A study of leagility and supply chain design

In the context of a dynamic and hyper-competitive business environment, appropriate design of supply chains helps organisations to align resources for improved flow of products and services and satisfy customers’ diverse needs. Researchers have proposed several supply chain designs which are mutually exclusive such as efficient versus responsive, and lean versus agile. Quantitative testing of these designs revealed that many firms’ supply chain designs do not match with what was conceptually expected.<br><br>In this research, a new approach to supply chain leagility is investigated, proposing all supply chains are leagile with different magnitudes of leanness and agility. In this regard, a new index, ‘deviation from leagility’ (DFL), is introduced, and employed in this study to optimise supply chain design. DFL is the absolute distance of supply chain design from a balanced supply chain. Balanced supply chain is a position where the magnitude of leanness and agility is equal. A comprehensive model of uncertainty including demand, supply, and internal uncertainty is engaged to investigate the impact of uncertainty as a key design driver of supply chains.<br><br>The partial least squares (PLS) was employed to analyse data collected from Australian firms. The results indicate that higher performance is achievable when the deviation from a balanced supply chain in which both aspects of leanness and agility are equally embedded, is minimised. Results also reveal that DFL is directly and positively influenced by the level of uncertainty; while it is indirectly impacted by the level of competition intensity and customers’ expectation.<br><br>Analysis of market segment revealed that irrespective of the segment a firm is operating in or for, uncertainty is a significant determinant of designing a supply chain. However, there is higher magnitude of agility for companies active in the up-market segment of an industry compared to the down-market segment.