Supply Chain Management

Among the numerous existing definitions of supply chain management, I have picked out this one as I believe it encompass all the other existing definitions: “Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from the point of origin to the point of consumption”

Supply chain management operates at three levels; strategic, tactical and operational. In this post I will go into detail about the importance of these three aspects for the development and success of the company.

The three levels are definitely related to each other.

1. Strategic decisions are linked to long term objectives. Highlighting the vision you have of your supply chain for the next years.

2. The tactic decisions include what are you going to do to make those change happen at a high level but detailed at smaller time slots.

3. The operational decisions are related to how to make the tactic solutions happen in the short term

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Once you have decided the strategic decisions you want to implement in the long run, it´s time to make decisions at the other two levels.

It´s not advisable to make decisions at operational level without having decided prior the strategy we will follow, if we do so, that will lead the company to failure as the actions made today will be inconsistent in the future. In the same way, making decision at a tactical level and going downwards to operational decisions without any strategy will lead to confusion and to future disruptions. Finally, decisions at strategic and tactical level without any operational one will keep the company where it is now as nothing is actually being implemented.

The strategic decisions include location, production, inventory, and transportation. The strategic level is characterized by concepts such as value chain, supply network and extended enterprise. High level analysis is done on how the company, products and business processes fit in the overall supply network, compare their supply network with competing networks, analyze future threats and opportunities, dynamics of power and dependence in the supply network, loss and development of competences within the supply network (Mills and Schmitz, 2002). 

On the tactical level, medium term decisions are made, covering the planning of supplies, manufacturing schedules, and the forecasting of demand in order to ensure seamless operation of the supply chain. 

The operational level of supply chain management is concerned with the very short term decisions made from day to day. Often, the border between the tactical and operational levels is vague.

The operational level deals with day to day short term supply chain decisions. Examples are scheduling, lead time quotations, routing, and truck loading. Plans and schedules to meet actual demand are executed at the operational level (Fox, 2002). The physical control issues of the daily manufacturing operations such as machining, dispatch, transfer, maintenance, material handling are dealt with at operational level (Umeda & Jones, 2005).