The Blog

New Strategy; Lean Out / Leagile In

The balance between producers and consumers is changing rapidly in an increasingly globalized world. The customers are changing their purchased products or suppliers with a growing route and preference precedence of “company history, reputation and brand awareness” dominated in the past, gives place to who produces maximum value from the point of customer now.

Today, customers are more conscious, inquisitive and the most importantly, they are aware of their importance. While producers had a say in the issues like which products will be produced, product specifications and what will the price in the past, this situation is now totally under control of customers if you do not produce the  product that extremely exclusive and cannot found anywhere. As a natural result of this situation, market dynamics gain a completely different dimension.

We are witnessing the dimensions and amazing effects every day.  The world’s fourth most valuable company in 1996, Kodak is in which situation today. Kodak was late in the transition from analog technology to digital. Japanese Hitachi which had uninterruptedly produced TV during 55 years, now it has left. It was unable to cope with LG and Samsung’s innovation ability, TV production is forced to close. 15 years ago, the most preferred mobile phone brand companies such as Nokia, Blackberry have been late in achieving the necessary change relying on their strength of market and they were forced to leave their place to Apple, Samsung. We could give similar examples in our country. The main reason of this is that, the leading companies in the market right now understand the customer expectations very well and they define their strategies as “change, innovation and speed” in order to respond fully to these expectations. Briefly, they aim operational excellence in all area by focusing customer requests means Value.

Customer expectations are changing incredible speed compared to past. This change is pushing the producers to change / improvement. Because now one thing for sure, if we do not change, the customer will change us in net. The customer is the reason of our existence and the real boss. Then, we must develop and apply more different / new strategies compared to past to be able to respond better to our customer expectations, remain an indispensable supplier for them in the competition world that have come to global dimensions.  We have no natural resources like petroleum / natural gas. We have to charge more than our competitors in the world for raw material and energy. Under these situations, we have to absolutely be more efficient to exist, survive and leave our competitors behind.

China and South Korea models are the one of the strategies of change that need to investigate in my opinion. China has become the world’s first assembly / production base first due to cheap labor, energy and raw material resources maybe by wasting a generation. By continuing this process during a period, China attracted the companies to own country and then it came to a structure that produces technology in addition to production by developing knowledge and skills over time.

South Korea came to these days with another strategy. The government regulated for strength and specialization in all area by allocating the segments. According to this situation, investing the segments which is not their specialization is blocked in a way even they have capital and they are encouraged to shift the existing investments to their own segment. While Hyundai produces computer twenty years ago, today they turn towards mainly automotive or while Samsung existed partially in automotive segment years ago, today becoming an electronic giant proves how it is quite correct strategy I think. As a second step, they have focused on efficient production topic and Japanese sensei’s are transferred. Especially in the mean of new product development and production management, they have learned Toyota philosophy and they comprehended that the more important thing then production is efficient production. Finally, they have made continuous attempts and developed new products by investing incredibly to the innovation.

The key of this job is change and transformation for Operational Excellence.

There are two dimensions in change. Technical dimension, social dimension. On the technical side, there is not much problem; the hardest part of the job is social change or cultural change. I believe that is the issue which we should focus on. It is a fact that will not be easy to change our ongoing habits / way of doing business for years in a snap. However, it is also another fact that there will not be any situation that needs to be change if we do not make this change real.

One of the highest priority agenda topic of companies while satisfying the changing customer expectations uneventfully, at the same time, the necessity of having efficient processes in terms of maintaining their own existence in our rapidly changing world.  In order to be efficient, first of all it should be very well understand that the property of Supply Chain Management, which strategies must be used in which situation, which areas the company has deficiency in the current situation and how effects this deficiency to the system.

Not saying out of stock but keeping stock levels low, not be out of material but minimizing the inventory levels, being fast in operational mean but using the resources optimum and while doing all of these, decreasing carbon release level by considering the environmental factors is first agenda topic of producers which are seeking operational excellence. All these necessary factors but seems to be constraint each other are the extent of any company cannot overcome alone no longer. This extent increases the importance of supply chain management even more and levels the necessity of managing more efficient.

As a result of change, new current situation is like that;

  • Market and customer expectations are changing with incredible speed with the reasons like technology, globalization, and socio-cultural effects.
  • Customers want more personalized product each passing day, as result of this product variety is increasing and product lifecycles are getting short.
  • Price factor cannot be sufficient alone during the preference process, speed and flexibility competence is vitally important for a company in supply chain processes.
  • Today, supply chains are competing, not companies.
  • Applying single production strategy to all area in the face of this variability is not possible.

In the businesses, everything starts with institutional main business strategies (business plan) that set the goals like how much turnover will make, profitability targets, growing plans and investment return ratios etc. Immediately afterwards, marketing strategies which consider the factors as product market share, price, competition, company market positioning should be formed in order to reach the goals in institutional main business strategies. Supply chain strategy is a part of institutional main business strategy and integrated to marketing strategies. Generally, it focuses on the issues of running the developing and producing processes the most effective way for products needed for reaching marketing strategy targets. Supply chain should design on competitive level in order to be effective.

Attaching great importance growingly to the personalized product by customers, accordingly, increasing product diversity and decreasing product lifecycle day by day force the statical structure of supply chain strategies to being dynamic. Leagile supply chain strategies are the most important and valid supply chain strategies that are well-accepted in today’s world and able to use separately or together during business processes. Many companies which are aware of this situation make an effort to adapt their production and supply chain processes to leagile strategies. However, most of these companies cannot use leagile production characteristics as it should be in consequences of both lacks of knowledge and misleading and as a result of this they are not able to come to competitive levels. Having efficient operational process is extremely important in order to be able to compete with world’s market in our country that are highly dependent on outside about the scopes as especially energy, raw material resources. In order to reach this aim, leagile supply chain strategies should be very well understood and applied properly.

Technology is doubled itself in approximately every eighteen month (Moore Law). Until today, this process had been continued progressively and sensors and communication technologies that were partially overcosting and generally used to industrial area before have been started to use increasingly in daily life of individuals as a result of especially development of micro-electronics industry. These developments have been changed all habits both individual and professional manner and revealed the concept of Internet of Things which was also called industry 4.0. Technological developments, placing the internet in all areas of our life, attaching great importance growingly to the personalized product by customers, accordingly, increasing product diversity and decreasing product lifecycle day by day force the statical structure of supply chain strategies to being dynamic.

Many academicians, practitioners have done researches on leagile production strategies and arrived at a decision that one model in supply chain strategies cannot respond all expectations (one size does not fit all). The remark is dominated that the products which’s variability is stable and functional is gained order with price criteria, but the innovative products that’s variability is low have a chance to gain order if they penetrate the market fast and the leagile strategies which called hybrid model are the most ideal model for a company because of being applicable together.

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