficiency.

1. Apple has implemented a just-in-time (JIT) inventory management system, which allows them to reduce inventory costs and respond quickly to changing market demands. They have also established strong relationships with suppliers and manufacturers, allowing them to streamline their supply chain and minimize disruptions.

2. Nike has implemented a centralized supply chain management system, which allows them to control their entire supply chain from sourcing to delivery. They have also implemented a vendor compliance program, which ensures that their suppliers meet strict quality and ethical standards. This allowed Nike to reduce costs and improve efficiency while maintaining high standards of product quality.

3. Nestle has implemented a sustainable sourcing program, which ensures that their suppliers meet strict environmental and social responsibility standards. They have also implemented a lean manufacturing system, which allows them to minimize waste and improve efficiency. This has allowed Nestle to reduce costs and improve their reputation as a socially responsible company.

All 3 companies  have in common: strong supplier management to maintain product quality. 

Effective supply chain management is essential for business operations as it ensures that goods and services are produced and delivered to customers at the right time, in the right quantity, and at the right cost. The three levels of supply chain management include strategic, tactical, and operational supply chain management. Businesses do not have to choose one over the other but can implement all three levels for successful supply chain management. Future trends and developments in supply chain management include the use of technology, automation, and analytics to improve supply chain performance.