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Hau L. Lee Stanford University AAA Value Chains: Agility, Adaptability and Alignment.

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Presentation on theme: "Hau L. Lee Stanford University AAA Value Chains: Agility, Adaptability and Alignment."— Presentation transcript:

1 Hau L. Lee Stanford University AAA Value Chains: Agility, Adaptability and Alignment

2 Strategies to Win Increasing sources of uncertainties Changing needs for products/markets/time Trend to distributed supply chains Challenges Uncertainty drives need for flexibility Supply chains to fit changing needs Differential interests of multiple players Implications Agility Adaptability Alignment

3 Agility Information integration Sense and response Design for postponement Agile logistics Super-efficient Supplier coordination Supplier innovation Contingency planning Regular Supply Chains Visibility, transparency, communication Process monitoring Design for Environment Smart logistics Total waste elimination Supplier collaboration Supplier innovation Contingency planning SER Supply Chains

4 Adaptability Evolving journey Adapt strategies for different times, markets, and products Dynamic responses to changing regulations, industry standards, and trade agreements, etc. Product life cycle management Regular Supply Chains Evolving journey Adapt strategies for different times, markets, and products Proactively mobilize industry-wide efforts to create standards and tools, and dynamically respond to changes PLC management SER Supply Chains

5 Alignment Role realignment Mission synchronization Incentive alignment Integrated performance measurement Leadership Regular Supply Chains Shared ownership of compliance, open sharing Common goals (+ vendors, business partners, NGOs) Cost, risk and gain sharing Integrated performance measurement; including business results Leadership, involving 3 rd party support SER Supply Chains

6 Examples of AAA Enterprises

7 Netafim Seckler et al, 2002 Projected Water Shortage 2025 An irrigation dripper producer aiming at: Preserving water – one of the world’s most precious resources Increasing global food production to bring relief to many less privileged Supporting universal efforts to improve the quality of the environment and the beauty of the planet Physical water scarcity Economic water scarcity Little/no water scarcity Not estimated

8 Netafim Afghanistan Corporate Car

9 Crop Management System: IrriWise EC/pH Control GSM Radio Water, fertilizer & energy management

10 Technical & agronomist education International knowledge sharing Professional studies programs Local hands on instruction. Netafim Irrigation University

11 Supply Chain Evolution 0 50 100 150 200 250 300 350 400 Revenues (Millions $) 450 Manufacturing efficiency to be “best drip irrigation equipment company” Agility to mass customize equipment in expanded but diverse market Solution provider – “More yield with less water” 500 1996199719981999200020012002 200320042005 20062007

12 AAA Value Chain at Netafim Agility Adaptability Alignment Innovative technology for most efficient & effective irrigation, manufacturing and order fulfillment excellence, use of IT Mass customized products to adapt to different geographies, climate and products; greenhouse project management offerings Customer solutions for win-win higher yield with less water, education of customers, migration from product to service

13 Soy Bean Supply Chain in India Farmers Mandis ITC Other Buyers Inbound logistics in bulk Display & visual inspection Auction (spot market) Outbound logistics & payment Congestion at Mandis can hold up farmers for days. Price uncertainty faced by farmers – material flow must precede price information discovery. Farmers rely on word of mouth or localized previous prices. Farmers vulnerable to delayed payments. Source: Anupindi & Suvakumar, 2007

14 ITC e-Choupal Farmers ITC Processing Other Buyers Selected farmers (Sanchalak) maintain computers and inspect products. Price transparency provided to farmers. Direct sales to ITC enabled. Material flows occur only after sales to ITC or price discovery to Mandis. Mandis e-Choupal Internet Kiosk Market conditions, prices, weather, knowledge Mandi Prices Authorized Prices Source: Anupindi & Suvakumar, 2007

15 Win-Win Value Proposition Transaction Costs in Rupees per metric ton Source: Anupindi & Suvakumar, 2007

16 ITC e-Choupal 6,000 e-Choupals & more than 120 hubs in 9 states, 36,000 villages; empowering 3.5 million e-farmers. 6,000 e- Choupal installations Started with soya bean, now covering wheat, coffee, shrimp and other aqua products. Reverse flow of fertilizers, household goods, seeds, etc. back to farmers. Aims at extending to 100,000 villages and 10 million e-farmers in next decade.

17 AAA Value Chain at eChoupal Agility Adaptability Alignment Restructuring information, physical & financial flows for transaction efficiency & supply/demand matching Product & geography expansion; product quality differentiation; using reverse channel for new business offerings and service Win-win for farmers and ITC, savings for consumers, higher quality with more variety for consumers

18 AAA Value Chain at eChoupal Agility Adaptability Alignment Restructuring information, physical & financial flows for transaction efficiency & supply/demand matching Product & geography expansion; product quality differentiation; using reverse channel for new business offerings and service Win-Win for farmers and ITC, savings for consumers, higher quality with more variety for consumers

19 Abercrombie & Fitch Brooks Brothers JCPenneyNike Nordstrom Polo Ralph LaurenTommy Hilfiger GAP/Banana Republic J.Crew Nautica Marks & SpencerLacosteHugo BossNext Esprit

20 Environment Cherish the Environment Excellence Reduce Waste through Functional Excellence Exploration Explore and Embrace Innovative Solutions Education Dare to Err but Quick to Learn Ethics Be a Good Citizen and a Good Employer Esquel Culture Wrinkle-free garments High performance Antibacterial finishing Cashmere-like cotton Genetic engineering for cotton breeding Nanotechnology in fabric finishing R&D Innovations

21 Sustainable Practices Organic cotton farms certified by OCIA (Organic Crop Improvement Association) New technologies to reduce dyeing cycle and chemical usage Use of natural resources (clays & enzymes to replace chemicals) Water conservation by special irrigation methods in cotton farms Dust collection, power efficiency, recycled heat, water treatment and reuse in manufacturing Educating Xinjiang communities on environmental preservation

22 HETIAN 和田 BAYINGOLIN 巴音郭楞 HAMI 哈密 ALTAY 阿勒泰 CHANGJI 昌吉 TACHENG 塔城 BORTALA 博尔塔拉 YILI 伊犁 AKESU 阿克苏 KEZILSU KIRGIZ 克孜勒苏 KASHI 喀什 TURPAN 吐鲁番 Kramay City 克拉玛依 市 Shaya 沙雅 Awati 阿瓦提 URUMQI 乌鲁木齐 Organic Farm AEA/AEC XJE/TPE WFC 丰达 Heboksel 和布克赛尔 Organic Cotton Development Organic Cotton Consumption (tons) 50% self-sufficient 0 50 100 150 200 250 300 350 400 450 500 03040506 0708F

23 Innovative Organic Farming Cotton consumes 11% of pesticides while occupying 2.4% of world’s farm lands. Fertilizers create nitrate pollution. Esquel’s R&D developed innovative farming methods: –Soil and fertilizer management –Cultivation technologies –Pest and disease control Turned organic cotton farms from yield of lower than 50% of conventional method to 20% higher. From 2005-7, yield increased from 40-50 kg/mu to 90-100 kg/mu. Highest yield in Xinjiang and China. Organic farms at 630 mu today with aim at 1,270 mu in 2012.

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25 Micro Financing An exploratory project initiated by Esquel and Standard Chartered Bank Help farmers in remote area to increase their living standard and increase yield by investing in irrigation systems. From Dec 2007 to Nov 2008, RMB 3M to be loaned, at RMB 15,000 per capita.

26 Eco-Mobile Lab in Xinjiang

27 Schools in Farms & Factory Locations

28 Building Schools in Local Communities

29 New School Opening Ceremony

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32 AAA Value Chain at Esquel Agility Adaptability Alignment Innovations for power efficiency, sustainable farming and manufacturing practices, ethical treatment & education of employees Continuous R&D innovations in product functionalities, farming methods, and manufacturing processes Contributions to communities where farms and factories are, champion industry-wide social responsibility in China

33 Summary  World class value chains require capabilities in Agility, Adaptability and Alignment.  AAA capabilities also required for socially and environmentally responsible supply chains.  AAA value chain is key to super-AAA business, social responsibility and sustainability performances.


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