The Triple-A Supply Chain: Agility, Adaptability and Alignment

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SUPPLY CHAIN – STRATEGY INFRASTRUCTURE UPDATE

The Triple-A Supply Chain revisited
Hau Lee’s highly acclaimed seminal article2 on “The Triple-A Supply Chain” has now been out in the domain for four years, during which time our understanding of how supply chains work has increased exponentially. So high time we re-visited the ideas in that article and added some refinements

By Dr John Gattorna, author and supply chain thought leader1

ee gives many interesting examples to support his de nitions of each ‘A’Agility, Adaptability, and Alignment, but while quite descriptive, there remain Supply Chain Asia November/December 2008

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some lingering questions in readers’ mind about exactly what is going on under the surface. Indeed, he admits as much in the last paragraph of the article when he muses

that, “…what they (firms) need is a fresh attitude and a culture to get their supply chains to deliver triple–A performance”3. He is right of course, and in this extension to

SUPPLY CHAIN – STRATEGY INFRASTRUCTURE UPDATE

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Lee’s article I will endeavour to introduce that added ingredient — the cultural perspective. Without it I’m afraid the story remains purely descriptive and lacks explanatory power. By better understanding what is going on inside the human dimension of supply chains, it becomes possible to move to a more predictive level. In other words, if you know what sub-cultures are in place and underpinning various supply chain strategies, you will be able to predict what the likely outcome is in terms of execution. Unfortunately, in my experience, over 40% of strategies written into business plans fail to be implemented, and it’s all due to a ‘misalignment’ between those strategies and the ‘values’ of the people inside the organisation, and the partner organisations in the chain. Lee posits4 that “… only those companies that build agile, adaptable, and aligned supply chains get ahead of the competition”. I agree with him. But I think we need to explore and re ne his de nitions of these three ‘As’. Re-de ning the three key properties Agility is becoming increasingly critical in today’s volatile markets. But you pay a price for it. You can’t be agile and cost-e cient co-incidentally – something has to give. In truth, you will find customers in your markets that want one or the other or at times, both. If the latter, you have to try and understand which they want more. To give an agile response at lowest cost-to-serve is in e ect rewarding customers behaving badly. I developed the concept of ‘supply chain alignment,’ which approaches this problem of supply chain design and operation from the customer’s dominant buying behaviour perspective5. By segmenting markets for a wide range of product/service categories I observed patterns which can be used to reverse-engineer the equivalent supply chain con gurations. Speci cally, I seldom found more than three or four dominant buying behaviours present in any market, which means that a small number of supply chain types is capable of covering up to 80% of the market, no more, no less. And although customers had a preferred way of working (based on their values), situations sometimes arise that cause them to change this preferred behaviour (but not their values) for short periods, which then require di erent supply chain solutions. See

my broader concept depicted in Figure 1. To ‘align’ with the four main behavioural segments there are four types of supply chain con gurations: Continuous Replenishment, Lean, Agile, and Fully Flexible. 1. Agile and Lean For those customers who genuinely seek lowest cost product (and ful llment), Lean is the solution for them. By de nition we are generally dealing with a relatively predictable market environment; a risk-averse customer with a transactional mindset, so there is a

lot of emphasis on making and ful lling to forecast; creating scale; and using process improvement techniques such as Six Sigma to lower cost....
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