Quick Guide to a Triple-A Supply Chain

01 January 2020       Blog

Supply chain management is understood today as a necessity to most businesses. In the past century, supply chains were rudimentary at best and completely neglected at worst.

Impulsive purchasing decisions, poor or lacklustre forecasting methods, and a lack of transparency between buyers and suppliers leads to inefficiencies that all contribute largely to the landed cost of your product and therefore affect your bottom line.

Efficient freight management is only part of the equation. A company like Freight People can help you lower costs and improve delivery times by taking advantage of new trends in technology and digitalisation (smart logistics), but a lot of your profitability will need to encompass a holistic approach to your entire supply chain.

The Triple-A Approach

One idea that is reframing logistics and supply chain management is that of the Triple-A Supply Chain by Stanford University professor Hau Lee in 2004. After analysing the success and failure of many companies, Lee found that strictly focussing on lowering costs and improving efficiency were not necessarily the main contributors to the failure of businesses.

Sometimes it’s all about the dollar, and yes it’s surely an important consideration for any business that wants to be or remain successful, but it isn’t everything. Efficiency is likewise an important factor, but strictly maximising efficiency does not correlate to a successful supply chain.

Lee observed that three qualities are necessary to the success and profitability of a supply chain management strategy. A successful supply chain must be Agile, Adatable, and Aligned.

Agility

How quickly can you respond to sudden changes in supply and demand? If customer orders rapidly increase, are you able to get the product out the door in time? Agile supply chains are able to address these issues and can reduce the “bullwhip effect” of spikes in forecasted product demand by quickly responding to customer orders and by reducing production when a trough in demand is anticipated.

Adaptability

Are you able to keep up with structural market changes and to reformulate strategies for your supply chain? Adaptable supply chains are able to modify current practices and to adapt to shifts in the market in order to better cater to the needs of the customer. One good example could involve outsourcing your logistics operation to a trusted expert such as Freight People when you can’t keep up with delivery lead times in-house.

Alignment

How is your relationship with suppliers? Do you actively work with them to streamline your processes? BMW in Germany is a perfect example of aligned supply chains in practice. The entire assembly operation relies heavily upon just-in-time deliveries handled by trusted suppliers who are freely given data regarding order types, quantities, and delivery time windows to meet.

An aligned supply chain hinges upon your ability to build relationships with buyers and suppliers to better identify their needs and to create shared incentives. Whether it’s negotiating for bonus incentives to suppliers that consistently meet targets or using data analytics software shared between suppliers, the technology exists provided that trust is given.

Bringing Them Together

The biggest competitive advantage you can bring to the supply chain of your business depends on your supply chain being agile, adaptable, and aligned. Producers and manufacturers should strive to have all three qualities, and it starts with formulating a strong understanding of your business model and how well it responds to shifts in demand and supply, how well it can adapt to market changes, and how well you can develop incentives and build relationships with other suppliers.

To learn more about how to optimise your logistics and supply chain management, contact a leading freight management company today.