Triple A Supply Chain. CRITICAL FACTORS TO CONSIDER IN SUPPLY CHAIN PLANNING
CRITICAL FACTORS TO CONSIDER IN SUPPLY CHAIN PLANNING
Before we look in detail at various aspects of different supply chain strategies, it is useful to look at some overarching principles that help managers develop their supply chain strategies and facilitate best fit with overall firm strategy.
Living supply chains
A ‘one size fits all’ approach to supply chain design just will not work. There is just too much variability in terms of lead times, product life cycles, marketplace demand, etc., to allow this to be the case.
Professor John Gattorna from the University of Wollongong describes the supply chains that are required in today’s complex and competitive world as ‘living supply chains’, with companies using a process of ‘dynamic alignment’ to match changing customer needs and desires with different supply chain strategies.He suggests that to succeed companies need different supply chain configurations in place to ‘align’ with the dominant buying behaviours of their customers, and that the best companies are achieving this multiple supply chain alignment.
Focus on processes and flows
Many companies get stuck in what we call a functional or silo mentality where they focus individually on separate areas, instead of configuring according to customer needs (a demand driven supply chain approach). This is one of the advantages of taking a supply chain approach in that it allows a full end-to-end perspective to be taken.
Some authors argue that the functional (or silo) nature of many organisations at an operational level acts as a barrier to aligning supply chains effectively with the markets they serve, thus obviating against a customer responsive supply chain strategy being pursued.
Another way to understand supply chain strategy is to observe some of the many strategic activities that take place along typical supply chains. Tang, for example, identified nine areas that facilitate more robust supply chain strategies: postponement, strategic stock, flexible supply base, make-and-buy, economic supply incentives, flexible transportation, revenue management, assortment planning, and silent product rollover. While Tang’s focus was on robust strategies to mitigate supply chain disruptions, the list of nine areas is useful because it gives an insight into the many strategies and activities that can be pursued along supply chains. Indeed, there are a number of other strategies that can also be pursued along supply chains such as, for example, factory gate pricing and cross docking. It is also important to note that companies can adopt different roles in different supply chains, for example be the leader of one supply chain and be a participating member of another.
Focus on high-level objectives
Some writers argue that supply chains need to meet certain high-level objectives. Professor Hau Lee from Stanford, for example, argued that the best supply chains are agile, adaptable and have aligned interests among the firms in the supply chain.He calls this the ‘Triple A Supply Chain’. It is also important to note of course that the supply chain cannot, and is not, the solution to all ills. Professor Christopher and colleagues highlight this when they state that ‘responsive supply chains … cannot overcome poor design and buying decisions which fail to introduce attractive products in the first place’.
The importance of people
It is obvious that SCM has grown in significance in recent years. SCM is benefiting from the application of some powerful technologies. Often overlooked, however, is the role played by people in the supply chain. Professor John Gattorna notes that ‘it’s people who drive the supply chain, both inside and outside your business, not hard assets or technology’. Similarly James Quinn notes that to achieve any measure of supply chain success, three critical elements (people, process and technology) need to be kept in balance. He adds that there is no single answer as to which of these three is the most important to supply chain success, although he does add that ‘you can’t do anything without the right people’.
It’s supply chains that compete
Dell , the PC maker uses robust logistics strategies and competes using its entire supply chain. The idea of supply chains competing was put forward by Professor Martin Christopher in his seminal book Logistics and Supply Chain Management, the first edition of which appeared in 1992. It is a powerful concept, and one that is becoming more and more relevant as we see the way that companies structure their supply chains often being a key determinant of success. A company can have the best and most sophisticated product in the world, but if it doesn’t have a good supply chain behind it, then it will likely not be able to compete, especially in terms of cost and speed, and indeed many other attributes also.