Dr John Gattorna

Designing Dynamic Supply Chains for volatile

market conditions

Dr John Gattorna
Gattorna Alignment
www,johngattorna.com
Evolution of Design Thinking in Enterprise Supply
Chains

From Logistics Operations Supply Chain networks

From Static set-and-forget Dynamic capabilities

From inside-out outside-in

From one-size-fits-all Multi-Supply Chains

From a stable operating

Volatile conditions
environment

From Functional Fully interactive business

specialisms models

2
 Reconfiguration of enterprise supply chains from
Static design, to tomorrows Dynamic design
Source Market Sales Market
(Supply) (Demand)
Static Configuration one-size-fits-all (push)
Procurement Logistics
Strategies Strategies
The Enterprise
CEO

Current
Transformation

Functions /BUs/Geographies

Source Market Sales Market

(Supply) Dynamic Configuration multiple alignment (push + pull) (Demand)
Procurement The Enterprise Logistics
Strategies Strategies
CEO
COO

Future

Functions/ /BUs/Geographies

3
 The Australian 4,000 meter men's Pursuit Cycling Team Competing
in the 2008 Beijing Olympics

Source: Photograph from Getty Images by Mike Hewitt

4
 Dynamic Alignment Business Model

Underlying Logic
An organisation must be aligned
Market Place Rules with its operating environment
Strategy

Usefulness

Infrastructure
Playing Shows the interaction between
the game customers needs, the
Business Processes

Strategy formulation of appropriate

strategic responses, and the
successful execution of these
strategies by shaping the
necessary internal capabilities
Technology

and corresponding leadership

styles

Culture Internal
performance

Capabilities
Human

Prerequisite
Understanding of the customers
fundamental needs and buying
Leadership Shaping & behaviours that ultimately drive
Style Creating sales, revenues, and profit

Figure 1.2: Elements of the dynamic alignment framework

Source: Adapted from Figure I.2 in Gattorna (2003), p. xiii; also Gattorna (1998), p. 5; and Gattorna (2006), p.16.

5
 Dynamic Alignment Business model from a supply
chain perspective

What is needed is an outside in approach, to align the business

with its customers

Dynamic Alignment

Business Processes

Leadership Culture Strategy Market

Style Place

Technology + Infrastructure

Business Strategy = The Market

Enterprise bridge between
the market and
the enterprise

Source: Adapted from Figure I.2 in Gattorna (2003), p. xiii; also Gattorna (1998), p. 5; and Gattorna (2006), p.16. Figure 1.2: Elements of the dynamic alignment framework

6
The corresponding 4 supply chain configurations equates
to multiple supply chain alignment-behavioral segmentation

Finding the linkages is key to SC design

Fully Flexible SC
Organisation Service
Leadership
/Process Proposition

Agile SC
Organisation Service
Leadership
/Process Proposition

Organisation Lean SC Service

Leadership
/Process Proposition

Continuous
Organisation Replenishment Service
Leadership
/Process Proposition

Leadership Cultural Strategy Buying

styles capability Behaviours

FIGURE 2.2 Multiple supply chain alignment on the customer side

Source: Adapted from Figure 4.3.2 in Gattorna (2003), p. 459; see also Gattorna (2006) Figure 2.1, p.40

7
 Behavioral forces at play in any business

I Integration Development D

Force for cohesion Force for creativity

co-operation and change and flexibility
relationships

Behavioral
Forces

Force for analysis, Force for energy

systems and control action and results

A Administration Producer P
Figure 1.3: General characteristics of the four dominant behavioral forces or logics

Source: Adapted from Figure 29.1 in Gattorna (1998), p. 474; see also Gattorna (2006), p. 17.
8
8
Typical bias of behavioral forces at play in markets

ILLUSTRATIVE

D=7
I=5

A = 10
Secondary P = 15
Primary

Figure 1.4: Typical spread of attributes that define customers buying behaviors; in this case P is the dominant logic and a is the
secondary logic, making a composite Pa

9
 Best-of-both-Worlds Strategy

% %
CUSTOMER CUSTOMER
SATISFACTION SATISFACTION

Time Time

% %
LOGISTICs COSTS LOGISTICS COST
(% OF SALES) (% OF SALES)

Time Time
TRADITIONAL PARADIGM NEW PARADIGM

Figure 1.9: Paradigm shift to a best-of-both-worlds strategy

Source: Developed in discussion with Deborah Ellis, Carpenter Ellis, 2009

10
 Four (4) primary behavioral forces

(I) Integration Early / young market (D)

Mature imminent change?? No clear patterns / traditions yet to
Loyalty and long-term relationships be established
Brand loyalty New product / technology
Joint Venture mentality High level R&D (eg. CDs)
Quality emphasis Supplier-led risk
Teamwork Entrepreneurial
Consensus Lower price sensitivity
Customer Service = Empathy, Customer Service = Innovative,
Understanding, Relationship Creative response to unique needs

UNDERSTAND SURPRISE
ME

Stable market, patterns are established Patterns emerge - growth

Commodity Customer led demand
Drive for efficiency experience Sales, promotion, distribution important
culture Strong commercial attitude anti-
Value for money relationship (eg. price sensitive); opposite to
High price sensitivity loyalty
Procedural Hollywood syndrome only as good as
Standards your last performance
Structure Product differentiation
Customer Service = Reliability, Customer Service = Responsiveness in
Predictability, Consistency a commercial way
(A) BE (P)
RESPOND
CONSISTENT
Figure 1.10: Primary customer service logics
Source: Adapted from Figure 2.4 in Gattorna and Walters (1996), p. 31; see also Figure 1.10 in Gattorna (2006), p.27.

11
The sixteen (16) possible dominant behavioral segments

EFFICIENT COMMERCIAL

INNOVATIVE SOLUTIONS

COLLABORATIVE

DYNAMIC
FIGURE 2.1 The sixteen (16) possible dominant behavioral segments

12
 Behavioral segmentation: the 4 most commonly
observed dominant buying behaviors

Collaborative Efficient Dynamic Innovative solutions

Close working Consistent low cost Rapid response to Supplier-led

relationships for response to largely unpredictable supply and development and delivery
mutual gain predictable demands demand conditions of new ideas

Mostly predictable Predictable demand Unpredictable demand Very unpredictable

within contract demand
Regular delivery Commodity
Regular delivery relationship Higher risk
Mature or augmented
products Efficiency low cost Time priority/urgency Flexible delivery response
focus
Primary source of Opportunity focus Innovation focus
supply Multiple sources of
Ad hoc source of Rapid change
supply
Trusting relationship supply
Individual decision
Little sharing of
Teamwork/partnership Low loyalty, making
information
impersonal
Information sharing Solutions oriented
More adversarial
Fewer processes
Joint development Management of IP
Standard processes
Outcome oriented
Forgiving Incentives/ego
Power imposed
Commercial deals
Price not an issue No price sensitivity
Transactional based on pragmatism
Very price sensitive Price aware

FIGURE 2.3 The four most commonly observed dominant buying behaviors
Source: Adapted from Table 1.3.1 in Gattorna (2003), p. 32; see also Gattorna (2006), p.41

13
Intersection of Institutional and Behavioral Segments, Indicative Only
and corresponding supply chain types and process capabilities

End Users !00%

20
Distributors %
80%

20
Panel Builders 80%
%

20
O.E.M %
80%

SC Type Fully Flexible Lean Agile Project

Collaborati Plant to Shorten LT Complete Site Site Shorten LT
Stock order
ve platform customer MTO order Delivery Delivery MTO
Customer On Line Stagging Shorten LT Merge in Order
Fast Track Precision
Dashboard EDI order MTO Transit Grouping
On Line Pro active
Consignt Promotion Fast Track Precision Consignt
EDI Info Pdt
Order Pro Active Contract &
CLO V.M.I Document
Grouping Info Pdt Commission

Last Track &

Kitting
minute Trace
Track &
Trace

Behavioural
Segment
Collaborative Transactional Dynamic Pragmatic

Basic Capability across the board Example: Reliability (A)

14
 An example of Behavioural segmentation cutting
across Institutional segments ILLUSTRATIVE

Suburban Typical institutional Clubs,

hotels 5-Star segmentation National Night clubs, restaurants,
and bottle Hotels retailers casinos cafes,
shops bistros

Local* Integrated*
Integrated* Destination*
Destination* Connect*
Small volumes Large volumes Small volumes Small volumes
Difficult delivery locations Standing orders Some unpredictable in Special solutions
Merchandising support Straight forward regular demand Specific delivery arrangements
Limited space deliveries Regular orders Creative sales and logistics
Tight finance Relatively high stock levels Difficult delivery locations arrangements
Stable demand Price sensitive Pack presentation important Small volumes
Certainty of supply Appropriate promotions Premium/value-adds Value-for-money
Regular orders Price aware
Price sensitive Variety important
Relationship important
eg., suburban hotels, and eg., Major retailers; CML; eg., Small and remote
eg., Fine dining restaurants;
bottle shops Woolworths customers; not buying direct
casinos; resorts; theme parks;
5-star hotels * Segment names selected by Fosters
FIGURE 2.7 Fosters new behavioral-based segmentation in the Australian alcoholic beverage industry
Source : Adapted from Figure 2.6 in Gattorna (2006), p.51
15
 The corresponding 4 supply chain configurations
equates to multiple supply chain alignment- strategy

Finding the linkages is key to SC design

Fully Flexible SC
Organisation Service
Leadership
/Process Proposition

Agile SC
Organisation Service
Leadership
/Process Proposition

Organisation Lean SC Service

Leadership
/Process Proposition

Continuous
Organisation Replenishment Service
Leadership
/Process Proposition

Leadership Cultural Strategy Buying

styles capability Behaviours

FIGURE 2.2 Multiple supply chain alignment on the customer side

Source: Adapted from Figure 4.3.2 in Gattorna (2003), p. 459; see also Gattorna (2006) Figure 2.1, p.40

16
Operational strategy dimensions- holistic approach

1. Product mix 9. Production

2. Innovation emphasis 10. Capacity considerations

3. Marketing emphasis 11. Fulfilment emphasis

4. Channels of distribution 12. Relationship intensity

5. Pricing regime 13. Systems/IT support

6. Promotional activity 14. Resource allocation priorities

7. Service emphasis 15. Strategic risk profile

8. Procurement/sourcing approach

Figure 3.1 Strategic dimensions for formulating supply chain strategies

17
Strategic dimensions-Continuous Replenishment SC

STRATEGIC DIMENSION IDEAL STRATEGY

1 Product mix Emphasis on mature, branded, and augmented
products
2 Innovation emphasis Big emphasis on product quality; joint product
development. Innovate to improve relationship
3 Marketing emphasis Build brand loyalty
4 Channels of distribution Either direct or via trusted outlets
5 Pricing regime Price according to strength of brand; moderate price
sensitivity
6 Promotional activity Low promotional activity- not needed

7 Service emphasis Empathy with loyal customers; consistency of

service; trust
8 Procurement/sourcing approach Select suppliers on basis of relationships

9 Production Low volume high value add. Collaborate to reduce

costs
10 Capacity considerations Maximum utilization achievable consistent with
serving customers
11 Fulfilment approach Reliable/scheduled delivery; shared forecasts

12 Relationship intensity Mutual dependence between customer and supplier

13 Systems/ IT support Emphasis on customer management, CRM essential

14 Resource allocation priorities Focus on supporting the relationship to retain

customer
15 Strategic risk profile Low
FIGURE 7.1 Continuous replenishment supply chain strategy - protective

18
Strategic dimensions Lean SCs

STRATEGIC DIMENSION IDEAL STRATEGY

1 Product mix Stable product line; minimal variants

2 Innovation emphasis Focus on ways to reduce cost of inputs and

processes
3 Marketing emphasis Lowest price; reliability

4 Channels of distribution Wide distribution through multiple channels

5 Pricing regime Lowest price. EDLP

6 Promotional activity Low

7 Service emphasis Efficiency and process engineering

8 Procurement/Sourcing approach Outsource standard products to gain

lowest cost production.
9 Production High volume low cost; commodity

10 Capacity considerations High utilization

11 Fulfilment approach High reliability; predictable service and

availability
12 Relationship Intensity Low

13 Systems/ IT support Emphasis on transactional systems

14 Resource allocation priorities Focus on cost reduction

15 Strategic risk profile Low

FIGURE 8.1 Lean supply chain strategy - incremental

19
Strategic dimensions -Agile SCs

STRATEGIC DIMENSION IDEAL STRATEGY

1 Product mix Larger range; choice important

2 Innovation emphasis Seek product differentiation

3 Marketing emphasis Quick response to changing customer requirements

4 Channels of distribution Provide easy access to consumers; convenience

5 Pricing regime Competitive; moderate price sensitivity

6 Promotional activity High; fashion-style approaches

7 Service emphasis Performance to specifications

8 Procurement/sourcing Market knowledge and distribution

9 Production Shorter runs; flexible scheduling; make-to-order

10 Capacity considerations Lower utilisation because of buffers in the system

11 Fulfillment Short lead times; use postponement

12 Relationship intensity Low

13 Systems/ IT support Use modelling and analysis

14 Resource allocation priorities Build spare capacity to cater for volatile demand

15 Strategic risk profile Higher risk

FIGURE 9.1 Agile supply chain strategy - operational

20
Strategic Dimensions- Fully Flexible SCs
(Business Event)
STRATEGIC DIMENSION IDEAL STRATEGY

1 Product mix Broad changing product line

2 Innovation emphasis Extensive R & D; aim to be first to market

3 Marketing emphasis Creative problem solving

4 Channels of distribution Limited

5 Pricing regime Price appropriately for a creative solution; no price

sensitivity
6 Promotional activity Target early adopters

7 Service emphasis Novel solutions

8 Procurement/sourcing arrangements Product; technology; innovation

9 Production Prototypes; customisation

10 Capacity considerations Low. Hedge and deploy resources

11 Fulfillment approach Speed is vital

12 Relationship intensity Intense but short term while problem exists

13 Systems/ IT support Whatever is required to solve the problem

14 Resource allocation priorities Hedge and deploy resources; sometimes

ineffectively
15 Strategic risk profile High

FIGURE 10.3 Business event fully flexible supply chain strategy - Entrepreneurial

21
 The corresponding 4 supply chain configurations equates
to multiple supply chain alignment-cultural capability

Finding the linkages is key to SC design

Fully Flexible SC
Organisation Service
Leadership
/Process Proposition

Agile SC
Organisation Service
Leadership
/Process Proposition

Organisation Lean SC Service

Leadership
/Process Proposition

Continuous
Organisation Replenishment Service
Leadership
/Process Proposition

Leadership Cultural Strategy Buying

styles capability Behaviours

FIGURE 2.2 Multiple supply chain alignment on the customer side

Source: Adapted from Figure 4.3.2 in Gattorna (2003), p. 459; see also Gattorna (2006) Figure 2.1, p.40

22
 Implementation the invisible unconscious world of
cultural values

Visible Patterns of Behavior

Structure
Strategy
VISIBLE
Systems
CONSCIOUS

VALUES AND BELIEFS

Goals of the enterprise
Means used to accomplish these goals

UNDERLYING ASSUMPTIONS
Taken for granted assumptions about the
organizational reality
INVISIBLE
UNCONSCIOUS

Source Adapted from Figure 4.3.3 in Gattorna (2003), p. 460 FIGURE 4.1 The performance iceberg

23
 The four (4) major sub-cultures

Indirect
I Control D
Group Entrepreneurial

Means: Synergy, teamwork, Means: Innovation, flexibility,

cooperation readiness

Ends: Cohesion Ends: Growth

Internal External
Focus Focus

Means: Systems, Means: Action, objectives,

measurements, controls energy

Ends: Order Ends: Results

Hierarchical Rational
A Direct P
Control

FIGURE 4.3 The four generic enterprise subcultures

Source: Adapted from Figure 4.3.5 in Gattorna (2003), p. 461

24
 Detailed characteristics of each main sub-culture

I Group Culture Entrepreneurial Culture D

Emphasis on cohesion, teamwork, synergy and Emphasis on creativity, innovation and flexibility.
consensus.
Closed, informal communication shared through groups and teams Open, informal communication which is shared with whoever
Control achieved by commitment to common Values happens to be around at the time
Management support emphasizes the internal climate, particularly Control achieved by commitment to a common vision
co-operation, personal development and recognition Management support emphasizes leading, inspiring, flexibility and
Individuals tasks are negotiated by consensus initiating behaviors
Rewards are based on informal standards and the ability to maintain Individuals are empowered to perform their roles
internal cohesion good team players Rewards are based on creativity and entrepreneurial behavior
Deviant behavior is tolerated provided it adheres to consensus Deviant behavior is tolerated provided it is goal directed
values

Emphasis on stability, order, systems and control. Emphasis on results, urgency and high levels of activity.

Closed, formal communication which is shared only on a need to Open, formal communication by way of concise, timely updates
know basis using the most appropriate media for speed
Control achieved by focus on processes Control achieved by focus on results
Management support emphasizes procedures Management support emphasizes planning
Individuals tasks are established by precedence Individuals are given structural authority to perform their roles
Rewards are based on formal standards and the ability to maintain Rewards are based on formal standards and relevant results
internal control good administration analysis and action
No deviation from approved processes No deviation from plans or performance standards

A Hierarchical Culture Rational Culture P

Source Adapted from Figure 3.3 in Gattorna (2006), p. 74 Figure 4.4: Details of each generic sub-culture

25
 The eight (8) possible transformation pathways

1. Evolutionary 2. Revolutionary

2
2

1 1

Fig 4.9 a Fig 4.9 b

Fig 4.9 c

2 2

Fig 4.9 d

Source Adapted from Figure 4.3.6 in Gattorna (2003), p. 463 Figure 4.10 Change pathways

26
 Continuous Replenishment supply chains: demand-side

..where relationships matter most

MARKET SEGMENT COLLABORATIVE CLOSE WORKING RELATIONSHIPS SOUGHT WITH SELECTED SUPPLIERS

FULFILMENT VALUE STRATEGIES

STRATEGY PROPOSITION Share information Collaboration
Seek strategic partnerships Zone
Seek long-term stability
Build mutual trust

INTERNAL CULTURAL GROUP SUBCULTURE

CULTURAL LEVERS
CAPABILITY 1. Org design Relationship cluster
2. People positioning Ensure bias in cluster is towards personnel with F in their MBTI profile
3. Processes Standard processes, eg. Customer Account Management
4. IT/systems CRM; VMI; ECR; CDP; CPFR
5. S&OP S&OP processes relatively simple in this collaborative environment
6. KPIs Emphasis on loyalty and retention
7. Incentives Encourage participative schemes
8. Job design Authority/autonomy negotiated by consensus
9. Internal comms. Consultative; face-to-face
10. Training & devel. Team building
11. Role modelling Managers with ESFP/MBTI profile are ideal
12. Recruitment Recruit team players

LEADERSHIP 13 LEADERSHIPSTYLE COACH

Conscientious
Lead by teaching
Concerned for others
Loyal, committed, politically astute
Seeks agreement by consensus

Source Adapted from Figure 1.1 in Gattorna (2009), p. 48 FIGURE 7.2 Continuous replenishment supply chain configuration - demand-side

27
 Organisation design for Collaborative customers

CEO
COO

P Procuremen Production Finance Sales/Mktg Logistics

P t
L Customer A
F
Relationships Clusters

S/M

L P
Customer B

S/M F

Customer
L P
segment
F
S/M
FUNCTIONS
Note 1: Account teams/clusters configured with a relationship mindset bias
Note 2 : Individual team members return to their respective functions for specialist training Collaborative
buying behavior

Source Adapted from Figure 9.2 in Gattorna (2009), p.140. Figure 6.4 Continuous replenishment supply chain clusters

28
 Arranging technology to serve Collaborative customers

Customer
buyer behavior segments

Innovative
Collaborative solutions
Efficiency Demanding/
unpredictable

Different Continuous Lean Agile supply Fully flexible

combinations replenishment supply chain supply chain
of IT supply chain chain
applications RAPID PLANNING
ASCP/CBO ASCP/CBO DEMANTRA PTP
SIEBEL CRM DEMANTRA PTP SNO(NUMETRIX)
DEMANTRA PTP SNO (NUMETRIX) OTS (G-LOG) RAPID PLANNING
OTM (G-LOG) OTM (G-LOG) AGILE - PLC AGILE - PLC

J.D.Edwards
ERP transaction system and data base
Peoplesoft (HR) (or can be SAP or legacy systems)
e-Business suite (EBS)

Source Adapted from Figure 1.5 in Gattorna (2009), p.55 FIGURE 7.3 Requisite technology for continuous replenishment supply chains

29
 Lean supply chains: demand-side

MARKET SEGMENT EFFICIENT REQUIRE RELENTLESS FOCUS ON COST AND EFFICIENCY

FULFILMENT VALUE STRATEGIES

STRATEGY PROPOSITION
Seek economies of scale
Low cost production and distribution
Forecast demand; mature products; predictable-lead times

INTERNAL CULTURAL LEVERS HIERARCHICAL SUBCULTURE

CULTURAL
CAPABILITY
1. Orgnl design Organize clusters around core processes
2. People positioning Ensure bias towards personnel with S in their MBTI profile
3. Processes Standard processes; emphasis on cost
4. IT/Systems Replace legacy systems with ERP system
5. S&OP Effective decision framework in a relatively predictable operating environment
6. KPIs DIFOTEF; forecast accuracy; productivity ratios
7. Incentives Conformance to policies
8. Job Design Centralized control rules and regulations apply
9. Internal comms Regular; structured on need to know basis
10. T&D Emphasis on analysis and measurement
11. Role modelling Managers with ISTJ (A) MBTI profile are ideal
12. Recruitment Recruit players with deep analytical skills

LEADERSHIP 13. LEADERSHIP TRADITIONAL

STYLE
Leads by procedure; precedent
Implements only proven business practices
Cost controller; efficiency focus
Uses information to control
Seeks stability
Is risk averse

Source Adapted from Figure 1.2 in Gattorna (2009), p.49 FIGURE 8.2 Lean supply chains demand-side

30
 Organisation design for Transactional customers

CEO
COO
SOURCING

P
Procurement Production Finance Sales/Mktg Logistics
P
L
F
S/M
Process Clusters

ORDER MGT

L P

S/M F
Price
sensitive /
FULFILMENT
efficiency
P customer
segment

L P

F
S/M
FUNCTIONS
Note 1: Process teams configured with a cost improvement bias, led by a process manager
Note 2: Individual team members return to their respective functions for training and other specialist matters
Source Adapted from Figure 9.3 in Gattorna (2009), p.140. Figure 6.5: Lean supply chain clusters

31
 Arranging technology to serve Transactional customers

Customer
buyer behavior segments

Collaborative Innovative
Efficiency Demanding/ solutions
unpredictable

Different Continuous Lean Agile supply Fully flexible

combinations replenishment supply chain supply chain
of IT supply chain chain
applications RAPID PLANNING
ASCP/CBO ASCP/CBO DEMANTRA PTP
SIEBEL CRM DEMANTRA PTP SNO(NUMETRIX)
DEMANTRA PTP SNO (NUMETRIX) OTS (G-LOG) RAPID PLANNING
OTM (G-LOG) OTM (G-LOG) AGILE - PLC AGILE - PLC

J.D.Edwards
ERP transaction system and data base
Peoplesoft (HR) (or can be SAP or legacy systems)
e-Business suite (EBS)

Source Adapted from Figure 1.5 in Gattorna (2009), p.55 FIGURE 8.3 Requisite technology for lean supply chains

32
 Agile supply chain: demand-side
..where quick response is paramount
MARKET SEGMENT DEMANDING RESPONSE REQUIRED TO UNPLANNED OR UNFORESEEN DEMAND

VALUE STRATEGIES
FULFILLMENT
PROPOSITION
STRATEGY Fast decision making
Fast delivery
Rapid response in unpredictable conditions

INTERNAL CULTURAL LEVERS RATIONAL SUBCULTURE

CULTURAL 1. Orgnl design Clusters designed for speed and focused on specific sub-segments
CAPABILITY 2. People positioning Ensure bias towards personnel with N in their MBTI profile
3. Processes Process short-cuts; fast response; postponement techniques
4. IT/systems Software applications: SCP; APS; Network Models
5. S&OP Keep S&OP at aggregate capacity planning level
6. KPIs Absolute speed of response
7. Incentives Achieve targets; cash and in-kind bonuses
8. Job design Authority/autonomy established by clear and published limits
9. Internal comms Formal; regular; action-orientated
10. Training & dev Problem solving; resource allocation and management
11. Role modelling Managers with ENTJ MBTI profile (or P code) are ideal
12. Recruitment Recruit personnel who are results-driven

LEADERSHIP 13. Leadership style COMPANY BARON

Leads by objectives (MBO)
Embraces change
Goes for growth
Focuses on whats important
Analytical; fact-based negotiations

Source Adapted from Figure 1.3 in Gattorna (2009), p.50 FIGURE 9.2 Agile supply chains - demand-side

33
 Organisation design for Dynamic customers

CEO
COO

P
Procurement Production Finance Sales/Mktg Logistics
P
L
F
S/M
Speed Clusters

P
Sub-sets of
demanding
L P customer
segment

S/M F

L P

S/M F
FUNCTIONS
Note 1: Clusters are focused on different parts of the same segment but possibly different product categories
Note 2: Individual team members return to their respective functions for training and other specialist matters
Source Adapted from Figure 9.4 in Gattorna (2009), p.141. Figure 6.6 Agile supply chain clusters

34
Picture: An Agile organisation in action

35
 Arranging technology to serve Dynamic customers

Customer
buyer behavior segments

Innovative
Collaborative solutions
Efficiency Demanding/
unpredictable

Different Continuous Lean Agile supply Fully flexible

combinations replenishment supply chain supply chain
of IT supply chain chain
applications RAPID PLANNING
ASCP/CBO ASCP/CBO DEMANTRA PTP
SIEBEL CRM DEMANTRA PTP SNO(NUMETRIX)
DEMANTRA PTP SNO (NUMETRIX) OTS (G-LOG) RAPID PLANNING
OTM (G-LOG) OTM (G-LOG) AGILE - PLC AGILE - PLC

J.D.Edwards
ERP transaction system and data base
Peoplesoft (HR) (or can be SAP or legacy systems )
e-Business suite (EBS)

Source Adapted from Figure 1.5 in Gattorna (2009), p.55 FIGURE 9.3 Requisite technology for agile supply chains

36
Fully Flexible supply chain: demand-side

..where nothing is impossible

MARKET SEGMENT INNOVATIVE
CREATIVE SOLUTIONS REQUIRED, VERY FAST
SOLUTIONS

FULFILLMENT VALUE STRATEGIES

STRATEGY PROPOSITION Meet unplanned/unplannable demand
Innovative solutions, delivered fast

INTERNAL CULTURAL LEVERS ENTREPRENEURIAL

CULTURAL 1. Orgnl design Small multi-disciplinary cluster, usually on standby, but can be full-time
CAPABILITY 2. People positioning Ensure bias towards personnel with P in their MBTI profile [CHECK MBTI?]
3. Processes No standard processes; use local initiative at the time
4. IT/systems Low systems requirements; event management applications
5. S & OP Focus on aggregate capacity planning in the short-term
6. KPIs Emphasis on finding creative solutions, very fast
7. Incentives Reward individualism and risk-taking behaviour
8. Job design Autonomy through empowerment
9. Internal comms Spontaneous and informal
10. Training & dev Lateral thinking; brainstorming
11. Role modelling Managers with ENFP (MBTI profile) and D (P-A-D-I logic) are ideal
12. Recruitment Recruit enterprising, resourceful personnel

LEADERSHIP 13. LEADERSHIP VISIONARY

STYLES Leads by inspiration; is authentic
Informal
Decisive
Cares about ideas
Values innovation

FIGURE 10.5 Fully flexible supply chains - demand-side

37
 Organisation design for Innovative Solutions customers

CEO
COO

Procurement Production Finance Sales/Mktg Logistics

Innovation Cluster

Innovative
solutions
segment

L P

S/M F

FUNCTIONS
Note 1: This innovation cluster may be composed of part-time members who only convene in an emergency
Note 2: Individual team members return to their respective functions for training and other specialist matters

Source Adapted from Figure 9.5 in Gattorna (2009), p.141 Figure 6.7 Fully flexible supply chain cluster

38
 Arranging technology to serve Innovative solutions
customers

Customer
buyer behavior segments

Innovative
Collaborative
Efficiency Demanding/ solutions
unpredictable

Different Continuous Lean Agile supply Fully flexible

combinations replenishment supply chain supply chain
of IT supply chain chain
applications RAPID PLANNING
ASCP/CBO ASCP/CBO DEMANTRA PTP
SIEBEL CRM DEMANTRA PTP SNO(NUMETRIX)
DEMANTRA PTP SNO (NUMETRIX) OTS (G-LOG) RAPID PLANNING
OTM (G-LOG) OTM (G-LOG) AGILE - PLC AGILE - PLC

J.D.Edwards ERP transaction system and data base

Peoplesoft (HR)
e-Business suite (EBS)
(or can be SAP or legacy systems)
FIGURE 10.6 Requisite technology for the fully flexible supply chain configuration
Source Adapted from Figure 1.5 in Gattorna (2009), p.55

39
The corresponding 4 supply chain configurations equates
to multiple supply chain alignment-leadership style

Finding the linkages is key to SC design

Fully Flexible SC
Organisation Service
Leadership
/Process Proposition

Agile SC
Organisation Service
Leadership
/Process Proposition

Organisation Lean SC Service

Leadership
/Process Proposition

Continuous
Organisation Replenishment Service
Leadership
/Process Proposition

Leadership Cultural Strategy Buying

styles capability Behaviours

FIGURE 2.2 Multiple supply chain alignment on the customer side

Source: Adapted from Figure 4.3.2 in Gattorna (2003), p. 459; see also Gattorna (2006) Figure 2.1, p.40

40
 The four (4) main leadership styles

Coach Thinking Visionary

I D
Continue to: Continue to:
Lead by teaching Lead by inspiration
Make decisions by consensus Respond to turbulence
Get the best from people Use information to create change
Watch out for: Watch out for:
Slow response to sudden Tangential interests
environmental change Short on the detail
Market-related performance People policies
Inefficient response to opportunities

Consensus Individual
Traditionalist Company Baron
Continue to: Continue to:
Lead by procedure Lead by objectives
Use information to maintain control Focus on whats important
Implement proven business tactics Plan for future profitability
Watch out for: Watch out for:
Inability to respond to Paralysis by analysis
environmental change
Political in-fighting
Efficiency at the expense of effectiveness
Effectiveness before
efficiency
A Doing P

Source Adapted from Figure 4.2 in Gattorna (2006), p. 99 FIGURE 5.2 Leadership styles

41
 Translating from MBTI to PADI metrics

Thinking
I ISFP
INFP
ID
ENFP
D
I D
INFJ ENFJ
Id Di
ESFP INTP
Ia Dp
Consensus
ISFJ ENTP
Individual
ESFJ INTJ
AI Ai Pd DP

ISTP ESTP
Ap Pa
ISTJ ENTJ
ESTJ
A A
PA
P
P
Doing
FIGURE 5.1 MBTI overlay on P-A-D-I framework
Source Adapted from Figure 29.6 in Gattorna (1998), p. 480

42
 Supply-side and demand-side alignments are the mirror image
of each other

Supplier Reverse Forward Customer

Enterprise
Market Alignment Alignment Market

Supplier behaviors Procurement strategies Leadership styles Cultural capabilities Demand-side strategies Buyer behaviors
Trusted and reliable partners Continuous replenishment Coach Group Continuous replenishment Collaborative
Planned creativity Lean Traditional Hierarchical Lean Efficiency/consistency
Process driven Agile Company baron Rational Agile Demanding/quick response
Opportunistic Fully flexible Visionary Entrepreneurial Fully flexible Innovative solutions

Source Adapted from Figure 3.5.2 in Gattorna (2003), p.346 Figure 6.1: Supply-side alignment - the mirror image of the demand-side

43
 Conventional segmentation on the supply-side

COMMODITY STRATEGIC
High Spend High Spend
Low Switching Costs High Switching Costs
Multiple Sources of Supply Few Sources of Supply
Short-Lead Times Typically Long Lead-Times
Low Complexity / Items on Shelf Critical Performance Characteristics
Low Item Costs High Item Costs
High Volume Variable Volumes

STANDARD KEY
Low Spend Low/Medium Spend
Low Switching Costs High Switching Costs
Multiple Sources of Supply Few Sources of Supply
Short Lead-Times Typically Long-Lead times
Standard, on Shelf Items Critical Performance Characteristics
Low Item Costs High Item Costs
Volumes Vary Variable Volumes

FIGURE 12.1 Supplier segmentation based on a combination of product and supplier characteristics

Source: Adapted from Diane Bueler (May 2006)

44
Typical expectations/ selling behaviours of suppliers

TRUSTED & RELIABLE PROCESS DRIVEN PLANNED CREATIVITY OPPORTUNISTIC

PARTNERS

Close working relationships Consistent low cost Capability to provide rapid Capability to create
for mutual gain response to largely response in irregular innovative solutions, very
predictable demands demand situations fast

Like predictability Prefer tight contracts Have capacity to meet Have the capacity to
Prefer regular orders Regular order/delivery volatile demand cope with unexpected
schedule Prefer not to enter close situations
Prefer producing nature
products Offer lowest cost-to- relationships Can provide creative
serve Can respond to urgent solutions as required
Like to be treated as an
exclusive source Dont wish to share demands Innovation mindset
information Use as few processes embedded
Seek trusting long-term
relationship Can be adversarial at as possible Very solutions oriented
Enjoy times Outcome oriented Prefer to charge a
partnership/teamwork Adopt standard Very commercial significant premium
Prepared to share processes Require price premium
information Impose power where
Engage in joint possible
development Very transactional
Expect fair margin mindset
Sensitive to low price
demands

FIGURE 12.3 Supply-side behavioral segmentation characteristics

45
 Example of supplier/producer segments in the Brazilian
cattle market
TALKATIVE TRADITIONALIST SUSPICIOUS e-RANCHERS

Partnership , intense Interested in yield, Opportunistic. Interested in

relationship, and and price is a Sell to who pays the best technology mixed with
friendship pre-requisite to negotiate personal contact

37% 35% 19% 9%

Partnerships Focus on yield Capable of fast Interested in any new

response technologies
Long term contracts Require assistance in
reducing costs Will seek out best Electronic
Special treatment
opportunity at a point communications
Require assistance to
Transparency in time
increase yield from Computer savvy
Closeness animals Only interested if a
Seek market information
premium price
Reliable

FIGURE 12.6 Cattle supplier (ranchers) segmentation in Brazil

Source: Adapted from information supplied by Axia Consulting, Brazil (2008)

46
 The 16 possible hybrid supply chains in a 4 x 4
segmentation regime

4
FULLY FULLY
FLEXIBLE FLEXIBLE
14

15 11
16

3
AGILE AGILE

8 9
SUPPLY-SIDE DEMAND-SIDE

7
12

2
LEAN LEAN
6

10 13

1
CONTINUOUS CONTINUOUS
REPLENISHMENT REPLENISHMENT

* See text for descriptions of each combination

FIGURE 13.2 The 16 possible combinations of hybrid supply chains including the four main generic types

47
 Multiple combinations of supply-side and demand-side
elements of enterprise supply chains
Supplier Supply-side Organizational Demand-side Solutions to
selling logics clusters Innovative
Procurement strategy Sales/Distributions strategy
P
D MF HR
Fully Flexible Fully Flexible D
L F

S MK
I
OPPORTUNISTIC
INNOVATIVE

P
MF HR
a Agile Agile
a
L F

S MK
I
PLANNED CREATIVE
DEMANDING

P
MF HR
Lean Lean
L F

S MK
I
PROCESS DRIVEN
EFFICIENCY

P
I Continuous Replenishment MF HR Continuous Replenishment I
L F
a Key:
P = Procurement a
S MK
I MF = Manufacturing
TRUSTED & L = Logistics
CULTURE-LEADERSHIP S = Sales COLLABORATIVE
RELIABLE PARTNERS
MK = Marketing
F = Finance
FIGURE 13.1 Different combinations of hybrid supply chains HR = Human Resources
I = IT

48
Labyrinth maze cutting through complexity

49
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