"When it comes to streamlining processes, there is no doubt that leaner is better. Before a company starts weighing its options, however, it might be worth it to check the label on the latest supply chain strategies.
In research published in the Journal of Business Logistics and recently discussed in Supply Chain Digest, co-author Thomas Goldsby, an associate professor at UK's Gatton College of Business and Economics, examined the differences between some of the most popular strategies today in supply chain management - namely lean, agile and the hybrid "leagile" options. The research, which was co-written by Stanley Griffis of the Air Force Institute of Technology and Anthony Roath of the University of Oklahoma, also examines how such strategies are applied by companies like Toyota Motor Manufacturing and Dell Computers.
According to Goldsby, the biggest difference between the three may simply be a matter of perspective.
"In most companies, the way they operationalize lean is that they work within the factories to eliminate waste and try to enhance the flexibility of operations," Goldsby said. "Whether they're a manufacturer, distributor, wholesaler, or retailer, everyone should try to enhance flexibility, but in so many situations, they stop there and don't look at the broader supply chain implications."
By looking beyond the four walls of their own factories and considering opportunities to increase flexibility of the operations of their suppliers, and even their customers, companies can depend less on forecasting and base their production on actual demand as it happens, Goldsby said.
That examination of the larger picture is at the heart of the agile supply chain strategy.
For many companies, it may not be a question of which strategy is right for them, but which is most appropriate for each of their different products, Goldsby said.
"Oftentimes I recommend that people look at their supply chain strategies on a value stream by value stream basis.
If you have very stable demand, very predictable, high-volume products, lean those out and try to be very efficient with them. However, on more speculative products that have greater volatility in their demand, ... it might make sense to take a wait-and-see approach and make those on an as-needed basis with make-to-order provisions, and go direct to customers."
That determination depends on the company's evaluation of numerous additional factors, however, including the supply chain's capabilities, the economics of production and customers' tolerances for longer lead times.
"If the customer is not willing to wait, and you feel as though you must have the products readily available for immediate acquisition, then it doesn't really offer you any degree of freedom to wait and see," Goldsby said. "But if there is some tolerance, you might be able to leverage it and not rely on speculation."
Goldsby's research also analyzes "leagile" options, which include a combination of lean and agile components to bring identical products up to the point of differentiation for separate customers. As more customers request special packaging or unique bundling of products, producers can benefit by streamlining their systems, but stopping just short of that final packaging.
"Opportunities to postpone the commitment of that inventory can bring about tremendous savings and provide you with a lot more flexibility in how you are going to allocate the inventory," Goldsby said. "But as soon as it becomes dedicated, you lose all flexibility, and in essence the inventory becomes speculative and risky. Once you commit inventory to its final form and allocate that inventory to customers, essentially you are crossing your fingers in hopes of positioning the right inventory in sufficient supply at the right location."
Goldsby, who earned his MBA from UK in 1993 and his Ph.D. in marketing and logistics at Michigan State, joined UK last year to serve as faculty coordinator for the supply chain module of the university's 11-month immersive MBA program, which he teaches along with fellow faculty member Deepak Iyengar. Goldsby previously taught at Iowa State University and Ohio State University, which has been ranked among the country's top three supply chain management programs. He chose to come to UK for the chance to introduce supply chain management coursework in the newly formed intensive program, which also highlights new product development and mergers and acquisitions in its curriculum, he said.
"This opportunity was so enticing," Goldsby said. "I was eager to try to create something where nothing had existed before, especially at my alma mater."
To learn more about UK's immersive MBA program or Goldsby's work in supply chain management, contact him at goldsby.1@uky.edu or (859) 257-2979. "