A Look at 'Triple-A Supply Chains' | Summary and Q&A

Transcript

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Summary

In this video, the speaker discusses the concept of the Triple A supply chain, which stands for agility, adaptability, and alignment. He explains that these three properties are necessary for companies to excel in supply chain performance. The speaker also highlights the importance of measuring and learning from supply chain processes, as well as the need for companies to adapt to changing market conditions. Additionally, he discusses the importance of aligning with supply chain partners and shares examples of companies that have successfully implemented the Triple A supply chain.

Questions & Answers

Q: What is the Triple A supply chain?

The Triple A supply chain refers to the three properties of agility, adaptability, and alignment that companies need to possess in order to excel in supply chain performance. These properties are essential for companies to meet the challenges of uncertainty, rapid changes, and dependencies on multiple partners in the supply chain.

Q: Why is agility important in the supply chain?

Agility is important because in a rapidly changing and uncertain market, it is difficult to forecast accurately. Instead of trying to improve forecasting, companies should focus on being fast and flexible in their responses to market changes. Sensible sense and responsive response are key concepts here, where companies must sense changes in the market and respond quickly based on the information they gather.

Q: Can you explain the concept of sensible sense and responsive response?

Sensible sense refers to the idea that companies must not only sense changes in the market, but also make sense out of the information they gather. Simply sensing without analyzing and understanding the data can lead to misinterpretations and distorted signals. Responsive response is about acting quickly on the information gathered, so that companies can adapt and make timely decisions.

Q: How does adaptability play a role in the supply chain?

Adaptability is important because market conditions, technology, and product lifecycles are constantly changing. Companies need to be able to adapt their supply chain strategies and processes to meet these changes. This may involve changing manufacturing locations, outsourcing, or modifying value chains. The examples mentioned in the video include the case of 7-Eleven Japan adapting to customer demand for meal options in their cinemas, and POSCO's integration of supply chain partners to optimize their steel manufacturing processes.

Q: What is the importance of alignment in the supply chain?

Alignment refers to the need for companies to have synchronized goals, performance measures, and risk-sharing schemes with their supply chain partners. It is important to align incentives and expectations to ensure that all parties work together towards a common goal. The speaker mentions the example of Toyota aligning incentives for its dealers to sell the Prius by taking on the risk of the product and providing better margins. Another example mentioned is the financial reengineering implemented by companies like Silicon Valley Bank to share the liability and financing of inventory with suppliers.

Q: Can you provide some examples of companies that have successfully implemented the Triple A supply chain?

The speaker mentions Zara as an example of a company that exhibits agility in its supply chain. Zara is able to sense and respond quickly to market trends, allowing them to produce and distribute fashion items in a short time. 7-Eleven Japan is another example where sensible sense and responsive response play a role. They gather information about customer preferences and adjust their inventory accordingly. Lastly, POSCO is mentioned as an example of adaptability, where they have changed their supply chain strategy based on changing market conditions and the availability of inputs.

Q: What are the benefits of implementing the Triple A supply chain?

Companies that successfully implement the Triple A supply chain can enjoy higher market performance and market cap. They are better equipped to handle uncertainty, rapid changes, and dependencies in the supply chain. By being agile, adaptable, and aligned, companies can respond quickly to market demands, optimize their operations, and build strong relationships with supply chain partners. This ultimately leads to improved performance and profitability.

Q: How can companies measure and improve their supply chain performance?

Measuring supply chain performance involves looking at metrics such as inventory turn, speed, cycle time, and customer satisfaction. Companies can benchmark their performance against industry averages to identify areas for improvement. Continuous measurement, analysis, and improvement are necessary to ensure a well-functioning supply chain. It is also important to explore the concepts of Triple A supply chain, such as agility, adaptability, and alignment, to enhance performance.

Q: What are the challenges in managing a supply chain well?

The speaker explains that there are three major trends that make managing a supply chain difficult. The first challenge is increasing uncertainty in the market, which makes it hard to predict and forecast accurately. The second challenge is the rapid pace of change, including short product life cycles and technological advancements. The third challenge is the need to work with multiple partners, each with their own self-interests, and ensure that these interests are aligned. These challenges require companies to possess the properties of agility, adaptability, and alignment in their supply chain.

Q: How do supply chain glitches affect performance?

Supply chain glitches, such as shortages or disruptions, can have a significant impact on performance. Research has shown that companies that experience supply chain glitches often underperform compared to their competitors in the same sector. These incidents can result in decreased market value and financial performance. This highlights the importance of having a well-designed and well-managed supply chain to avoid such glitches and their negative consequences.

Q: What are some solutions to the challenges in managing a supply chain well?

The speaker suggests that instead of trying to improve forecasting, companies should focus on being fast and flexible in their responses to market changes. Creating a responsive engine and utilizing concepts like sensible sense and responsive response can help in this regard. Companies should also recognize the need for adaptability in response to changing market conditions and technologies. Lastly, it is important to align goals, performance measures, and risk-sharing schemes with supply chain partners to ensure effective coordination and collaboration.