The Three Levels of Supply Chain Management

12/16/20 10:30 AM

Supply chain management (SCM) is the management of operations that are involved in the procurement of raw materials, its processing into finished goods, and distribution to the end consumer. SCM also involves the active streamlining of the supply-side activities of a business to maximize customer value and gain an overall competitive advantage in the marketplace.

three levels of supply chain management

Supply chain management can be taken for granted within the world of business. However, it is important to realize that the supply chain forms the foundation of any operation or company. It includes every decision made about the products or services that a company offers its customers. 

The best way to understand the various stages of supply chain management and their influence on one another is to take a look at the three levels of supply chain management: the strategic level, the tactical level, and the operational level. Together, these levels work together to manage all decisions that are required to deliver quality products to your customers on time for the cheapest cost and greatest revenue.

 

Understanding the Three Levels of Supply Chain Management

1. Strategic Level

The top-level of supply chain management is responsible for the long-term decisions of the company. The decisions made at this level lay the groundwork for the entire supply chain process. Examples of decisions made at this level include things such as deciding which products or services will be offered by the company. This task involves keeping track of current market trends and customer feedback to improve existing products or introduce new items to the product mix.

Along with product development comes decisions surrounding which suppliers to purchase materials from and where the manufacturing operations should take place. Choosing the right suppliers should involve decisions that consider the company’s overall objectives and values. For example, choosing a supplier for their sustainable practices may incur higher costs for certain materials but will better reflect the values and goals of the company that is looking to reduce their environmental impact and build a sustainable supply chain. 

This level of supply chain management is crucial to develop an advantageous process that will tie in all levels of the company to ensure that every decision being made accurately reflects the overall goals of the company. This will ensure that all parts of the supply chain are working together to deliver your goods to your customers and allow you to make profits. 

2. Tactical Level

The second level of supply chain management is involved with all of the short- and medium-term decisions of the supply chain. While the strategic level takes care of the general and ‘big-picture’ decisions, this level is usually where the more specific processes are defined. This is where manufacturing processes will be defined to ensure that a high-quality product can be made for the lowest cost possible.

Tactical-level decisions play a substantial role in controlling costs and minimizing risks. The focus here is on customer demand and achieving the overall best end value.

Other decisions made at this level can include transportation, warehousing, and inventory logistics, notably whether these should be handled internally or outsourced. These decisions can be different based on factors such as location, costs of transportation, costs or land ownership, etc. 

3. Operational Level

This level of supply chain management is the most commonly encountered. It is where the day-to-day processes, decision-making, and planning occurs to keep the supply chain running. Often times, companies and manufacturing facilities forget to take into account the tactical and strategic level when making operational-level decisions. 

It is critical for the operational level to carefully consider the options they are faced with and make decisions that are aligned with the overall strategic and tactical decisions that have been made. Even though the higher-level decisions are made with the intention of creating advantageous processes throughout the supply chain, operations managers must make hundreds of decisions every day to handle every unexpected thing that comes their way. The best decisions are made within the strategic and tactical frameworks. 

Some of the aspects of operational-level management include daily and weekly forecasting for resource and capacity planning, monitoring logistics to ensure that enough inventory is available and that materials are available on-time for production. Other decisions include settling damages or losses with suppliers in the event that the manufacturing facility receives material deemed to be of poor quality, which would affect the overall quality of products being made. 

 

It is essential for any manufacturing organization to understand the three levels of supply chain management. Advanced Planning and Scheduling (APS) can easily help align the three levels of supply chain management. These softwares provide a thorough insight into your manufacturing operations through visual production scheduling and is a must for companies trying to take their operations to the next level.

 

APS systems like PlanetTogether are being implemented into manufacturing operations around the globe and is helping companies improve the overall efficiency of their operations to ensure that they maintain a competitive advantage.

 

Advanced Planning and Scheduling (APS) Software

Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS Systems can be quickly integrated with an ERP/MRP software to fill the gaps where these systems lack planning and scheduling flexibility, accuracy, and efficiency.

With PlanetTogether you can:

  • Create optimized schedules that balance production efficiency and delivery performance
  • Maximize throughput on bottleneck resources to increase revenue
  • Synchronize supply with demand to reduce inventories
  • Provide company-wide visibility to resource capacity
  • Enable scenario data-driven decision making

The implementation of an Advanced Planning and Scheduling (APS) Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system. APS is a step in the right direction of efficiency and lean manufacturing production enhancement. Try out a free trial or demo!

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Topics: supply chain

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