What Is Supply Chain Network Design &  Why Is It Important?

It is important to recognize that a company’s network determines its supply chain efficiency and customer satisfaction.

Designing an optimal supply chain network means the network must be able to meet the long‐term strategic objectives of the company.

Most business units or functional areas within a company are impacted by a network design project.

When designing a supply chain the following steps must be followed: 1) Define the business objectives, 2) The project scope must be defined, 3) The form of analyses to be done must be determined, 4) Determine what tools will be used, 5) Finally, Project completion, the best design.

Once the path forward is determined and the design approach has been completed correctly, the business will reap many significant benefits.

What Creates Real Economic Value?
Business and operations strategy - the formulation of strategies that drive investment, operations, and competitive positioning - is where all value begins.

There are five strategic questions that need to be answered:

1. What business is the CPG company in and why?
2. How should value be added to the business?
3. What are the target markets?
4. What are the products and why will customers buy from the CPG company?
5. What capabilities are needed to assure that the company adds value and differentiates?

Most companies develop strategies for target markets and products #3 and #4. Some at least consider #1 and #2. Few companies resolve #5 effectively.

This is generally because operations strategies are not developed or implemented with the same scenario plan or rigor that is given to the more often seemingly interesting issues of markets and products. The alignment of business and operations strategies is often weak or non-existent.

Mission and vision statements, plans, goals, objectives, and performance measures while important for driving execution, most often do not ensure that capabilities will be built for scenarios from the business strategies.

Therefore, companies do not always have carefully developed alternatives for customer demand, new channels, competition, supply risks, and product development.

Achieving clear and sustained alignment between operations execution and the plans derived from business strategies is challenging. Leadership understands the complexities involved, but are concerned that 90% of business strategies are not implemented as intended.

They are beginning to understand that supply chains are about more than logistics regarding the buying and selling of goods, they are about competitive differentiation and profitable business growth.