An analysis of Ambidextrous strategy in the supply chain


Ambidextrous strategy is relatively new among other supply chain strategies. It has much importance in achieving operational excellence and leads to a communion in terms of supply chain partners. Ambidexterity is based on March's notion of exploration and exploitation strategies in supply chains. In other words, achieving both exploration and exploitation of resources /or opportunities simultaneously is all about ambidexterity. We can observe this strategy more in collaborative supply chians than in adversarial supply chains. The relationship between associated members in a supply chain is sustainable only when there is a win-win policy. The chain of companies is formed to co-operate each other so that they can leverage their resources to achieve better quality of service and increase their profits. Understanding of the basic supply chain and its characteristics is key to argue that ambidexterity is more evident in collaborative supply chains. Essentially this essay argues with reasons stating that. It also introduces the concepts of exploration and exploitation of opportunities (ambidexterity), collaborative supply chains and adversarial supply chains and influence of ambidexterity on supply chains. The context in this essay is not deviated from supply chain strategy.

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Preliminary understanding of supply chian and its characteristics eases understanding of collaborative and adversarial supply chains. Supply Chain Management (SCM) is one of the most significant areas of business segments where the global enterprises are concentrating seriously. This is where majority part of the costs involved for a business. It is one of the traditional objectives to reduce costs and simultaneously achieve the goal. How well it coordinates between its suppliers and customers determines a business's success. The definition shows that the partner companies as a team try to produce high quality services or products for consumers. The coordination and information flow is very important to succeed. Information is major resource for any business and that needs to be shared in the case of a supply chain. This tells in other words that a basic idea behind any supply chain is coordination and sharing of resources to provide end consumer a high quality experience. According to,

Traditionally the relationship between buyer and supplier is adversarial. Every business usually comprises of suppliers and consumers. In a supply chain, each partner company is a consumer to other partner company in the downstream and supplier in the upstream. So, competition is common between individual companies. This actually resulted as a barrier to information exchange and other resource sharing. Eventually poor quality in the services to the end consumer damaged whole value of the chain. These adversarial supply chains cannot support cooperation, and innovative opportunities to improve their profits. It does well to the business as long as the operational excellence is practiced to over come the partner and as part of the competition. This idea improves the internal strength of the organization rather than competing externally with the partner organizations.

Gradually, this model of adversarial buyer-supplier relationship is replaced by better performance and quality oriented collaborative model. Reciprocal trust has become important to maintain a healthy win-win relationship as partners. The endless cycle of climbing supply chain costs influences the bottom-line of all partners involved. Companies realised that supply chain performance is influenced by collaborative planning. A recent study by AMA Research shows that collaboration strategy can add three percentage points to profit margins for all types of partners on supply chain. Wal-Mart has experienced significant success in this regard. Using a joint initiative called collaborative forecasting and replenishment (CFAR) with P&G, managers from both Wal-Mart and P&G jointly forecast sales of P&G products at Wal-Mart stores and plan replenishment strategies. Developing a collaborative or integrated supply chain acts as a new strategy to gain and sustain competitive advantage in terms of service levels, product customisation and delivery times and product quality. These factors contribute to the company's competitiveness. Collaborative strategy is motivated by previous technologies such as EDI (Electronic data exchange), JIT (Just In Time) and QR (Quick response). Collaborative supply chain enables information sharing and exchanging. It also enables sharing knowledge, risks and profits. defined Collaborative supply chain as,

On the other hand, James G. March introduced two strategies like concepts called exploration and exploitation of opportunities or possibilities. These notions were actually meant for Organizational learning. Later they were adapted to many organization related functional areas such as Supply chain, Operational management, Business intelligence etc. According to March, Exploration includes things captured by terms such as search, variation, risk taking, experimentation, play, flexibility, discovery and innovation. Exploitation includes things such as refinement, choice, production, efficiency, selection, implementation and execution. Systems that follow exploration with exclusion of exploitation are more likely to suffer the costs of experimentation without many benefits. Conversely, following exploitation with exclusion of exploration are likely to be trapped in. So maintaining correct balance between exploration and exploitation is most important. This enables companies to achieve combinative competitive capabilities of quality, delivery, flexibility, cost and all together on business performance. When adapted to supply chain, these concepts can be defined as As the exploration and exploitation concepts are likely to be seen as key ingredients for the reciprocal trust

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Ambidexterity is the pursuit of both exploration and exploitation. Duncan proposed this strategy stating that exploration or exploitation alone makes short for manufacturers to support them in a highly competitive and dynamic environment. defined ambidextrous supply chain strategy from a manufacturer's point of view as. Exploration is weakened with out appropriate resources. Usually internal resources are not sufficient to support a company's exploration capabilities. Resources from partner companies help to achieve finding accurate knowledge to get competitive advantage. In essence it is important to have good relationship with other supply chain partners to get high exploration capabilities. In other words ambidexterity works better for collaborative supply chains than adversarial supply chains.

Organizations understood this fact and expected a transition from traditional adversarial to collaborative strategy. The principal effects of this transformation are, in our opinion, as follows:

The alteration of the adversarial model of the supplier-customer relationship. The supply transaction is transformed by the operative mutuality between the partners of the production chain into a co-operative and growingly more exclusive relationship.

The supply chain management is integrated and reconfigured. The profile and role of the supplier is redesigned by more external area of buyer-supplier interaction according to his place in the supply chain. More over, since the level of competitiveness of material flow is measured within the company assembling it but also in the whole supply chain that manufactures each part of it, the vertical connection of the units meeting on the same method and adding to the concept, design, production and delivery of the material producing the final product becomes vital. Simultaneously, the dynamics of competition and the current global competing models support the search for more qualified suppliers and/or for sources directly connected to the operational activity.

The extension of the traditional sourcing areas is promoted. This development is certainly irreconcilable with the preceding.

Collaborative Supply Chain Management is viewed as the one that gives significant benefits, including:

Improvements in Customer services: Services to customers (internally and externally) are improved through implementation of Collaborative strategy. Internally, the operational barrier could be reduced via better communication which could also enhance the effectiveness in making decisions related to forecasting, designing and marketing. This also influences the effectiveness of producing, delivering and distributing goods to the customer which will increase the expectations and loyalty of customers of the organisations in the chain and its products.

Cost reduction: By implementing Collaborative strategy, the inventory cost can be reduced. Unlike JIT approach, which transfers the cost upstream or downstream of the supply chain, in Collaborative supply chain management this cost can be distributed among the parties and this will lead to a reduction of production costs. In addition, the risk could also be dispensed among the parties in the supply chain.

Improvement in Business processes: The Collaborative strategy implementation is proved to help all partners in the supply chain to align and enhance their business processes and their efficiencies for maximising their capabilities in facing the challenges in dynamic and highly competitive market. Enhancements in business processes will help these partners to eliminate the redundant and less valued processes. This improvement may enhance the effectiveness of the supply chain and can be used to leverage the competitive advantage over other supply chains.

Efficient use of resources: Resources such as human resources, technology and raw materials that are available among the supply chain parties could be utilised more effectively. In the collaborative situation, each member of the chain agree to work together to achieve a common goal. In addition to this, collaborative environment enables decisions such as human resource development and technology planning can be done effectively by considering the capabilities of all parties.

Geoffrey Moore in 'Dealing with Darwin' his well known book stated a model for business strategy which is similar to ambidextrous collaborative strategy. That model is called Core/Context strategic model which was basically proposed by Charles Darwin in his evolutionary theory. Moore in his proposal, divided business processes into two groups and named them Core and Context. Core group helps business in creating competitive differentiation where Context processes act like catalysts for the Core. He suggests that strengthening core processes through innovation and differentiation as the best strategy for a business. Utilizing resources carefully in Innovation cycle is important in implementing this strategy. He divided Innovation into four quadrants using, Core, Context, Mission-critical and Non-Mission critical parameters. Usually resources get stuck with context processes and they need to be offloaded to fund further innovations. This careful deployment and managing of innovation takes businesses to achieve differentiation and bargaining power in the market and finally revenues and profits. This is very similar in the context of exploration and exploitation strategy. Mission critical parameters are used in exploitation and non mission critical parameters are given to exploration which are also essential to build a future strategy such as outsourcing.

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In summary, the above definitions tell us that ambidextrous strategy is very important for a business to achieve combinative competitive capabilities and is more evident in collaborative supply chains because collaborative supply chains are integrated in terms of resources, risks and profits so that each player in the chain communicates and shares their resources to leverage their competitive advantage. Reciprocal trust is also important to build and sustainability of relationships between suppliers and buyers. The benefits of collaborative supply chains mentioned above are indeed because of application of ambidexterity.