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  • Writer's pictureZsofia NAGY

Strategic & organisational aspects of frugal supply chains



Building on last week's article where we revisited the frugal mindset and how frugal supply chains work on a higher level - including value chain maps (the Google maps of your organisation), the TVC / TnVC assessment approach - this week we take a look at the components where frugal supply chains focus on strategic & organisational aspects differently.

Getting into the right mindset is key, so let's revisit the main principle of frugal supply chains (or even frugal businesses in general):

We need to re-adopt that frugal mindset that will allow us to utilise resourcefulness again and create economical, social and ecological value simultaneously.

These help us execute on the principles of circular economies: reduce-reuse/repair-recycle/upcycle-retire-regenerate.

How does this impact supply chain strategies? - Through a shift in focus:

  1. Focus on collaboration, not only on competition - setting incentives is critical here

  2. Focus on affordable products & services that are circular, yet good on functionality & UX (user experience)

  3. Focus on process solutions that can manage within our social & ecological boundaries

  4. Focus on elevating the human aspect & understanding of circular principles, frugal mentality

  5. Focus on all stakeholders equally at evaluating the value generated

After establishing a healthy cost & value baseline for the business ecosystem, we strive to generate value for ourselves and our partners equally by empowering everyone in the organisation to innovate beyond their scope of work and find new ways that can sound irregular / outlandish / crazy first, but can be the ideal solution.

How do we know what 'healthy' baseline means for businesses that are well established?

By going through the VCM & TVC exercises collaboratively with our partners and ask the relevant, inconvenient questions to start on a new level of partnership and start honestly answering the questions and sharing where a business struggles to make a required price point met, but also being honest about where our profit lines start making sense for a long-term business view.

Based on my observations of businesses so far, the above will take time to get there. At the same time, there are businesses already doing it well, so it is definitely attainable.

If anyone ever wondered, there is a company in India making great quality and health-wise safe wall paint out of cow poo...talking about ideas that sound irregular first, but they are better than the original solutions...and the list of such companies is long by now!

Where are we from organisational perspective?

We cultivated a workplace culture globally that only rewarded adherence to rules, processes and control points where change is usually perceived as something we "need to get over with" as fast as possible to feel comfortable again and we mostly allowed change, when it targeted cost optimisation (exceptions always apply, as usual, but that's the minority).

In many cases those being more innovative in their roles were considered as not-fitting or rocking the boat too hard, even if the benefit of the change was clear (especially bottom up).

Then this pandemic happened and many leaders had to learn the hard way that as much as they felt uncomfortable with big changes, they were forced to accept less perceived control and more flexibility around how people contribute to their business success over a prolonged period of time.

With this newly found flexibility, people delivered. On multiple levels, especially in supply chains and found amazing frugal ways to make critical supplies happen.

We need to use this momentum to build on it and change how we work and re-learn frugal innovation, frugal mindset and become as resourceful as possible and fast.

So how do we grasp this and what are the main characteristics of frugal supply chain teams?

  1. Understanding circulation of value, as backbone principle

  2. Long-term strategy & view of the business life-cycle at all levels

  3. Clear evaluation to balance the 3 areas of value creation (social, ecological, economical)

  4. Open mind to what can constitute value & what else we can use resources for

  5. Complex(er) job roles, clear empowerment for decisions & flat org. structures

  6. Regular value chain review & continuous learning

  7. Critical thinking & collaborative, timely decision making

In the above list, those that aren't highlighted are characteristics we have cultivated for some time already, even under very different business ethics & values. Yet, I believe we haven't succeeded in building strong competencies in these areas till now, also partly due to the earlier described workplace culture impact that doesn't help fostering these.

The highlighted points we need to adopt in the supply chain teams as fast as possible to make the next steps in operations.

Some of these points clearly go against what we have seen in the last few decades in supply chain organisations, but we need to realise that over-simplifying roles to automate and/or "optimise" existing processes only for incremental gains is no longer an option and it was clearly not working as the recent pandemic has proven with many globalised supply chains failing in the first place (not all areas did well, as we know).

Everyone working in supply chain also knows that digitisation of data and digitalisation of processes are key enablers of the current evolution of supply chains. This is an opportunity to avoid over-simplifying roles and really utilise AI and the digital solutions to the best of their abilities, combining them with our human cognitive asset in more complex roles to make the right decisions in the supply chain ecosystems.

To summarise:

The key question that developing countries and frugal supply chain teams do really well (by their situation as they have much less or no resources) is this: "What would we do, if we had to accomplish similar/same result without any resources available in our possession?"

Your answer is in the 5 & 7 points here and is driven by re-defined value baselines in our businesses, consequently in our supply chains.

Whether we like it or not, this is the situation we are already in with resources running out faster than we can see it around us, so adopting a frugal mindset is no longer just an option.

If some the above seem to you closely related to the basics of how to run an ethical business, you are not far from the truth. The difference is the frugal innovation mindset that underpins the perception and creation of value in these supply chains.

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Part 3/3 of the article series is coming up next week, detailing more about the operational aspects of frugal supply chains, so stay with us!

Let me know if any of the above have sparked further questions or thoughts, I'm happy to hear inputs from other practitioners and supply chain experts!


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