Dynamic Supply Chains: creating value by

design in volatile market conditions

by
Dr John Gattorna, Global SC Thought Leader and
Author

15 April 2013
Al Bustan Palace Hotel
Muscat, Sultanate of Oman

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

environment

Volatile conditions

From Functional
specialisms

Fully interactive business

models

Reconfiguration of enterprise supply chains from

Static design, to tomorrows Dynamic design
Source Market
(Supply)

Sales Market
(Demand)

Static Configuration one-size-fits-all (push)

Procurement
Strategies

Logistics
Strategies
The Enterprise
CEO

Transformation

Current

Functions /BUs/Geographies

Source Market
(Supply)

Dynamic Configuration multiple alignment (push + pull)

Procurement
Strategies

The Enterprise
CEO
COO

Future

Functions/ /BUs/Geographies

Logistics
Strategies

Sales Market
(Demand)

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

Style

Culture

Strategy

Market
Place

Technology + Infrastructure

Business
Enterprise

Strategy = The
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.

Market

Figure 1.2: Elements of the dynamic alignment framework

The corresponding 4 supply chain configurations equates

to multiple supply chain alignment-behavioral segmentation
Finding the linkages is key to SC design

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership
styles

Fully Flexible SC

Agile SC

Lean SC

Continuous
Replenishment

Cultural
capability

Service
Proposition

Service
Proposition

Service
Proposition

Service
Proposition

Strategy

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

Buying
Behaviours

Behavioral forces at play in any business

I

Integration

Development

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

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.

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

Best-of-both-Worlds Strategy
%

CUSTOMER
SATISFACTION

CUSTOMER
SATISFACTION

Time

Time

LOGISTICS COST
(% OF SALES)

LOGISTICs COSTS
(% OF SALES)

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

Time

The sixteen (16) possible dominant behavioral segments

EFFICIENT

COMMERCIAL

INNOVATIVE SOLUTIONS

COLLABORATIVE

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

Behavioral segmentation: the 4 most commonly

observed dominant buying behaviors
Collaborative

Efficient

Dynamic

Innovative solutions

Close working
relationships for
mutual gain

Consistent low cost

response to largely
predictable demands

Rapid response to
unpredictable supply and
demand conditions

Supplier-led
development and delivery
of new ideas

Mostly predictable

Regular delivery

Mature or augmented
products
Primary source of
supply

Trusting relationship

Teamwork/partnership

Information sharing

Joint development
Forgiving
Price not an issue

Predictable demand
within contract

Unpredictable demand

Commodity
relationship

Very unpredictable
demand

Regular delivery

Higher risk

Efficiency low cost

focus

Time priority/urgency

Flexible delivery response

Multiple sources of
supply

Opportunity focus

Innovation focus

Ad hoc source of
supply

Rapid change

Little sharing of
information

Low loyalty,
impersonal

Individual decision
making

More adversarial

Solutions oriented

Fewer processes

Standard processes

Management of IP

Outcome oriented

Power imposed

Incentives/ego

Transactional

Commercial deals
based on pragmatism

No price sensitivity

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

10

The changing buying behaviours of customers,

according to the situation they find themselves in

Collaborative
customers

Efficiency/low cost
customers

Demanding
customers

Innovative solutions
customers

Fully flexible supply chain

aligned with customers

FIGURE 10.1 Business event fully flexible supply chain and its innovation solutions-seeking customers
Source: Taken from Figure 8.1 in Gattorna (2006)

11

Intersection of Institutional and Behavioral Segments, Indicative Only

and corresponding supply chain types and process capabilities
End Users

!00%
20
%

Distributors

80%

Panel Builders
20
%

O.E.M

SC Type

20
%

80%

80%

Fully Flexible

Lean

Agile

Project

Stock order

Collaborati
ve platform

Plant to
customer

Shorten LT
MTO

Complete
order

Site
Delivery

Site
Delivery

Shorten LT
MTO

Customer
Dashboard

On Line
EDI

Fast Track

Precision

Stagging
order

Shorten LT
MTO

Merge in
Transit

Order
Grouping

Consignt

Promotion

On Line
EDI

Fast Track

Precision

Consignt

Pro active
Info Pdt

CLO

V.M.I

Order
Grouping

Pro Active
Info Pdt

Document

Contract &
Commission

Kitting

Last
minute

Track &
Trace

Track &
Trace

Behavioural
Segment
Collaborative

Transactional

Dynamic

Basic Capability across the board Example: Reliability (A)

12

Pragmatic

Buying behaviours of selected clients* of a global 3PL

Service category: 3PL and constituent services (e.g. Ocean-freight,
consolidation of refrigerated product; cross docking; warehousing; etc.)

KRAFT

KRAFT
JABIL CIRCUIT

Strategic relationship (I)

Strategic relationship

SRM program (I)

Innovations (D)
New opportunities (D)
Look at us as global
entity (not regional) (P)

(I)
Win-win (I)
Knowledge (A)
Business processes
(A)
Optimise value (A)
Reliable (A)
Risk management (A)
Responsive (P)
Support brand (I)

HITACHI GST
ABBOTT
LABORATORIES
Significant industry presence

EMERSON
EMERSON
(Corporate Logistics) (Corporate Logistics)

(A)
Capacity in selected lanes
(A)
Flexibility (D)
Low rates (A)
Trustworthiness/Integrity (I)
Attitude towards our
business (I)
Lean processes (A)
Partnership mentality (I)
Responsiveness (P)

Cost focused (A)

Consistent
processes (A)
Responsiveness (P)
Meet service
specifications (P)

* Primary research conducted by telephone: KRAFT;

ABB (declined); Emerson; Hitachi Global Storage;
Abbott Laboratories; Jabil Circuit

Scalability (A)

13
13

Flexibility (D)
Customised
solutions (D)
Growth (P)
Innovations (D)

The corresponding 4 supply chain configurations

equates to multiple supply chain alignment- strategy
Finding the linkages is key to SC design

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership
styles

Fully Flexible SC

Agile SC

Lean SC

Continuous
Replenishment

Cultural
capability

Service
Proposition

Service
Proposition

Service
Proposition

Service
Proposition

Strategy

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

14

Buying
Behaviours

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

15

Strategic dimensions -Agile SCs

STRATEGIC DIMENSION

IDEAL STRATEGY

Product mix

Larger range; choice important

Innovation emphasis

Seek product differentiation

Marketing emphasis

Quick response to changing customer requirements

Channels of distribution

Provide easy access to consumers; convenience

Pricing regime

Competitive; moderate price sensitivity

Promotional activity

High; fashion-style approaches

Service emphasis

Performance to specifications

Procurement/sourcing

Market knowledge and distribution

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

16

Strategic Dimensions- Fully Flexible SCs

(Business Event)
STRATEGIC DIMENSION

IDEAL STRATEGY

Product mix

Broad changing product line

Innovation emphasis

Extensive R & D; aim to be first to market

Marketing emphasis

Creative problem solving

Channels of distribution

Limited

Pricing regime

Price appropriately for a creative solution; no price

sensitivity

Promotional activity

Target early adopters

Service emphasis

Novel solutions

Procurement/sourcing arrangements

Product; technology; innovation

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

17

An array of customer segments and matching

supply chain configurations for a global 3PL
Greater emphasis on
relationships, Account
Management, and sharing

Strategy
Dimensions

Core Logistics Business

Continuous
Replenishment SC

Lean
SC

Agile
SC

Greater emphasis on
finding and delivering
solutions at speed

Fully Flexible SC

Special capability option

Long term investment
in innovations

Shared Innovation SC

Portfolio

Standard services

Standard services

Non-standard service

Non-standard service

Completely new service models

Pricing

Moderate price sensitivity

Lowest price

Competitive price

No price sensitivity

No price sensitivity

Reliability

High reliability

High reliability

Meet SLAs

Less reliability

Reliability not an issue

Capacity

Max. utilization of avail. capacity

High utilization

Lower utilization: buffers Low. Hedge + deploy

Low

Fulfilment

Scheduled delivery

High reliability

Postponement

Speed

New methods

Systems/IT

Customer Management (CRM)

Transactional

Modelling and analytics

Systems + Human intervention

Develop new systems

Resource Alloc. Priority to customer retention

Cost reduction

Spare capacity

Hedge + deploy

Strategic investments

Network

Predictable routing

Least-cost pathways

Optimal network design

On-off network orchestrations

New networks

Risk Profile

Low

Low

Medium

High Manage risk

High Manage risk

Assets

Own assets

Own assets

Own assets + alliances

Selective alliances

Share assets

Alliances

Not required

Selective

Develop consortium

Develop in-market alliances

Alliances outside 3PL industry

Global reach

Own and/or alliances

Own +sub-contractors Sub-contractors

Develop as required

Designs as required

Innovation

Innovate to develop relationship

Re-engineer process

Additional customisation First to market with new service

Operational strategies
18

Fundamentally new paradigm

The corresponding 4 supply chain configurations equates

to multiple supply chain alignment-cultural capability
Finding the linkages is key to SC design

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership
styles

Fully Flexible SC

Agile SC

Lean SC

Continuous
Replenishment

Cultural
capability

Service
Proposition

Service
Proposition

Service
Proposition

Service
Proposition

Strategy

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

19

Buying
Behaviours

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

20

The performance iceberg

The four (4) major sub-cultures

Indirect
Control

I
Group

D
Entrepreneurial

Means: Synergy, teamwork,

cooperation

Means: Innovation, flexibility,

readiness

Ends:

Ends:

Cohesion

Growth

Internal
Focus

External
Focus

Means: Systems,
measurements, controls

Means: Action, objectives,

energy

Ends:

Ends:

Order

Hierarchical

Direct
Control

Results

Rational

FIGURE 4.3 The four generic enterprise subcultures

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

21

Continuous Replenishment supply chains: demand-side

..where relationships matter most
MARKET SEGMENT

COLLABORATIVE

FULFILMENT
STRATEGY

VALUE
PROPOSITION

CLOSE WORKING RELATIONSHIPS SOUGHT WITH SELECTED SUPPLIERS

STRATEGIES
Share information
Seek strategic partnerships
Seek long-term stability
Build mutual trust

INTERNAL
CULTURAL
CAPABILITY

CULTURAL
LEVERS
1. Org design
2. People positioning
3. Processes
4. IT/systems
5. S&OP
6. KPIs
7. Incentives
8. Job design
9. Internal comms.
10. Training & devel.
11. Role modelling
12. Recruitment

GROUP SUBCULTURE

LEADERSHIP

13 LEADERSHIPSTYLE

COACH

Collaboration
Zone

Relationship cluster
Ensure bias in cluster is towards personnel with F in their MBTI profile
Standard processes, eg. Customer Account Management
CRM; VMI; ECR; CDP; CPFR
S&OP processes relatively simple in this collaborative environment
Emphasis on loyalty and retention
Encourage participative schemes
Authority/autonomy negotiated by consensus
Consultative; face-to-face
Team building
Managers with ESFP/MBTI profile are ideal
Recruit team players

Conscientious
Lead by teaching
Concerned for others
Loyal, committed, politically astute
Seeks agreement by consensus
FIGURE 7.2 Continuous replenishment supply chain configuration - demand-side

Source Adapted from Figure 1.1 in Gattorna (2009), p. 48

22

Organisation design for Collaborative customers

CEO

COO

Procuremen

P
P

Relationships Clusters

Production

Finance

Sales/Mktg

Logistics
Customer A

F
S/M
P
L

Customer B

S/M

P
L
S/M

Customer
segment

P
F

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
Source Adapted from Figure 9.2 in Gattorna (2009), p.140.

Collaborative
buying behavior

Figure 6.4 Continuous replenishment supply chain clusters

23

Arranging technology to serve Collaborative customers

Customer
buyer behavior segments

Collaborative

Different
combinations
of IT
applications

Efficiency

Continuous
replenishment
supply chain

Lean
supply
chain

ASCP/CBO
SIEBEL CRM
DEMANTRA PTP
OTM (G-LOG)

J.D.Edwards

Demanding/
unpredictable
Agile supply
chain

ASCP/CBO
DEMANTRA PTP
SNO (NUMETRIX)
OTM (G-LOG)

RAPID PLANNING
DEMANTRA PTP
SNO(NUMETRIX)
OTS (G-LOG)
AGILE - PLC

Innovative
solutions

Fully flexible
supply chain

RAPID PLANNING
AGILE - PLC

ERP transaction system and data base

(or can be SAP or legacy systems)

Peoplesoft (HR)
e-Business suite (EBS)

FIGURE 7.3 Requisite technology for continuous replenishment supply chains

Source Adapted from Figure 1.5 in Gattorna (2009), p.55

24

Lean supply chains: demand-side

MARKET SEGMENT

EFFICIENT

FULFILMENT
STRATEGY

VALUE
PROPOSITION

INTERNAL
CULTURAL
CAPABILITY

CULTURAL LEVERS

LEADERSHIP

Source

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Orgnl design
People positioning
Processes
IT/Systems
S&OP
KPIs
Incentives
Job Design
Internal comms
T&D
Role modelling
Recruitment

13. LEADERSHIP
STYLE

REQUIRE RELENTLESS FOCUS ON COST AND EFFICIENCY

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

HIERARCHICAL SUBCULTURE
Organize clusters around core processes
Ensure bias towards personnel with S in their MBTI profile
Standard processes; emphasis on cost
Replace legacy systems with ERP system
Effective decision framework in a relatively predictable operating environment
DIFOTEF; forecast accuracy; productivity ratios
Conformance to policies
Centralized control rules and regulations apply
Regular; structured on need to know basis
Emphasis on analysis and measurement
Managers with ISTJ (A) MBTI profile are ideal
Recruit players with deep analytical skills
TRADITIONAL
Leads by procedure; precedent
Implements only proven business practices
Cost controller; efficiency focus
Uses information to control
Seeks stability
Is risk averse
FIGURE 8.2 Lean supply chains demand-side

Adapted from Figure 1.2 in Gattorna (2009), p.49

25

Organisation design for Transactional customers

COO

SOURCING
P

Procurement

Production

CEO

Finance

Sales/Mktg

Logistics

P
L
F

Process Clusters

S/M
ORDER MGT
P
L

S/M

Price
sensitive /
efficiency
customer
segment

FULFILMENT
P
L
S/M

P
F

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

26

Arranging technology to serve Transactional customers

Customer
buyer behavior segments

Collaborative

Efficiency

Different
combinations
of IT
applications

Continuous
replenishment
supply chain

Lean
supply
chain

ASCP/CBO
SIEBEL CRM
DEMANTRA PTP
OTM (G-LOG)

ASCP/CBO
DEMANTRA PTP
SNO (NUMETRIX)
OTM (G-LOG)

J.D.Edwards

Peoplesoft (HR)
e-Business suite (EBS)

Demanding/
unpredictable
Agile supply
chain
RAPID PLANNING
DEMANTRA PTP
SNO(NUMETRIX)
OTS (G-LOG)
AGILE - PLC

Innovative
solutions

Fully flexible
supply chain

RAPID PLANNING
AGILE - PLC

ERP transaction system and data base

(or can be SAP or legacy systems)
FIGURE 8.3 Requisite technology for lean supply chains

Source Adapted from Figure 1.5 in Gattorna (2009), p.55

27

Agile supply chain: demand-side

..where quick response is paramount
MARKET SEGMENT

FULFILLMENT
STRATEGY

DEMANDING

RESPONSE REQUIRED TO UNPLANNED OR UNFORESEEN DEMAND

VALUE
PROPOSITION

STRATEGIES

INTERNAL
CULTURAL
CAPABILITY

CULTURAL LEVERS

LEADERSHIP

13. Leadership style

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Orgnl design
People positioning
Processes
IT/systems
S&OP
KPIs
Incentives
Job design
Internal comms
Training & dev
Role modelling
Recruitment

Fast decision making

Fast delivery
Rapid response in unpredictable conditions
RATIONAL SUBCULTURE
Clusters designed for speed and focused on specific sub-segments
Ensure bias towards personnel with N in their MBTI profile
Process short-cuts; fast response; postponement techniques
Software applications: SCP; APS; Network Models
Keep S&OP at aggregate capacity planning level
Absolute speed of response
Achieve targets; cash and in-kind bonuses
Authority/autonomy established by clear and published limits
Formal; regular; action-orientated
Problem solving; resource allocation and management
Managers with ENTJ MBTI profile (or P code) are ideal
Recruit personnel who are results-driven
COMPANY BARON
Leads by objectives (MBO)
Embraces change
Goes for growth
Focuses on whats important
Analytical; fact-based negotiations
FIGURE 9.2 Agile supply chains - demand-side

Source Adapted from Figure 1.3 in Gattorna (2009), p.50

28

Organisation design for Dynamic customers

COO
P

Procurement

Production

CEO

Finance

Sales/Mktg

Logistics

P
L

Speed Clusters

S/M

P
L

Sub-sets of
demanding
customer
segment

P
F

S/M

P
L

P
S/M

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

29

Arranging technology to serve Dynamic customers

Customer
buyer behavior segments

Collaborative

Different
combinations
of IT
applications

Efficiency

Continuous
replenishment
supply chain

Lean
supply
chain

ASCP/CBO
SIEBEL CRM
DEMANTRA PTP
OTM (G-LOG)

ASCP/CBO
DEMANTRA PTP
SNO (NUMETRIX)
OTM (G-LOG)

J.D.Edwards

Demanding/
unpredictable
Agile supply
chain
RAPID PLANNING
DEMANTRA PTP
SNO(NUMETRIX)
OTS (G-LOG)
AGILE - PLC

Innovative
solutions

Fully flexible
supply chain

RAPID PLANNING
AGILE - PLC

ERP transaction system and data base

(or can be SAP or legacy systems )

Peoplesoft (HR)
e-Business suite (EBS)

FIGURE 9.3 Requisite technology for agile supply chains

Source Adapted from Figure 1.5 in Gattorna (2009), p.55

30

Fully Flexible supply chain: demand-side

..where nothing is impossible
MARKET SEGMENT

INNOVATIVE
SOLUTIONS

FULFILLMENT
STRATEGY

VALUE
PROPOSITION

INTERNAL
CULTURAL
CAPABILITY

CULTURAL LEVERS

LEADERSHIP

13. LEADERSHIP
STYLES

1. Orgnl design
2. People positioning
3. Processes
4. IT/systems
5. S & OP
6. KPIs
7. Incentives
8. Job design
9. Internal comms
10. Training & dev
11. Role modelling
12. Recruitment

CREATIVE SOLUTIONS REQUIRED, VERY FAST

STRATEGIES
Meet unplanned/unplannable demand
Innovative solutions, delivered fast

ENTREPRENEURIAL
Small multi-disciplinary cluster, usually on standby, but can be full-time
Ensure bias towards personnel with P in their MBTI profile [CHECK MBTI?]
No standard processes; use local initiative at the time
Low systems requirements; event management applications
Focus on aggregate capacity planning in the short-term
Emphasis on finding creative solutions, very fast
Reward individualism and risk-taking behaviour
Autonomy through empowerment
Spontaneous and informal
Lateral thinking; brainstorming
Managers with ENFP (MBTI profile) and D (P-A-D-I logic) are ideal
Recruit enterprising, resourceful personnel

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

FIGURE 10.5 Fully flexible supply chains - demand-side

31

Organisation design for Innovative Solutions customers

CEO

COO

Innovation Cluster

Procurement

Production

Finance

Sales/Mktg

Logistics

Innovative
solutions
segment

P
L

P
S/M

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

32

Arranging technology to serve Innovative solutions

customers
Customer
buyer behavior segments

Collaborative

Different
combinations
of IT
applications

Efficiency

Continuous
replenishment
supply chain

Lean
supply
chain

ASCP/CBO
SIEBEL CRM
DEMANTRA PTP
OTM (G-LOG)

ASCP/CBO
DEMANTRA PTP
SNO (NUMETRIX)
OTM (G-LOG)

J.D.Edwards

Peoplesoft (HR)
e-Business suite (EBS)

Innovative
solutions

Demanding/
unpredictable
Agile supply
chain
RAPID PLANNING
DEMANTRA PTP
SNO(NUMETRIX)
OTS (G-LOG)
AGILE - PLC

Fully flexible
supply chain

RAPID PLANNING
AGILE - PLC

ERP transaction system and data base

(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

33

The corresponding 4 supply chain configurations equates

to multiple supply chain alignment-leadership style
Finding the linkages is key to SC design

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership

Organisation
/Process

Leadership
styles

Fully Flexible SC

Agile SC

Lean SC

Continuous
Replenishment

Cultural
capability

Service
Proposition

Service
Proposition

Service
Proposition

Service
Proposition

Strategy

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

34

Buying
Behaviours

The four (4) main leadership styles

Coach

Visionary

Thinking

Continue to:

Continue to:

Lead by teaching
Make decisions by consensus
Get the best from people

Lead by inspiration
Respond to turbulence
Use information to create change

Watch out for:

Watch out for:

Slow response to sudden

environmental change
Market-related performance

Tangential interests
Short on the detail
People policies
Inefficient response to opportunities

Individual

Consensus

Traditionalist

Company Baron

Continue to:

Continue to:

Lead by procedure
Use information to maintain control
Implement proven business tactics

Lead by objectives
Focus on whats important
Plan for future profitability

Watch out for:

Watch out for:

Inability to respond to
environmental change
Efficiency at the expense of effectiveness

A
Source Adapted from Figure 4.2 in Gattorna (2006), p. 99

Paralysis by analysis
Political in-fighting
Effectiveness before
efficiency

Doing
FIGURE 5.2 Leadership styles

35

Translating from MBTI to PADI metrics

Thinking

INFP
ISFP

ID

Consensus

D
INFJ

ENFJ

Id

Di

ESFP

INTP

Ia

Dp

ISFJ

ESFJ

INTJ

ENTP

AI

Ai

Pd

DP

ISTJ

ENFP

ISTP

ESTP

Ap

Pa

ESTJ
PA

Individual

ENTJ
P

Doing
FIGURE 5.1 MBTI overlay on P-A-D-I framework

Source Adapted from Figure 29.6 in Gattorna (1998), p. 480

36

Supply-side and demand-side alignments are the mirror image

of each other
Supplier
Market

Supplier behaviors
Trusted and reliable partners
Planned creativity
Process driven
Opportunistic

Reverse
Alignment

Procurement strategies
Continuous replenishment
Lean
Agile
Fully flexible

Forward
Alignment

Enterprise

Leadership styles
Coach
Traditional
Company baron
Visionary

Cultural capabilities
Group
Hierarchical
Rational
Entrepreneurial

Source Adapted from Figure 3.5.2 in Gattorna (2003), p.346

Demand-side strategies
Continuous replenishment
Lean
Agile
Fully flexible

Customer
Market

Buyer behaviors
Collaborative
Efficiency/consistency
Demanding/quick response
Innovative solutions

Figure 6.1: Supply-side alignment - the mirror image of the demand-side

37

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)

38

Typical expectations/ selling behaviours of suppliers

TRUSTED & RELIABLE

PROCESS DRIVEN

PLANNED CREATIVITY

OPPORTUNISTIC

Consistent low cost

response to largely
predictable demands

Capability to provide rapid

response in irregular
demand situations

Capability to create
innovative solutions, very
fast

Like predictability

Prefer tight contracts

Prefer regular orders

Regular order/delivery
schedule

Have capacity to meet

volatile demand

Have the capacity to

cope with unexpected
situations

PARTNERS
Close working relationships
for mutual gain

Prefer producing nature

products
Like to be treated as an
exclusive source
Seek trusting long-term
relationship
Enjoy
partnership/teamwork
Prepared to share
information
Engage in joint
development
Expect fair margin

Prefer not to enter close

relationships

Offer lowest cost-toserve

Can respond to urgent

demands

Dont wish to share

information

Use as few processes

as possible

Can be adversarial at
times

Outcome oriented

Adopt standard
processes

Very commercial
Require price premium

Impose power where

possible
Very transactional
mindset
Sensitive to low price
demands

FIGURE 12.3 Supply-side behavioral segmentation characteristics

39

Can provide creative

solutions as required
Innovation mindset
embedded
Very solutions oriented
Prefer to charge a
significant premium

The 16 possible hybrid supply chains in a 4 x 4

segmentation regime

FULLY
FLEXIBLE

FULLY
FLEXIBLE

14
15

11

16

AGILE
8

AGILE
9

SUPPLY-SIDE

DEMAND-SIDE
7
12
2

LEAN

LEAN

5
10

13

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

40

Multiple combinations of supply-side and demand-side

elements of enterprise supply chains
Supplier
selling logics

Supply-side

Organizational
clusters

Procurement strategy

Solutions to
Innovative

Sales/Distributions strategy

P
MF

Fully Flexible

Demand-side

HR

F
S

Fully Flexible

MK
I

OPPORTUNISTIC

INNOVATIVE
P

Agile

MF

HR

Agile

MK
I

PLANNED CREATIVE

DEMANDING
P

Lean

MF

HR

Lean

F
S

MK
I

PROCESS DRIVEN

I
a

EFFICIENCY
P

Continuous Replenishment

MF

HR

F
S

MK
I

TRUSTED &
RELIABLE PARTNERS

CULTURE-LEADERSHIP

FIGURE 13.1 Different combinations of hybrid supply chains

41

Continuous Replenishment
Key:
P = Procurement
MF = Manufacturing
L = Logistics
S = Sales
MK = Marketing
F = Finance
HR = Human Resources
I = IT

I
a

COLLABORATIVE

Taking the broadest supply chain perspective

SUPPLY

THE MARKET
Level 1
Level 2

Logistics Network
Overflow

Drivers e.g. Manage

variability

Network
Efficiency/Cost
Minimisation

Inventory level
and location

Supply Patterns

Agility

Manage
variability

End Users

Intermediaries

DCs

Brand
strength

Demand Patterns

42

Labyrinth maze cutting through complexity

43

Latest Book 2010

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