Businesses invest many resources to ensure the on-time manufacturing and delivery of products. There are several levels of supply chain management or SCM, all of which drive customer satisfaction and business growth. These levels are:
Key Takeaways:
- Supply chain management involves all the activities that take raw materials and deliver a final product to the consumer.
- Strategic planning, tactical planning, and operational planning are the three fundamental levels of supply chain management.
- Successful SCM enables a company to deliver products cost-effectively, on time, and in the expected condition.
You can improve your SCM with the right software partner. Watkyn specializes in customizing business management applications to meet your company’s unique needs.
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What Is Supply Chain Management?
Supply chain management concerns the overseeing and controlling of the processes involved with the flow of materials and goods through an organization and out to the final destination. This process starts with the acquisition of raw materials and moves through the manufacturing processes to produce a sellable, quality product. The process ends with the delivery of the product to the customer.
SCM occurs at three levels: strategic SCM, tactical SCM, and operational SCM. These are the phases needed to determine what a company’s goals or supply chain needs are and formulate a plan to address them.
Level 1: Strategic Supply Chain Management
The first of the levels of supply chain management, strategic SCM aligns the corporate goals and plans with decisions made concerning the supply chain.
Definition of Strategic SCM
This level of the supply chain concerns long-term decisions for the entire supply chain process. It involves product development, material needs, and the target market. In this phase, managers work on optimizing logistics, creating efficient processes, improving quality, and delivering value to consumers from a big-picture perspective.
Main Components of Strategic SCM Software
For manufacturing or sales and distribution companies, the strategic level is where SCM software contributes to and helps to execute the company’s overall strategy in the marketplace. According to renowned business strategy theorist Michael Porter, strategy is how an organization in a competitive environment will achieve superior performance in comparison to other companies in the marketplace. The key to competitive success is finding a unique mix of value-creating activities to meet customer needs.
How Does Strategic SCM Impact Long-Term Business Goals?
Carefully working through the details of your supply chain will help avoid surprises that could hurt the company’s financial efficiency and productivity. Minimizing the costs of manufacturing, expediting customer deliveries, and lowering operational costs provide a competitive advantage.
Examples of Strategic SCM in Action
The specifics of your strategic SCM and the other levels of supply chain management are unique to your company, but there are several common points across industries:
- Developing a set of key performance indicators for the process
- Researching the best location for manufacturing
- Choosing technology and developing software to support your process
- Determining supply needs
The more thorough you are during this level of SCM, the more effectively you can work through the next levels.
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Level 2: Tactical Supply Chain Management
As the second level of supply chain management, this phase involves short- and medium-term decisions concerning the supply chain. This is where management defines the specifics of the supply chain processes.
Definition of Tactical SCM
Tactical SCM is decision-making that focuses on processes and procedures. The goals are to save time and money without sacrificing quality and jeopardizing value to the customer.
Main Components of Tactical SCM
Each area of the supply chain process needs specific goals and objectives. Key components to address at this level include:
- Transportation
- Distribution channels
- Purchasing strategies
- Locations for warehouses and distribution centers
All plans should define targets, establish priorities, and design strategies to achieve the targets.
How Does Tactical SCM Support Short-Term Business Objectives?
Tactical planning gives a company a clear way forward with regard to production, delivery, and customer satisfaction. Short-term strategies are easy to revisit and adapt as performance reveals weaknesses or strengths along the supply chain process.
Examples of Tactical SCM in Action
In a real-world environment, tactical SCM can include the following:
- Automated processes
- Material sources
- Product pricing
- Software services and upgrades
- Hiring and training
These solutions help mitigate risks to the company and have a positive impact on productivity and profitability.
Level 3: Operational Supply Chain Management
After working through the other levels of supply chain management, operational SCM occurs. This phase consists of enacting the tactical plans put in place.
Definition of Operational SCM
The operational phase puts into action the tactical plans by setting up the procedures and systems to achieve maximum results. This involves coordinating across the departments to ensure the execution of the plans, working on a day-to-day schedule, and focusing on the small details of operations.
Main Components of Operational SCM
The hundreds of decisions made daily concerning the development, manufacturing, sale, and transport of products are part of operational SCM. Some of the key areas where these decisions take place are:
- Logistics
- Suppliers
- Manufacturing
These decisions keep the strategic and tactical phases in mind.
How Operational SCM Ensures Day-to-Day Efficiency
With the right processes already in place and enacted, companies can avoid delays and reduce efficiency. Streamlined practices and the appropriate use of resources improves performance, while quality expectations across all departments and SCM elements ensure each contribution directly supports the company’s objectives.
Examples of Operational SCM in Action
Here are some of the ways your see operational SCM in action across various industries:
- Forecasting for labor, materials, and consumer demand needs
- Monitoring logistics to maintain adequate inventory levels
- Reviewing contracts or finding alternative options for suppliers providing damaged or delayed materials
These daily decisions have a direct impact on the customer, and satisfied customers have a direct impact on the company’s bottom line.
The Importance of Correctly Implementing All Levels of Supply Chain Management for Business Success
The collaboration between business partners, logistic services, suppliers, and internal business departments affects the final product and consumer experience. A positive outcome depends on successfully implementing the strategic, tactical, and operational levels of supply chain management.
With the right software in place, you can continue to streamline your processes and avoid human errors. Watkyn specializes in developing tailored supply chain management applications that cater to your company’s unique needs, integrating strategic, tactical, and operational SCM seamlessly. Explore how our expertise in SCM modules and dedicated applications can elevate your business by visiting our supply chain management development page.
