Strategic agility in Supply Chains – risk and foxes
Strategic agility is the way forward, and South African organisations need to follow suit without delay, especially when gearing their supply chains, if they want to be around for the up turn, industry experts tell SmartProcurement.
“Supply chains interact with many elements of risk. Agility is linked to risk,” says Douglas Kent, President of eKNOWtion, a global supply chain consultancy, and newly elected chairman of the European Supply Chain Council’s Leadership group.
Contemporary supply chains are more complex owing to factors such as outsourcing, supplier/customer collaboration, product proliferation and fluctuations in supplier costs, says Kent, who received the Terry Smee Award for “Best Speaker” at the 2009 SAPICS Conference and Exhibition for his presentation ‘Supply Chain Management – It’s a Risky Business’.
Risk must be measured, monitored and mitigated. “To do that effectively an organisation must make risk management a core competency within the company,” he explains.
Supply chain risks include logistics failures, fuel shortages or price increases, intellectual property violations, and your suppliers.
“Your organisation’s future is tied to your suppliers’ agility and how their ability to deliver will change in the future. You must understand how a glitch on their side will affect your business. Incorporate your supply chain into your business strategy, there must be consultation between finance and supply chain,” advises Kent.
Ian Mann, a business consultant specialising in strategy and strategic alignment, who spoke at the SAPICS conference, wonders how organisations can write lengthy strategic plans without a prophet on staff. “How can you know the environment that will surround ‘where you want to be in five years’?”
Infrastructure development offers strategic agility without the need for a crystal ball, says Kent. He advises vigorous R&D in supply chains, which will allow organisations to concentrate on being an innovator in products and in supply chain excellence.
Business Week noted that ten global organisations listed under the top 25 innovative companies (including Apple, Toyota, Nokia, Dell, Cisco, IBM and Walt Disney) dominated a list of the world’s top 25 supply chains.
“Agility comes from an organisation’s culture. It is your strategy taken to heart and people aligning themselves to the strategy,” says Mann.
Warren Buffet, Chairman and CEO of conglomerate holding company Berkshire Hathaway (BH) sends one letter a year to the directors of BH’s divisions. He reminds them of two rules they must follow. One. Do not lose shareholders’ money. Two. Don’t forget the first rule.
Note how Buffet does not specify how the directors should go about obeying the rules. They will all ‘not lose shareholder value’ in there own ways.
Hedgehogs and foxes
“A fox is a cunning creature. It’s always examining the environment in which it finds itself, looking for changes that would allow it acquire food, to prosper. A fox is agile and organisations should therefore be more fox-like,” says acclaimed scenario planner Dr. Clem Sunter.
He advised against being too much like a hedgehog.
A hedgehog has its eye only on the goal. It has planned its route to get there and through shear determination, force of will and by ignoring anything irrelevant to its planned route, it will get to its destination. Hedgehogs cannot proactively adapt to changing business environments.
“We have just seen the end of a 25-year economic boom, one that many people thought would continue for the foreseeable future. Being a hedgehog in an environment whose growth drivers are not fully understood is very dangerous,” noted Sunter.
When analysts began to comprehend the affect a US property bubble collapse would have on world markets, foxes had to act quickly. It was much too late to save the hedgehogs.
“To be adaptive, organisations must ask themselves tough questions that go back to first principals. Those questions, and the answers, must come from imagination, not the box,” he explained.
Business adaptability is being able to capture what the future may hold and putting yourself in a position to respond.
Biologist Charles Darwin first coined the phrase “survival of the adapted” in his work on evolutionary theory, but changed it to “survival of the fittest” at a friend’s suggestion. However, Darwin is quoted as saying that “it is not the strongest of the species that survive, nor the most intelligent – those that do [survive], are those most adaptive to change”.
An organisation might be the fittest in the current environment, but without adaptation it will not be the fittest in a changed environment.
Questions that Sunter advises organisations ask themselves:
• Think of big-picture surprises and possible competitor strategies?
• What would upset your business?
• If business is a playing field, can you change the playing field or your performance on that field? How quickly can you react to changes forced onto you?