The 3 Levels of Supply Chain Management

Custom Application Development Company | Business Software

Businesses invest many resources to ensure the on-time manufacturing and delivery of products. There are 3 stages of supply chain management and corresponding custom supply chain solutions, 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, tactical, 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 supply chain levels with the right supply chain 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 overseeing and controlling the processes involved with the flow of materials and goods through an organization and to the final destination. This process starts with acquiring raw materials and moves through manufacturing 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 a company’s goals or supply chain needs 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, supply chain managers optimize logistics, create efficient processes, improve quality, and deliver value to consumers from a big-picture perspective.

Main Components of Strategic SCM Software

For manufacturing or sales and distribution companies, the strategic level in supply chain management is where SCM software contributes to and helps execute the company’s overall strategy in the marketplace. According to renowned business strategy theorist Michael Porter, design is how an organization in a competitive environment will achieve superior performance compared 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 manufacturing costs, 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.

Flowchart showing phases of planning in SCM

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 Level 2: Tactical Level in 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 supply chain managers need to have daily goals to define the specifics of the supply chain processes.

Definition of Tactical Supply Chain Management

The tactical level of supply chain management is about 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 in supply chain management gives a company a clear way forward about 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 positively impact productivity and profitability.

Level 3: Operational Supply Chain Management

After working through the other levels of supply chain management, the operational level in supply chain management occurs. This phase consists of enacting the tactical plans put in place.

Definition of Operational SCM

The operational level of supply chain management is the phase that 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 projects, working on a day-to-day schedule, and focusing on the small details of operations.

Main Components of Operational SCM

The hundreds of daily decisions concerning product development, manufacturing, sale, and transport 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

Companies can avoid delays and reduce efficiency with the right processes already in place and enacted. Streamlined practices and the appropriate use of resources improve 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 you 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 an immediate effect 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, 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, seamlessly integrating strategic, tactical, and operational SCM. Explore how our expertise in SCM modules and dedicated applications can elevate your business by visiting our supply chain management development page.

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