AAA Supply Chains:

Agility, Adaptability and

Alignment
By

Allen Thomas Kannattu

Nidhi Desai
Raghav Samdani
Vishak Sharma

Is efficient supply chain the

ultimate?
Having a quick and cost effective
supply chain has best practices
At times these best practices are the
itself the perils of efficiency

High Tech Supply Chain

Environment
Demand
and supply
uncertainties

Fashion like product

Strong competitive forces
Increasing product variety
Potential of external disruptions

Short product
and
technology
cycles

Fast changing hardware and software

Multiple sources of technological advances
Frequent product transitions
Manufacturing cost pressures

Multiple
supply chain
partners

Outsourced manufacturing partners

Outsourced design partners
Consumer electronics channel
Other associated product providers

Challenges
Challenges

Implications

Increasing demand and

supply uncertainties

Uncertainty drives
need for flexibility

Shortening product and

technology cycles

Dynamic instead of
static supply chains

Multiple outsourced
supply chain partners

Differential interests
of multiple players

AAA Supply Chain

Agility:

Respond quickly to sudden changes in supply or demand. It enables a company to

handle unexpected external disruptions smoothly and cost-efficiently and to cover
promptly from shocks such as natural disasters, epidemics, and computer viruses.
Objective:
The main objective of agility is to respond to short-term changes in demand or
supply quickly.
There are 6 rules of thumb following which companies can attain agility Promote flow of information with suppliers and customers.
Develop collaborative relationship with suppliers.
Design for postponement.
Build inventory buffer by maintaining a stockpile of inexpensive but key
components.
Have a dependable logistics system or partner.
Draw up contingency plans and develop crisis management teams.

Crisis Bared Ones Weakness, Others

Strength
Wall Street Journal, January 29, 2001

March 17, 2000,

lightning-induced
fire at Philips
radio-frequency
chips factory in
Albuquerque,
New Mexico

Adaptability:
An adaptive supply chain enables a company to evolve over time as economic
progress, political shifts, demographic trends, and technological advances reshape
markets.
Objective:
The primary objective of adaptability is to adjust supply chain design to
accommodate market changes.
To make a company's supply chain adaptive, there are 5 golden rules Monitor economies all over the world to spot new supply bases
and markets.
Use intermediaries to develop fresh suppliers and logistics infrastructure.
Evaluate needs of ultimate consumers- not just immediate customers.
Create flexible product designs.
Determine where company's products stand in terms of technology cycles
and product life cycles.

Traditional Demand Chain For

Prius
Inventory

Toyota
Distribution

Dealers

Inventory risk
Facility
Investmen
t

Incentive Alignment For

Prius
Inventory

Toyota
Distributio
n

Inventor
y Risk

Dealers

Facility
Investment

Alignment:
Companies must align the interests of all participating firms in the supply chain
with their own. As each player maximizes its own interests, it optimizes the
chain's performance as well.
Objectives:
The objective of aligning a supply chain is to establish incentives for supply
chain partners to improve performance of the entire chain.
Companies can attain this ability by following 3 simple rules Exchange information and knowledge freely with vendors and
customers.
Lay down roles, tasks and responsibilities clearly for suppliers and
customers.
Equitably share risks, costs, and gains of improvement initiatives.

Supply Chain Alignment

Dimension

Alignment

Decisions, roles,
responsibilities

Assignment to best run

overall supply chain

Risks, costs, rewards

Adjusted for incentives

with win-win interests

Performance measures

Extended, joint,
stretched
to reflect alignment

Some Keys For Alignment

Empowerment of decisions
and responsibilities requires
provision of capabilities
Alignment ultimately
demands behavioral change
Successful alignment across
organizations is based on building
trust in a supply chain

Seven-Eleven Japan
Largest convenience
store chain in Japan
($23.3B annual
sales) with 10,853
outlets (1,200 sq. ft
each)
#1 in fast foods
#1 in battery,
ladies stocking sales
#2 in paperback/
magazine sales

55 Inventory
turns/year

Value of $1 Investment

SEJ

Year

Nikkei

Seven-Eleven Japans
Sense And Respond
Trust-based agile logistics
Dynamic shelving
Supplier collaborations

Measure

Act
Localized promotions
Shelf & merchandizing
New product development

POS+
Total visibility

Identify

Analyze

Correlation and
Substitution Local events
Product transitions

Seven-Eleven Japan (SEJ)

Respond to quick changes in demand
Real time systems to detect changes in
customer preference
Stores in key locations instead of outlets
across the country

Minimizing number of delivery trucks

Use of trucks, boats, motorcycles and
helicopters
125 motorcylces + 7 helicopters to deliver
64000 rice balls during Kobe earthquake

Alignment of interests between SevenEleven and its partners

Rewards and Penalty system
E-commerce company 7dream.com with 6
partners

AAA Supply Chain

Agility

Extensive information integration

Optimization-based applications
Highly efficient manufacturing processes
Centralized command, decentralized
control

Adaptabilit
y

Fab expansion based on technology

and market changes
Evolution to service-focus business
Optimized product/fab assignment

Alignment

Information sharing across supply chain

Collaborative relationships with customers
Tight connectivity with assembly and test
Trust-based, people-oriented organization

Summary
World class supply chains require
capabilities in agility, adaptability and
alignment
Sensible Sense and Responsive
Response to gain agility
Right supply chain for the
right product and right time
Winning with the whole supply chain

AAA supply chain management is the

key for super-AAA performance and
values

Thank You