4 Core Supply Chain Capabilities

4 Core Supply Chain Capabilities

Organisations are moving away from focusing their supply chain efforts on functional excellence to leveraging supply chain as a strategic capability, Deloitte study found. With this, supply chain firms should fulfil the core capabilities that form the functional backbone of the supply chain itself. These core capabilities also help supply chain operations at leveraging its business as a source of competitive advantage. 

Based on Deloitte review, the core capabilities encompass supply chain planning, sourcing and procurement, operations, and logistics and distribution. These are the main building blocks that form an effective supply chain, covering functional knowledge to run business processes, instruments to make tactical decisions, and frameworks to make strategic trade-offs. 

See also: Restarting & Synchronising Supply Chain with the New Normal

Supply chain planning 

Supply chain planning aims at predicting future requirements to balance supply and demand. From a strategic perspective, companies have to take into account the available capacity in their network, the required flexibility to react to demand signals or supply chain risks and the alignment between organisational departments, in order to be able to plan supply chain effectively.  

Extended supply chains need to be fully integrated to allow the leveraging of all available assets and deliver maximum value for agents at optimal costs. Companies should thus build integrated supply chain planning processes ranging from the long term strategic planning, sales and operations planning, to the day-to-day operational planning. 

Sourcing and procurement 

Sourcing refers to a value-added process of selecting suppliers and a respective cooperation scheme. It must be supported by advanced analytics and market intelligence, supplier performance information as well as concrete and well-developed strategy. Meanwhile, procurement refers to a transactional aspect of a relationship and should be streamlined as much as possible in order to achieve efficiency. 

From a strategic perspective, sourcing and procurement should be designed appropriately by procurement organisations. Optimal organisation design leads to prompt, reliable and cost-effective fulfilment of internal clients’ needs. 

Operations 

Operations entail all activities that are core to generating value for customers. These can be a combination of manufacturing end products and providing services, which together address the overall customer needs. The operational strategy should enable the direction set by business and commercial strategy. 

Logistics and distribution 

Logistics and distribution are about determining the best strategy and practices for moving the right products to the right place at the right time. This process can be done by optimising order processing, inbound operations, warehousing, outbound operations and reverse logistics. 

Supply chain company should have a distribution network that is aligned with the overall supply chain strategy, allowing it to meet customer service requirements at the lowest cost. Another aspect to take into account is the management of reverse logistics flow, gaining importance due to legal requirements and increased customer awareness, and performance of finance and performance management. 

Read also: Recovering Process for Supply Chain in The COVID-19 Crisis

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