Lean and Agile Supply Chain Strategies

Topics: Supply chain management, Lean manufacturing, Supply chain Pages: 16 (4922 words) Published: July 7, 2012
Lean and Agile Supply Chain Strategies|
Seminar in Business Economics|
Table of Contents
Problem Formulation3
Definition of Concepts4
Theory and Methodology5
Exploratory Analysis7
Lean Supply Chain: Toyota Motor Corporation7
Agile Supply Chain: Dell9
Comparison of the Two Strategies10
Leagile Supply Chain: Hennes & Mauritz12
Summary and Conclusion17
List of References19

Efficient supply chain strategy is crucial for businesses as it helps companies to achieve their most important goal – customer satisfaction. It assures that products are delivered on time, to the right location and with the right quality. Furthermore, it contributes to improving the financial position of the company, as it is targeted at reducing operating costs by decreasing purchasing and production costs. “A key feature of present day business is the idea that it is supply chains that compete, not companies, and the success or failure of supply chains is ultimately determined in the marketplace by the end consumer.” Therefore, an effective supply chain strategy can easily become company’s competitive advantage. The supply chain consists of multiple activities such as purchasing of raw materials, manufacturing, distribution, and customer relationship management (CRM). Michael Porter points out that while a separate activity can be imitated and even outperformed quite easily by your competitors through technology and innovation, linked activities are impossible to imitate, which leads to a unique competitive advantage. In this paper, I will discuss two supply chain strategies: lean and agile. In today’s competitive environment, it is not enough to be just “lean” or “agile”. In order to be successful, a company needs to be both. These paradigms are not opposites or mutually exclusive, but rather, they complement each other. Figure 1, represents the relationship between two strategies as a continuum scale. A company can find itself on this continuum, and the placement will depend on how much it pursues one or the other strategy. At one extreme, the company can be entirely “lean”, while on the other – it can be 100% “agile”. Those companies that pursue a “leagile” strategy should decide which operations in the supply chain will be lean and which will be agile, and this is done by positioning a decoupling point. This is an important issue that companies face today, as it affects the success or failure of the entire supply chain and therefore, the enterprise itself. Figure 1: Lean and Agile Supply Chain Continuum

100% Lean
100% Agile
100% Lean
100% Agile

Source: the author.
The purpose of this paper is to analyze the concepts of lean and agile supply chain strategies and to describe how these strategies can be combined into an optimal supply chain strategy. Each strategy has its own advantages and disadvantages, but of particular interest is how a company can create its own optimal supply chain – a hybrid of lean and agile strategies (“leagile”). By implementing its optimal strategy a company can increase the chances of matching supply to demand, therefore satisfying customers and improving its financial position. Problem Formulation

The research problem that will be discussed in the work is how lean and agile supply chain paradigms can be combined in order to create an optimal supply chain strategy that will benefit the company that implements it. Regarding the problem, a number of sub questions were formulated. * What are the characteristics of a lean supply chain strategy? * What are the characteristics of an agile supply chain strategy? Before moving towards “hybrid” strategies, it is essential to investigate the two paradigms separately and the relevant issues behind these concepts. * How lean and agile paradigms differ?

In other words,...

References: 1. An Integrated Model for the Design of Agile Supply Chains by M. Christopher and D. Towill (2001).
3. Disentangling leanness and agility: An empirical investigation by R. Narasimhan, M. Swink and S. W. Kim (2006).
7. Dell: Annual Report (2010).
8. Dell: Annual Report (2010).
9. H&M: Annual Report (2006).
10. H&M: Annual Report (2010).
11. H&M: Annual Report (2010).
[ 3 ]. R. Narasimhan et al. (2006), page 444.
[ 8 ]. Dell’s Annual Report (2010)
[ 9 ]
[ 10 ]. H&M Annual Statement (2010)
[ 11 ]
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