Global Supply Chain 3Vs, Agility, and Risks Management

By: Ms Ester Jesaya

Ekalipi@nust.na
 Agenda for the Presentation

 Learning Outcomes
 3 V’s of Global Supply Chain
 Supply Chain Agility
 Enhancing agile supply chain theoretical framework
 Managing Supply Chain Risks
 Learning Outcomes

By the end of this presentation, students should be able to:

Explain how the supply chain network works;
Distinguish between low and high visibility operations in supply chain;
Recommend strategies to solve supply chain variability;
Implement supply chain velocity;
Apply agility dimensions in the supply chain operations;
Manage supply chain risk
 3 V’s of global supply chain
The 3V Principles of Supply Chain Management explain how a supply chain network works by answering what, why
Faculty
when, where, and how:of Management Sciences

“When a company
1. Visibility: the ability to identify movement within the supply chain;
increases its supply chain
the cornerstone of situational awareness. Attempt to answer visibility and velocity
where is the inventory now and when will it be available? while reducing variability,
2. Variability: the degree of change from consistency in the supply a more consistent,
chain; although variations will occur, the manner they are handled predictable and ultimately
profitable supply chain is
is vital. Here supply chain try to answer what and why is likely
just around the corner.”
to change from one delivery to the next? Wilhjelm,2013
3. Velocity:  the speed at which activities within the supply chain are
completed; ensure that cargo arrives neither too early or too late
at the next stop, especially if it is the high risk location. Attempt to
answer how are relationships connected to make the delivery?

https://elearning.nust.na
 Supply chain visibility

Faculty of Management Sciences

 Defined as the extent to which actors within a supply chain have accesses to or share information which
they consider key or useful to their operations and which they consider will be of mutual benefit,
Ahimbisibwe A, Ssebulime R, Tumuhairwe, R and Tusiime, W (2016).
 It also implies a clear view of the upstream and downstream inventories, demand and supply conditions, and
production and purchasing schedules (Christopher & Peck 2004).
 Supply chain visibility affords companies to see problems before they occur through information analysis
to make well informed business decisions.
 E.g. POS (point of sale) data is visible to systems running in warehouses, the manufacturing plants and
supplier facilities. Now, sales data can immediately trigger appropriate actions i.e. shipments are scheduled
from the warehouse to replenish the retailer’s shelf, manufacturing produces another unit and the suppliers
releases parts to the manufacturer.
 Greater visibility into the supply chain results in higher velocity which is one of the primary goals of having a
supply chain in the first place.
 It also helps in reducing the safety stocks which is yet another avenue of achieving more savings.
 Simply put, visibility is the friend of velocity to the bane of variability.
 Low Visibility vs High Visibility
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Low visibility supply chain operations are High visibility supply chains operations are
characterized by limited transparency and characterized by increased transparency
communication among supply chain and real-time information sharing across
partners. Here are some of the key the supply chain. Here are some of the key
characteristics: characteristics:
 Limited information sharing  Real-time information
 Decentralized decision making  Technology
 Reactive problem solving:  Collaboration:
 Limited collaboration  Risk management
 Limited use of technology  Customer focus
 Limited risk management  Sustainability
 Supply Chain Variability
Faculty of Management Sciences
 Variability: It’s the natural tendency of the results of all business activities to fluctuate around:
average time to completion, average number of defects, average daily sales, average
production yields etc.
 Now the goal here is ensuring reduced variability to increase high velocity. thus, both
variability and velocity have an inverse relationship.
 To counter act variability it is a norm in supply chains to maintain safety stock to match supply
in order to meet the ever fluctuating demand.
 Variability culprit? It could be inaccurate forecast from the inventory planning department
where the ripples or the effects get greater as it moves downstream in the supply chain.
 It can come from not having visibility into vendor shipping performance leading to
inconsistent lead times.  
 Or it may just be the vendor is not filling the retailer’s orders as promised.
 Whatever the cause for variability, part of the cure is always visibility. And whatever the
causes of variability, one of the casualties (remedies) will no doubt be velocity.
 Low Variation vs High Variation Supply Chain Operations

Low variation High variation

High level of demand
predictability
Stable supply base
Standardized processes
Efficient inventory management
Consistent lead times
Minimal process variability
Variable demand
High product variety
Flexibility
Multiple suppliers
Collaboration
Inventory management
 Supply chain velocity
Faculty of Management Sciences

 Supply chain velocity is defined as the ability to complete an activity as quickly as possible (Carvalho
et al., 2012).
 Velocity can also be explained as distance over time thus to increase velocity, time must be reduced.
 Velocity also refers to supply chain agility.
 This, simply put, is the pace of doing business which ideally should remain on the upwardly curve.
 Maximum velocity is most desirable because it indicates a higher asset turnover for stockholders
and faster order to delivery response for customers.
 Velocity is enhanced by the supply chain running efficiently, and effectively.
 Methods of increasing the velocity of transactions along the supply chain include factors such as:
 Relying on rapid transportation
 Reducing the time in which the inventory isn’t moving by employing Just-In-Time delivery and
Lean Manufacturing methodologies
 Eliminating activities that don’t add value.
 High Volume vs Low Volume Supply chain Operations
• Large-scale operations: High volume supply chain
operations involve handling large quantities of
products, materials, or components.
• Efficiency: High volume supply chain operations
require a high level of efficiency to manage large
volumes of goods quickly.
• Predictability: High volume supply chain operations
require a high level of predictability in terms of
demand, production, and delivery schedules.
• Cost-effectiveness: High volume supply chain
operations require cost-effective management of the
entire supply chain.
• Automation: High volume supply chain operations
rely heavily on automation to handle the large
volumes of goods efficiently.
• Standardization: High volume supply chain
operations often involve the use of standardized
processes and procedures to ensure consistency and
reduce errors.
• Continuous improvement: High volume supply chain
operations require a continuous improvement
mindset to optimize operations and reduce costs
over time.
• Smaller Scale: Low volume supply chain operations typically
involve lower quantities of goods, which means they are smaller
in scale compared to high volume supply chain operations.
• More Customization: Because the quantities are lower, there is
often more customization required in the production process.
• Higher Cost: The unit cost of production is higher for low volume
supply chain operations because fixed costs, such as overhead
expenses and equipment, must be spread out over a smaller
number of units.
• Increased Flexibility: more flexible and responsive to changes in
demand, as they can more easily adjust their production and
inventory levels to meet customer needs.
• Greater Attention to Detail: the emphasis placed on quality
control and ensuring that each unit produced meets the required
specifications and standards.
• Longer Lead Times: Because low volume may involve custom
production, longer lead times are often required to produce and
deliver the goods.
• Increased Risk: Because low volume supply chain operations
involve smaller quantities, more risk involved in inventory
management, as any disruption in supply or demand can have a
significant impact on the bottom line.
 Supply chain Agility

Faculty of Management Sciences

The current business environment can be characterized by constant change, shorter product lifecycles, and increased
demand uncertainty. As these conditions have become the norm, global supply chain have turned to the concept of agility
in their quest for a sustainable source of competitive advantage. Consequently, supply chain agility has emerged as the
dominant competitive vehicle for organizations operating in such an uncertain and ever-changing business environment.

Agility is defined as the organization ability to thrive in a continuously changing, unpredictable business environment
(Prater, Biehl, & Smith, 2001), thus an agile firm has designed its organization, processes and products such that it can
respond to changes in a useful time frame (Agility Forum, 1994).
Despite the obvious benefits of agility, firms that operate in complex environments such as international markets, face
challenges in implementing the measures necessary to increase their agility. These challenges stem from the expense
associated with the complex operations and management structures necessary to support the desired attributes.

What does global supply chain agility mean to you?

 Supply chain Agility dimensions

1. Alertness- theFaculty
ability to of
quickly detect changes,
Management opportunities, and threats. The alertness dimension requires sensing emerging market
Sciences
trends, listening to customers, interchanging information with suppliers, monitoring demand, and sensing impending disruptions, be
they natural or man-made disasters.
2. Accessibility – the ability to quickly access relevant data. Information accessibility across the supply chain is a key requirement for
supply chain agility. At a minimum, supply chain members need to share real-time demand, inventory, and production information.
Why do you think this is a big challenge in global markets?
Example; Procter and Gamble (P&G) uses the GT Nexus platform to achieve real-time visibility into inventory flows across its global
supply chain. To achieve a "single version of the truth," all supply chain partners are connected to the same cloud-based platform,
getting access to a common, real-time data set, which includes status of orders, inventory, shipments, documents, and payments. Both
companies can use this information to quickly make decisions to reduce inventories or move products, so they are located close to the
end consumer when that customer wants them.
3. Decisiveness – the ability to make decisions firmly using the available information to capitalize to take up market opportunities. Think of
a bureaucratic environment and the drawbacks?
4. Swiftness- the ability to implement decisions quickly. Example; Zara, the Spanish clothing retailer, is famous for its supply chain speed,
which allows it to launch around 10,000 new designs each year. Zara can turn around its new clothing line within 2-4 weeks, compared to
the six-month industry average. The retailer has garnered accolades for its ability to quickly deliver new clothes to stores. This capability
of swiftly implementing decisions has allowed Zara to develop a level of supply chain agility that is unparalleled in the clothing industry.
5. Flexibility – They modify operations to the extent needed to implement the new strategy. Example, Apple's supply chain agility allowed
it to redesign the iPhone a little over one month before the iPhone was due on store shelves, Steve Jobs demanded that it include a new
screen made of unscratchable glass. How, by capitalizing on its suppliers' flexible operations Foxconn City.
 Enhancing agile supply chain theoretical framework
Do not second guess the market and Ensure customer collaboration efforts
limit customers interaction to buying by ensuring customers voice set the
and selling only agenda

Marke
t

Do not measure customer Do not make governance

service against internally too complex or formal
defined measures
networ The agile Virtua
k SC l
Let the customer define Establish an action and
measures of success project oriented exchange

Proces
s
Manage product proliferation with checks and
Do not grow product range faster than revenue
balances to avoid meaningless, non-profitable
and in a way drive down productivity
proliferation
 Managing risk
Faculty of Management Sciences
Five Critical Questions

So how can procurement, supply chain and operations executives help their companies reap the rewards and
mitigate the risks of global sourcing? By answering the below five key questions executives can make a richer
decision about the initial transaction while establishing a framework to regularly evaluate the total product
lifecycle:

1. What are the specific parameters and assumptions of this transaction that make this a good business
decision?
2. What are the macro-economic and geopolitical assumptions that could impact this decision through the
lifecycle of the program?
3. How do we monitor all these assumptions for changes?
4. What are the alternative sources? And if there are none right now, are we actively trying to develop
alternatives?
5. What is our exit strategy?
 Question 1.
Faculty of Management Sciences
1. What are the specific parameters and assumptions of this transaction that make this a
good business decision?

 Payment Terms: What are the Incoterms and payment terms? Do the payment terms support our goals for Days
Payable Outstanding? Do the payment terms negatively impact the supplier's working capital structure?
 Direct Costs: What are the cost of raw materials and labor that go into the process?
 Delivery Costs: What will be the total landed cost or delivered cost?
 Planning: Do the planning processes and information flows between our company and the supplier align (i.e., forecast,
change orders, order lead times, lot sizes and set-up times, transit times, etc.)? How about between our supplier and
their suppliers? What is the critical path set of parts we need to be concerned with?
 Working Capital: Will there be any additional working capital requirements for holding more inventory?
 Flexibility: What is the ability of the supplier to react to upside demand? What is the downside risk if the forecasts
don't materialize?
 Quality: What are the required quality standards and where in the process does it make sense to inspect for quality?
 Question 2.
Faculty of Management Sciences

2. What are the macro-economic and geopolitical assumptions that could impact this
decision through the lifecycle of the program?
 Direct Costs: What are the forecasted raw materials, labor, and energy costs?
 Financial Impacts: What are the forecasted inflation rates? What are the forecasted currency exchange rates?
 Geopolitical Environment: What is the state of affairs between the supplier's country with the U.S., EU, and other
markets for your product? Is there escalating trade sanction rhetoric? Are there specific anti-dumping or
countervailing duty cases between the two countries for your industry? Any quotas or safeguard measures?
 Supply Chain Risk: What supply chain interruptions can be expected for this trade lane? Is there a risk of natural
hazards, i.e., weather? Don't forget to anticipate labor strikes and the frequency of port congestion?
 Special Trade Preference Programs: Are there any duties on your product from this country? Are there any current or
proposed Free Trade Agreements that could impact the product from this source?
 Other Government Requirements: What government agencies have jurisdiction of your product (for example, FDA,
FCC, or EPA) and how does that agency view products from that source? Is there talk of increased inspections? Are the
documentary requirements becoming more stringent?
 Question 3.
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3. How do we monitor all of these assumptions for changes?

 How timely can we monitor customer demand and alter forecasts?
 What sensing mechanisms can we build to monitor changes to raw material, labor and energy costs? At what point
does an inflationary pressure create a problem?
 At what point does a shift in the currency exchange rate change make this a sub-optimal decision?
 What legislation or court cases are in progress that could change our assumptions? For example, recent U.S.
legislation requires over the next five years that all maritime cargo be scanned in the foreign port prior to loading
onto the vessel and three years for air cargo on passenger flights. If some ports are having issues with congestion
now, then this may further exacerbate the problem.
 How can we identify and stop a quality issue before the goods are shipped?
 How can we be alerted to delays in the supply chain and how can we best react to those changes?
 Question 4&5.
Faculty of Management Sciences
4. What are the alternative sources? And if there are none right now
are we actively trying to develop alternatives?
What are the alternatives not only for the product supplier, but also logistics providers, physical logistics routes,
ports, etc.?
5. What is our exit strategy?
When and how do we exit, Take a page out of the risk management playbook of stock traders and poker players
that understand high risk and high reward. Know before you award the sourcing how much you're willing to risk
and when you'll need to get out.
The big question is, global Sourcing Worth It?

Are the benefits of global sourcing really worth the challenge? Global sourcing can be a great tool to drive efficiency and
help gain access to new markets. However, it is not a strategy to be undertaken with little thought and many assumptions.
It's important to analyze the role global sourcing plays in your organization's overall strategic plan. Asking the right
questions not only before making the sourcing decision, but also regularly throughout the lifecycle of the transaction can
help mitigate your risk and improve the odds that the answer for your sourcing question is "Yes."
 Self Study Activity
Faculty of Management Sciences

Review the Zara case study of supply chain agility and identify;
a) The 3v’s of supply chain
b) The agility strategy/ies
c) Risk management
 References
Faculty of Management Sciences

Ahimbisibwe, A., Ssebulime, R., Tumuhairwe, R., and Tusiime, W. (2016), “Supplychain
visibility, supply chain velocity, supply chain alignment, and humanitarian supply chain relief
agility”, European Journal of Logistics, Purchasing and Supply
Chain Management, Vol. 4 No.2, pp.34-64.

Christopher, M., & Peck, H. (2004). Building the resilient supply chain. International Journal
of Logistics Management, 15(2), 1-13. doi:10.1108/09574090410700275

Gligor, D. M. (2015). Strategy The five Dimensions of supply chain agility. Supply Chain
Quarterly. Retrieved from
https://www.supplychainquarterly.com/topics/Strategy/20151022-the-five-dimensions-of-
supply-chain-agility/
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Thank You.