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Resilience or Lean SCM - This Week in Supply Chain Management (15 / 2012)

Daniel Dumke — Fri, 13 Apr 2012 12:43:22 +0000

Finally I was able to hand in my dissertation to my professor. I hope to get his feedback soon.
This week I found several interesting articles, just pick those you find useful.

Articles

Russ Banham wrote about “Reducing Disruption in the Global Supply Chain” summarizing some strategies and case studies (Wall Street Journal)
Enterra Insights presents an overview on the trade-offs between lean and resilient principles. (Enterra Insights)

Already tweeted

These are the tweets from this week. You can follow me on twitter.

RT @Industrialmfg: Factors Impacting Risks in Today’s Supply Chains http://t.co/sDoD5nX4
RT @benscm: @SCRMBlog Social Engagement for Supply Chain Improvement http://t.co/mLspDy7k
Supply chain interdependency creates new risks http://t.co/T4qXUVV3

Enjoy your weekend!

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The Supply Chain Uncertainty Circle

Daniel Dumke — Wed, 27 Oct 2010 16:17:00 +0000

How to shrink the “Uncertainty Circle” is the topic of a paper I read today. It has been written by Rachel Mason-Jones and Denis R. Towill and can be downloaded here free of charge.

This article from 1998 focusses on how to shrink the uncertainty within a supply chain and therefore improve performance, since

we believe that those companies which cope best with

uncertainty, are most likely to produce internationally

competitive bottom-line performance.

This hypothesis is also backed by several other authors like, Craighead et al. (2009) or Hendricks and Singhal (2005).

Within the product delivery process for a single company, the authors find four causes of uncertainty: supply side, manufacturing processes, control systems and demand side (see figure 1).

Causes of Supply Chain Uncertainty (Mason-Jones and Towill 1998)

The Circle

With the Uncertainty Circle it is now possible to visualize to effect of shrinking one of the risks without the other: Overall risk is only reduced by a (comparatively) small amount. This furthermore implies the goal for supply chain risk managers: Reduction of risk on all frontiers!

Uncertainty Circle and Risk Reduction Process (Mason-Jones and Towill 1998)

This of course does not have to happen at the same time. Companies usually start with improvements in their own manufacturing processes and establish lean thinking to improve lead times and quality. As a next step this concept may be enlarged to the companies suppliers as well to reduce supply side risks.

The authors then argue that much potential is left untouched on the reduction of demand side uncertainties and control systems.

Demand side risks can be reduced by improving the information flow from the end-customer throughout the supply chain and companies can tackle control risks by improving their ability to act on this new information with a adequate Decision Support System.

Supply Chain Design Strategies

The authors then simulate a given supply chain and test strategies to improve (in figure 3) “Information pipeline time compression only”, “Material flow pipeline compression only”, “Total Cycle Time compression”.

Rating Risk Mitigation Strategies (click to enlarge; Mason-Jones and Towill 1998)

Conclusion

Even though the article has been published twelve years ago the concept of the Uncertainty Circle can still be used as a framework to reduce risks within a supply chain. The comparison table shows the effects of different risk mitigation strategies clearly and should adapted and used by more companies.

Reference:

Mason-Jones, Rachel, & Towill, Denis R. (1998). Shrinking the Supply Chain Uncertainty Circle IOM Control, 24 (7), 17-22

Craighead, C., Hult, G., & Ketchen Jr., D. (2009). The effects of innovation–cost strategy, knowledge, and action in the supply chain on firm performance Journal of Operations Management, 27 (5), 405-421 DOI: 10.1016/j.jom.2009.01.002

Hendricks, K., & Singhal, V. (2005). An empirical analysis of the effect of supply chain disruptions on long-run stock price performance and equity risk of the firm Production and Operations Managment, 14 (1), 35-52

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Design of Agile Supply Chains

Daniel Dumke — Tue, 29 Jun 2010 13:28:00 +0000

I already reviewed two other articles about agile supply chains. One on the role of distribution centers in supply chains and one on the migration from lean to agile supply chains.

But the question comes to mind if lean and agile supply chains have to be mutually exclusive or if it is possible to combine them. Christopher and Towill (2001) had a look at this question regarding the supply chain design.

Factors for Leanness / Agility

Several factors influence the design decision if a supply chain should be more agile or lean. Nowadays more often than not supply chains compete, not companies. This implies that not only companies must act market orient, but also supply chains.
Market orientation can be analyzed using the market winner / market qualifier concept. This also means that there are different foci of the lean and agile supply chain.

Correlation of Agile / Lean Supply Chains to Market Winners / Market Qualifiers

Strategies

Christopher and Towill mention three ways to combine the lean and agile paradigm in one supply chain:

80/20 approach
Usually in a supply chain with multiple products only a few of them make most of the overall volume (20% make 80% of the volume). Result: for the high volume products choose a lean approach, while for the low volume products an agile strategy might be better suited.
Decoupling point approach
Strategic inventory can act as a decoupling point within a supply chain. If you select this point wisely, it can be beneficial to use a lean strategy up to this point and an agile strategy after this point.
Base and surge demand
the strategies can also be combined if the demand pattern shows a base demand. This demand could be produced using a lean strategy, while the surge implements a more agile approach.
Base and Surge demand
Source: Christopher and Towill (2001)

Conclusion

It is important to see, that not only leanness and agility can be combined, but also the strategies mentioned above can be used complementarily.

Reference:

Christopher, M., & Towill, D. (2001). An integrated model for the design of agile supply chains International Journal of Physical Distribution & Logistics Management, 31 (4), 235-246 DOI: 10.1108/09600030110394914

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