A Supply Chain Built to Handle Disruption

Sara Mayes, President and CEO Gemini Shippers Group

Often companies measure the effectiveness of their supply chain with a focus on the need to increase velocity while reducing costs.  While cost control and speed are important features of great supply chains, a supply chain that offers a true competitive advantage has to be designed to allow the firm to deal with the known and unknown disruptions we face every day.

Today, importers face a host of challenges; uncertain and fickle consumer demand, the threat of supply disruption in both their raw material and ocean transportation, SOLAS weight requirements, the effects of e-commerce and Omni-channel shoppers, a tepid economy and a looming US presidential election.

Challenges like these require Supply Chain managers to build a supply chain nimble enough to deal with change and resilient enough to overcome disruption.

In 2004, Stanford Professor Hau L. Lee wrote an article in the Harvard Business Review, The Triple-A Supply Chain, where he outlined that a focus on efficient and cost effective supply chains alone did not lead companies to a sustainable competitive advantage over their rivals.  Based on Professor Lee’s research, companies that had achieved a true competitive advantage in their supply chain displayed three distinct qualities; Agility, Adaptability, and Alignment.

An agile supply chain is designed to deal with changes in supply and demand efficiently and to respond to external disruptions seamlessly.  Picking dependable logistics partners, sharing information among your partners and having a strong forecasting and inventory management system in place are all attributes of an agile supply chain.

Adaptable supply chains are able to adjust to shifting structural trends in the market.  Most recently, the effect of growing e-commerce and Omni channel shoppers, the passing of the TPP agreement and the enlarging of the Panama Canal are all examples of changing market dynamics that should be incorporated into supply chain planning.  Companies can increase their adaptability by creating a formal monitoring system for changes that will affect their supply chain and creating active listening and feedback loop for input from both their customers and suppliers.

Successful supply chains align the goals and incentives of the firm with their vendors.  Importers should provide their partners with clear goals, increased visibility and information and an equitable share of risk and reward to ensure all parties are working together on towards the mutual goal.

While the focus on cost and speed is important as ever, professor Lee’s Triple-A supply chain reminds us that speed and cost control is not enough in today’s disruptive environment.