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AAA Supply Chain

AAA Supply Chain



The Triple A Supply Chain- How to make your supply chain Agile, Adaptable and Aligned

The Triple A Supply Chain- How to make your supply chain Agile, Adaptable and Aligned



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    AAA Supply Chain AAA Supply Chain Presentation Transcript

    • The Triple A Supply Chain
      Hau Lee
    • The Triple A Supply Chain
      The holy grail of supply chain management are high speed and low cost.
      Or, are they?
      Though necessary, they aren’t sufficient to give companies a sustainable competitive advantage over rivals.
      The Triple A Supply Chain
    • The Triple A Supply Chain
      1980-2000 US supply chains became faster and cheaper
      But product mark downs owing to excess inventory up from 10 to 30%
      The Triple A Supply Chain
    • Outstanding Examples of companies that bucked the trend
      The Triple A Supply Chain
    • The Perils of Efficiency
      Many companies have centralized manufacturing and distribution facilities to generate economies of scale.
      Deliver only container loads
      On demand surge, unable to react even if item is in stock
      The Triple A Supply Chain
      Decentralized Operations
    • The Perils of Efficiency
      The Triple A Supply Chain
    • Lucent’s Electronic Switching Systems- Perils of Efficiency
      The Triple A Supply Chain
      ~1990 mkts &
      suppliers shift
      to Asia
      ~ 2000
    • The 21st Century Supply Chain
      The Triple A Supply Chain
    • AAA- Definitions
      The Triple A Supply Chain
    • 1. Agile
      • respond quickly to sudden changes in supply or demand
      • handle unexpected external disruptions smoothly and cost effectively
      • recover promptly from shocks such as natural disasters, epidemics, and computer viruses.
      The Triple A Supply Chain
    • Importance of Being Agile - HP Example
      • HP-Canon Laserjet collaboration
      • Canon wanted 6 mths to change prod schedule. HP cud predict dmnd 3 mths ahead
      • unexpected drop in demand at EOL left HP with huge inventory
      • Having adaptable & aligned supply chain did not help HP overcome other disability
      The Triple A Supply Chain
      HP’s infamous Laserjet mountain
    • Importance of Being Agile – Compaq Example
      In 1990s whenever Intel unveiled new microprocessors, Compaq took more time than rivals to launch new PCs.
      Compaq unable to compete on price- lost market share
      Also slow to adopt engineering changes when vendors made changes
      The Triple A Supply Chain
    • 2. Adaptable
      Supply chains face near permanent changes in markets
      Structural shifts usually occur because of advances in TEMPLES factors
      Recall how Lucent woke up to industry shifts : Asian markets & Outsourced manufacturing
      The Triple A Supply Chain
    • Importance of Adaptability – Lucent Example
      The Triple A Supply Chain
    • CISCO’s Adaptable Supply Chain
      The Triple A Supply Chain
    • TOYOTA Adaptability
      In 2000 Toyota launched Prius – uncertainties too great to allocate it to dealers based on past trends
      Toyota’s transportation costs rose, however it customized products to demand and managed inventory flawlessly.
      In 2002 number of Toyotas on road in Northern California & Southeast were 7% & 20% resply.
      However, Toyota sold 25% of its Prius in Northern California and only 6% in Southeast
      Had Toyota not adapted its distribution system to the product it would have stockouts / excess inventories.
      The Triple A Supply Chain
    • Use Design-for-Supply principles to gain adaptability.
      Standardization – use of catalogue items
      Commonality – products share components
      Postponement – delays the step at which products become different
      The Triple A Supply Chain
    • 3. Aligned
      Great companies align the interests of all firms in their supply chain with their own.
      If any company’s interests differ from those of other organizations in the supply chain, its actions will not maximize the chain’s performance.
      The Triple A Supply Chain
      Hidden actions! Hidden Information!
    • Nonalignment at CISCO
      Why did CISCO have to write off $2.25 billion in inventories in 2001?
      The main culprit was misalignment of Cisco’s interests with those of its contract manufacturers.
      Contractors accumulated large inventories for months without factoring in demand for Cisco’s products.
      Cisco worked closely with vendors to ensure that the supply chain was agile and adaptable, but overlooked alignment!
      The Triple A Supply Chain
    • HP-shooting itself in the foot!
      IC division carried low inventory
      Ink-jet printer division had to carry high inventory
      HP’s supply chain did not align the interests of the divisions with those of the company.
      The Triple A Supply Chain
    • Agility in Practice
      Respond to short-term changes in demand or supply quickly, and
      Handle external disruptions smoothly
      Methods Recommended:
      Promote flow of information with suppliers & customers
      Develop collaborative relationships with suppliers
      Design for postponement
      Build inventory buffers 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
      The Triple A Supply Chain
    • Adaptability in Practice
      Adjust supply chain’s design to meet structural shifts in markets
      Modify supply network to strategies, products and technologies.
      Methods Recommended:
      Monitor economies all over the world to spot new supply bases & markets
      Use intermediaries to develop fresh suppliers & logistics infrastructure
      Evaluate needs of ultimate consumers – not just customers
      Create flexible product designs
      Determine where companies products stand in terms of technology cycles and product life cycles.
      The Triple A Supply Chain
    • Alignment in Practice
      Create incentives for better performance
      Recommended Methods:
      Exchange information and knowledge freely with vendors and customers
      Lay down roles, tasks and responsibilities clearly for suppliers & customers
      Equitably share risks, costs, and gains of improvement initiatives.
      The Triple A Supply Chain
    • 7-Eleven Japan’s 3 Aces
      Exploits triple As to stay ahead of rivals
      The $21 billion convenience store has low stock out rates and in 2004 had an inventory turnover of 55
      With gross profit margin of 30 % SEJ is one of the most profitable retailers in the world
      Just how has the 9000 store retailer managed to sustain performance for more than a decade?
      The Triple A Supply Chain
    • 7-Eleven’s Agility
      Real time systems to detect changes in customer preference & tracks data on sales & consumers
      Relocates inventory among stores. Restocks at right time
      Store shelves reconfigured three times daily to cater to different customer segments.
      The Triple A Supply Chain
    • 7-Eleven’s Adaptability
      Concentrates stores in key locations
      Suppliers in same region consolidate shipments
      Expanded kinds of vehicles from trucks to motorcycles, boats & helicopters
      Effectiveness of the company’s logistics system is legendary
      The Triple A Supply Chain
    • 7-Eleven’s Alignment
      Close alignment bet. 7-11 interests and its partners
      Incentives & disincentives are clear:
      Make 7-11 successful & share rewards
      Fail to deliver on time, and pay a penalty
      When carriers deliver products no one verifies trucks contents
      The Triple A Supply Chain
    • 7dream.com (Example of Alignment)
      Allows customers to order products on line/ via kiosks and pick up from any 7-11 store
      Partners benefit from SEJ’s logistic network
      7-Eleven has become a manufacturing outlet for partners (multimedia kiosks for games, tickets, CDs etc
      The Triple A Supply Chain