A Leagile Strategy

14/03/2017

Whilst embarking on a two year supply chain course at Toi-Ohomai from February this year I was presented with, in my first set of course material, two common supply chain strategies:-

Lean strategy : categorised by the ability to reduce inventory and waste. Lean supply chains focus on cutting out unnecessary business practices and wasting fewer resources while maintaining or improving delivery of their product to customers. 

Agile strategy : the whole supply chain needs to be interactive and flexible according to actual customer demands. Agility is a comprehensive response to the business challenges of profiting from rapidly changing, high flexibility orientation, advanced level of customised products and services. 

Then the course covered something I had not heard of before: a LEAGILE strategy

A leagile strategy ("leagility") is, you guessed it, a hybrid of the other two. This strategy aims to obtain flexibility and competitiveness in a cost-effective manner. In order to achieve the combination of lean and agile ideas, a decoupling point is introduced. 

From the upstream material supply part to the decoupling point, because the uncertainty of raw materials and product components are relatively low, the supply chain partners can adopt lean strategy to minimise supply costs and inventory restraining this part. 

From the decoupling point to the downstream final customers, because the uncertainty of customer demand and final products are high especially in many modern markets, supply chain partners can implement agile strategy to obtain high flexibility and responsiveness to satisfy customers.

In the past a highly customisable product was important to the success of an agile supply chain. However, fulfilling customisable demand for this was also often detrimental to the success of a lean supply chain.

I feel this situation is similar to the current Custom software vs SaaS debates that companies are grappling with.

Custom software development has the ability for the business to truly delver agile, highly customisable and unique products for its customer base. This often requires a significant upfront investment that many companies either cannot afford, or they don’t have the appetite to take on the risk. SaaS on the other hand has the ability for a business of any size to use valuable software tools in a manageable, lower risk package but often they cannot be customised to meet specific business requirements quickly and so don’t add enough customer value and competitive edge beyond internal efficiency gains.

What seems to be missing is that LEAGILE strategy from technology providers, something that caters for a lean low risk SaaS model of usable components whilst giving the business flexibility to be market responsive and customise the software without the risk of large upfront initial investment.

At Cucumber we are actively looking at how we can support customers who have chosen a LEAGILE path to help reduce waste, remove unnecessary business process, as well as improve their market flexibility and responsiveness. One view is to help customers deliver a LEAGILE “decoupling” point in their software strategy where they do not have to compromise between Custom development and SaaS to meet business objectives.

We’d be keen to hear from anyone who might be interested in talking about this idea further.

Written by Ian Gray