The Three Levels of Supply Chain Management

A successful supply chain operation is all about effective decision-making across all levels of supply chain management.

To achieve the optimal supply chain, there has to be a successful series of planning, organizing, and controlling of all the processes involved in the operation. But these processes are not singular. They are replicated several times across different levels of supply chain management. The levels of supply chain management are generally classified into three.

All three levels of supply chain management play essential roles in the success of the supply chain, with each level feeding off the other. 

Strategic Level

On this level, the business defines the objective and long-term goal of the supply chain.

The decisions on this level guide the other levels’ coordination, planning, and decision-making processes. The strategic level of supply chain management is responsible for evaluating the supply chain’s strengths and weaknesses. Strategies that can grow the supply chain and increase its outputs are developed at this level. This level is responsible for the direction of the supply chain in the long term.

Some of the decisions in the strategic level of the supply chain management are:

1. Vertical integration Vs. horizontal integration

2. Sourcing strategies (singular Vs multiple)

3. Technology adaptation

4. Sustainable strategies

For any supply chain to work, there has to be a well-defined objective.

But maybe more importantly, the supply chain should be able to stick to the well-defined objectives, that is except in cases where the objectives simply do not work. It is the strategic level of supply chain management is responsible for this. 

Tactical Level

The strategic level of supply chain management sets the tone for the supply chain, but it is the tactical level that navigates the supply chain through the external and internal forces that impact the supply chain.

The tactical level focuses on achieving the supply chain’s medium and short-term goals. And it is the enforcer of the big picture set up by the strategic level. For instance, the strategic level focuses on sourcing strategies, but the tactical level focuses on the criteria for selecting the suppliers. The tactical level is where decisions on the process of all supply chain segments are made.

The tactical level is responsible for ensuring that all facets of the supply chain operation, including transportation, warehousing, inventory control, distribution, and manufacturing, all work in line with the objectives of the strategic team. 

Operational level

This is the last of the three levels of any supply chain management.

It is concerned with the day-to-day running of the supply chain and all the decision-making that entails. The operational level is where all the decisions on the strategic and tactical levels are enforced. In enforcing the decisions of the strategic and tactical managers, the operational manager has to go up against unexpected events while using the blueprint from the strategic and tactical levels. This may include supplier management, navigating unforeseen disruptions, and ensuring compliance across the entire operation.

The operational level manages and decides on insights from

• Forecasting
• Resource management
• Hires, lead times, capacity planning
• Quality control

The level deals with the customer directly. So, they have to ensure customer satisfaction by providing quality customer service. The people on this level are also responsible for giving feedback to other levels of the supply chain. This way, there is a proper analysis of the impacts of the decision-making and proposed strategies from the other levels of management. For the strategic and tactical levels of the supply chain management to function correctly, they feed off the report and data gathered from the operational level.

Other operational activities include

• Supplier management
• Sourcing raw materials
• Processing returned items
• Customer Success

Why Is Understanding These Three Levels of Supply Chain Management Important?

Understanding the three levels of supply chain management allows for effective streamlining of the processes and operations.

Every stakeholder across the three levels understands their role. And this is what allows them to work effectively. Although success means different things for every supply chain, there must be effective synergy between these levels to achieve success.

Here is why understanding the role they play is critical

Cost Reduction

If not tackled properly, the supply chain’s cost can overwhelm a business or organization.

To curtail this, businesses and organizations keep innovating across the three levels of supply chain management. Processes and results are analyzed through these levels, making it easier to identify potential areas that could be streamlined or optimized for cost reduction.

An example of this is reviewing the inventory control strategies for optimizing production and distribution. 

Supply Chain Visibility

Supply chains cannot be run blindly, so understanding the role of the three levels allows for more visibility.

By synchronizing the different levels of supply chain management, the business can promote visibility across all processes. This will greatly impact the supply chain. Visibility allows for a lot of collaborative opportunities across different segments of the supply chain, making the supply chain more effective. 

Customer Satisfaction

A business depends on customer satisfaction to thrive.

To improve customer satisfaction, a business must manage all levels of the supply chain management effectively. A few key metrics of the supply chain would give any business insight into the satisfaction of its customers. Some of them are:

• Lead times
• Product quality/value
• Sustainable practices
• Order visibility
• Consistency and compliance

 Supply Chain Agility

Supply chain agility is the supply chain’s ability to rebound from a crisis or disruption in the supply chain. For this to happen, effective supply chain management has to be in place. And it is only achievable by coordinating between all three levels effectively. 

Conclusion

Understanding the three levels of supply chain management is a great tool for maximizing efficiency.

However, businesses and organizations struggle to manage them effectively, especially at the strategic and tactical levels. When many of these organizations focus solely on the operational level, supply chain management becomes ineffective. To get the best out of the supply chain, every organization should pay attention to its supply chain management strategies and the three levels mentioned here.