In our recent series on The End of Competitive Advantage, we noted that in many industries, there is no such thing as sustainable competitive advantage. The best a company can hope for is to deftly move from temporary advantage to temporary advantage in an effort to remain in the black.
In order to do this, it has to follow a new playbook with a new set of rules, which include the switch to competing in arenas and not industries, the requirement to get (out) while the gettin (out)’s good, the support of the C-suite, and the continual resource re-allocation to deftly move from one arena to another where temporary advantage can be obtained.
In order to do this, a company needs a supply chain that can keep up. Such a supply chain has an adaptable structure at its core, as per this article on the essence of supply chain flexibility. Such a structure allows a company to get back to business quickly following a disruption. Consider Nissan, the first Japanese car company to get back to business following the 2011 quake. And in the wake of the Thai floods, it was able to contain the issues locally by swiftly resourcing parts from China. It was able to do this because its low-cost “V” platform for vehicles in emerging markets allowed Nissan to extend its production base across the world using standardized parts in different production facilities.
So how do you get an adaptable structure? Start with the checklist presented in the article:
- focus on risk management, not risk avoidance
with a 98% chance of a disruption within 24 months no matter what you do, this only makes sense
- develop a variable cost structure
that can be applied on a node-by-node basis and ramped up and down as needed
- launch flexible capacity initiatives
to adequately handle peaks and troughs in demand
- establish hedging strategies for critical components
and put appropriate backup plans in place
- acquire actual supply chain insurance policies
and insure specific high-risk events are covered
- explore shared services models
and use them where they make sense
- implement flexible pricing structures
to support flexible capacity initiatives that allow demand to be rapidly aligned with supply
- and form cross-functional teams, led by a C-suite officer, to get the job done!
Within days of the Japan earthquake, the CEO of Nissan and a risk management team visited the plant, surveyed the damage, and determined what needed to be done to regain normal operations. The CEO. Take note of that.