Historically, companies in almost every industry have aimed for supply chain networks that are fast and cost-efficient but these two goals when achieved almost never translate into sustainable competitive advantage. In addition, focus on these two traits often leads to price markdowns and, thus, lower profit margins. The key to winning the competition is not a cost-efficient and fast supply chain network but instead top-performing supply chain networks are agile, adaptive, and aligned. Efficient and low-cost supply chain networks fail because of poor responsiveness to unexpected changes in the forces of demand and supply. Similarly, such supply chain networks are also badly suited to efficient quality management (Lee).
A well-designed supply chain network should be agile which means it should be able to respond to sudden changes in the external environment in a timely fashion. This is even more important now due to growing fluctuations in different industries. Supply chain networks that are not agile often lead to large buildup of inventory or work-in-process due to changes in the external environment and, thus, have little choice but to mark down prices to clear inventory. The slow nature of such supply chain networks also mean the organization’s competitive power is significantly weakened over time (Lee).
Second quality of high performance supply chain networks is adaptability. This means the structure of the supply chain network continues to evolve over time due to changes in the external environment. The changes in the external environment may be economic, political, and/or social. Adaptation is not only a defensive tactic employed by companies to stay competitive but can also become a source of competitive advantage.
Companies who closely monitor the external environment my recognize the changes ahead of the competition and take steps to gain competitive edge. Toyota is a great example as it studied different customer groups and geographical regions before introducing Toyota Prius and allocated cars according to varying demand levels across the U.S. Thus, adaptability basically requires companies to closely monitor the environment to spot trends and build a supply chain network that can be quickly restructured (Lee).
The third quality of high performance supply chain networks is the alignment of interests of all the stakeholders including the organization and its supply chain partners. Alignment also means different players in the supply chain network work closely and share information so that the response time from each stakeholder to a potential event is minimal. The stakeholders also try to understand each other’s unique characteristics and circumstances and accommodate where possible. They all work towards common objectives, thus, their efforts complement each other.
7-Eleven Japan’s supply chain network employs all three As which are adaption, agility, and alignment of everyone’s interests. First of all, the company’s supply chain network has been designed to quickly respond to changes rather than to focus on cost and speed. Similarly, all supply chain network players such as suppliers and logistics providers are linked and access the same information. When 7-Eleven wanted to reduce road congestion due to its delivery trucks, it asked its suppliers to consolidate shipments and the suppliers complied. This shows that when the interests of the players are aligned, they are more likely to support each other.
- Lee, Hau L. “The Triple-A Supply Chain.” Harvard Business Review October 2004: 102-112.
