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Production, Manufacturing and Logistics

Modeling the metrics of lean, agile and leagile supply chain:


An ANP-based approach
Ashish Agarwal
a
, Ravi Shankar
a,
*
, M.K. Tiwari
b
a
Department of Management Studies, Indian Institute of Technology Delhi, HauzKhas, New Delhi 110016, India
b
Department of Manufacturing Engineering, National Institute of Forged and Foundry Technology, Ranchi 834003, India
Received 1 December 2003; accepted 12 December 2004
Available online 16 February 2005
Abstract
With the emergence of a business era that embraces change as one of its major characteristics, manufacturing suc-
cess and survival are becoming more and more dicult to ensure. The emphasis is on adaptability to changes in the
business environment and on addressing market and customer needs proactively. Changes in the business environment
due to varying needs of the customers lead to uncertainty in the decision parameters. Flexibility is needed in the supply
chain to counter the uncertainty in the decision parameters. A supply chain adapts the changes if it is exible and agile
in nature. A framework is presented in this paper, which encapsulates the market sensitiveness, process integration,
information driver and exibility measures of supply chain performance. The paper explores the relationship among
lead-time, cost, quality, and service level and the leanness and agility of a case supply chain in fast moving consumer
goods business. The paper concludes with the justication of the framework, which analyses the eect of market win-
ning criteria and market qualifying criteria on the three types of supply chains: lean, agile and leagile.
2005 Elsevier B.V. All rights reserved.
Keywords: Agility; Flexibility; Supply chain; Analytic network process
1. Introduction
Enterprises are continuously paying attention in
responding to the customer demand for maintain-
ing a competitive advantage over their rivals. Sup-
ply Chain Management (SCM) has gained
attention as it focuses on material, information
and cash ows from vendors to customers or
vice-versa. A key feature of present day business
is the idea that it is supply chains (SC) that
compete, not companies (Christopher and Towill,
2001), and the success or failure of supply chains
is ultimately determined in the marketplace by
the end consumer. Getting the right product, at
0377-2217/$ - see front matter 2005 Elsevier B.V. All rights reserved.
doi:10.1016/j.ejor.2004.12.005
*
Corresponding author. Tel.: +91 11 26596421; fax: +91 11
26862620/26582037.
E-mail addresses: ashish_ka@yahoo.com (A. Agarwal),
ravi1@dms.iitd.ernet.in (R. Shankar), mkt09@hotmail.com
(M.K. Tiwari).
European Journal of Operational Research 173 (2006) 211225
www.elsevier.com/locate/ejor
the right time to the consumer is not only the
linchpin to competitive success, but also the key
to survival. Hence, customer satisfaction and mar-
ket place understanding are critical elements for
consideration when attempting to establish a new
SC strategy. Signicant interest has been shown
in recent years in the idea of lean manufactur-
ing, and the wider concepts of the lean enter-
prises. The focus of the lean approach has
essentially been on the elimination of waste or
muda. The upsurge of interest in lean manufactur-
ing can be traced to the Toyota Production Sys-
tems with its focus on the reduction and
elimination of waste. Lean is about doing more
with less. Lean concepts work well where demand
is relatively stable and hence predictable and where
variety is low. Conversely, in those contexts where
demand is volatile and the customer requirement
for variety is high, a much higher level of agility
is required. Leanness may be an element of agility
in certain circumstances, but it will not enable the
organization to meet the precise needs of the cus-
tomers more rapidly.
Agility is a business-wide capability that
embraces organizational structures, information
systems, logistics processes and in particular,
mindsets (Power et al., 2001; Katayama and Ben-
nett, 1999). Agility is being dened as the ability
of an organization to respond rapidly to changes
in demand, both in terms of volume and variety
(Christopher, 2000). The lean and agile paradigms,
though distinctly dierent, can be and have been
combined within successfully designed and oper-
ated total supply chains (Mason-Jones and Towill,
1999). The past studies show how the need for agil-
ity and leanness depends upon the total supply
chain strategy, particularly considering market
knowledge, via information enrichment, and posi-
tioning of the de-coupling point. Combining agil-
ity and leanness in one SC via the strategic use
of a de-coupling point has been termed le-agility
(Naylor et al., 1999). Therefore leagile is the com-
bination of the lean and agile paradigms within a
total supply chain strategy by positioning the
decoupling point so as to best suit the need for
responding to a volatile demand down stream yet
providing level scheduling upstream from the mar-
ket place (van Hoek et al., 2001). The decoupling
point is in the material ow streams to which the
customer orders penetrates (Mason-Jones et al.,
Table 1
Comparison of lean, agile, and leagile supply chains
Distinguishing attributes Lean supply chain Agile supply chain Leagile supply chain
Market demand Predictable Volatile Volatile and unpredictable
Product variety Low High Medium
Product life cycle Long Short Short
Customer drivers Cost Lead-time and availability Service level
Prot margin Low High Moderate
Dominant costs Physical costs Marketability costs Both
Stock out penalties Long term contractual Immediate and volatile No place for stock out
Purchasing policy Buy goods Assign capacity Vendor managed inventory
Information enrichment Highly desirable Obligatory Essential
Forecast mechanism Algorithmic Consultative Both/either
Typical products Commodities Fashion goods Product as per customer demand
Lead time compression Essential Essential Desirable
Eliminate muda Essential Desirable Arbitrary
Rapid reconguration Desirable Essential Essential
Robustness Arbitrary Essential Desirable
Quality Market qualier Market qualier Market qualier
Cost Market winner Market qualier Market winner
Lead-time Market qualier Market qualier Market qualier
Service level Market qualier Market winner Market winner
Sources: Naylor et al. (1999), Mason-Jones et al. (2000a), Olhager (2003), Bruce et al. (2004).
212 A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225
2000a,b; Prince and Kay, 2003). Table 1 illustrates
the comparison of attributes among lean, agile and
leagile supply chain.
The present paper presents a framework for
modeling performance of lean, agile and leagile
supply chain on the basis interdependent variables.
Here performance of SC implies how much the SC
is responsive to the needs of the market. The
framework provides an aid to decision makers in
analyzing the variables aecting market sensitive-
ness, process integration, information driver and
exibility in lean, agile and leagile supply chains
for the performance improvement of a case supply
chain in fast moving consumer goods (FMCG)
business. For this we have adopted Analytic Net-
work Process (ANP) approach. By using ANP in
a SC context, we can evaluate the inuence of var-
ious performance dimensions on the specied
objectives of SC, such as timely response to meet
the customer demand. It also explicitly considers
the inuence of the performance determinants on
one another. Since the dimensions and determi-
nants of supply chain performance (SCP) have sys-
temic characteristics, they may be integrated into
one model. These systemic relationships can more
accurately portray the true linkages and interde-
pendencies of these various determinants (Saaty,
1996).
2. Supply chain performance
Supply chain is described as a chain linking
each element from customer and supplier through
manufacturing and services so that ow of mate-
rial, money and information can be eectively
managed to meet the business requirement (Ste-
vens, 1989). Most of the companies realize that
in order to evolve an ecient and eective supply
chain, SCM needs to be assessed for its perfor-
mance (Gunasekaran et al., 2001). Christopher
and Towill (2001) have explained the issues related
to market qualier and market winner in a supply
chain and identied quality, cost, lead-time and
service level as four performance measures. While,
service level is the market winner for an agile sup-
ply chain, rests are market qualiers. In case of
lean supply quality, lead-time and service level
are the market qualier and cost is a market
winner. However, with changed objectives, the
qualier and winner may change positions (Hill,
1993). Aspects combining lean and agile features
have also been explored under the concept of lea-
gility (van Hoek, 2000). In the proposed ANP
framework market sensitiveness (MS), informa-
tion driver (ID), process integration (PI) and ex-
ibility (F) have been considered as supply chain
performance (SCP) dimensions by experts of the
case supply chain. These dimensions are important
characteristics of agility (Christopher, 2000).
Market sensitiveness involves issues related to
quick response to real demand. It is characterized
by six measures (Jayaram et al., 1999; Power et al.,
2001; Agarwal and Shankar, 2002a): delivery
speed (DS), delivery reliability (DR), new product
introduction (NPI), new product development
time (NPDT), manufacturing lead-time (MLT)
and customer responsiveness (CR). Higher values
of DS, DR, NPI and CR or lower values of NPDT
and MLT would make the supply chain more sen-
sitive towards market forces.
Information driver involves making use of
information technology to share data between
buyers and suppliers. This enables the supply
chain to become demand driven. Electronic Data
Interchange (EDI), means of information (MOI),
such as Internet, data accuracy (DA), etc enable
supply chain partners to act upon the same data
with real time demand.
Another key characteristic of an agile organiza-
tion is exibility (Vickery et al., 1999; Prater et al.,
2001; Olhager, 2003). In that respect, the origins of
agility as a business concept lie partially in exible
manufacturing systems. Initially it is thought that
the route to manufacturing exibility is through
automation to enable rapid changeovers (i.e. re-
duced set-up times) and thus enable a greater
responsiveness to changes in product mix or vol-
ume. Later this idea of manufacturing exibility
is extended into the wider business context and
the concept of agility as an organizational orienta-
tion emerged. The performance dimension exibil-
ity may be broken down into two capabilities: the
promptness with and the degree to which a rm
can adjust its supply chain speed, destinations,
and volumes (Prater et al., 2001). The supply chain
A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225 213
may be broken down into three basic segments:
sourcing, manufacturing and delivery. Any rms
supply chain agility is determined by how its phys-
ical components (i.e. sourcing, manufacturing and
delivery) are congured to incorporate speed and
exibility. As the levels of speed and, more impor-
tantly, exibility increase, the level of supply chain
agility increases. The rm can, to a degree, make
up deciencies in the speed or exibility of one
of the supply chain parts by excelling in the other
two. For example, the delivery part of the supply
chain may be inherently inexible, such as is found
in sea transportation (i.e. the speed is low). Supply
chain agility may be increased if the rm is able to
compensate for these shortcomings by setting up
its inbound logistics (i.e. sourcing) or manufactur-
ing operations to be fast or exible (Olhager et al.,
2002). As the speed in outbound logistics is inex-
ible, speed and exibility in manufacturing and
sourcing could help compensate for the slow out-
bound transportation.
Shared information between supply chain part-
ners can be fully leveraged through process inte-
gration (PI). Process integration (PI) means
collaborative working between buyers and suppli-
ers, joint product development, common systems
and shared information (Christopher and Jittner,
2000). Collaboration across each partners core
business processes (CPB), company specic issues
on demand side (CDS) such as quality, cost, etc
and company specic issues on supply side (CSS)
such as buyersupplier relations, vendor managed
inventory, information sharing, etc are the main
enablers of the process integration.
Now we will focus on developing a framework
for signicant alternative for the performance
improvement of supply chain.
3. The decision environment
Analytic hierarchy process (AHP) is introduced
for choosing the most suitable alternative, which
fulls the entire set of objectives in multi-attribute
decision-making problem (Wasil and Golden,
2003). AHP allows a set of complex issues, to be
compared with the importance of each issue rela-
tive to its impact on the solution to the problem.
Since the introduction of AHP numerous applica-
tions have been published in the literature (Zahedi,
1986; Shim, 1989; Kleindorfer and Partovi, 1990;
Corner and Corner, 1991, 1995; Ghodsypour and
OBrien, 1998). Analytic Network Process (ANP)
is a more general form of AHP, incorporating
feedback and interdependent relationships among
decision attributes and alternatives (Saaty, 1996).
This provides a more accurate approach for mod-
eling complex decision environment (Meade and
Sarkis, 1999; Lee and Kim, 2000; Agarwal and
Shankar, 2002b, 2003; Yurdakul, 2003).
We have adopted the ANP-based evaluation
framework for the selection of the best alternative
(Meade and Sarkis, 1999). The reasons due to
which ANP is selected for this purpose are due
to three facts: (i) analyzing the supply chain per-
formance is a multi-criteria decision problem, (ii)
many factors, enablers and criteria in decision
environment are interdependent on one another,
and (iii) some of the criteria, enablers and dimen-
sions are subjective due to which a synthetic score
through simple weightage method is dicult to ar-
rive at. Analytic Hierarchy Process (AHP) is simi-
lar to ANP but cannot capture interdependencies
(Meade et al., 1997; Meade and Sarkis, 1999).
Hierarchical representation is an important com-
ponent of ANP, however strict hierarchical struc-
ture is not recommended, as is the case with
AHP. The ANP technique allows for more com-
plex relationships among the decision levels and
attributes. The ANP consists of coupling of two
phases. The rst phase consists of a control hierar-
chy of network of criteria and sub-criteria that
control the interactions. The second phase is a net-
work of inuences among the elements and clus-
ters. The network varies from criteria to criteria
and thus dierent super-matrices of limiting inu-
ence are computed for each control criteria. Final-
ly, each one of these super-matrices is weighted by
the priority of its control criteria and results are
synthesized through addition for the entire control
criterion (Saaty, 1996).
A graphical summary of the ANP model and its
decision environment related to supply chain per-
formance is shown in Fig. 1. The overall objective
is to select the best framework for improving per-
formance of the case supply chain.
214 A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225
4. Deriving the interdependence in supply chain
performance model
The interdependence among dierent levels in
supply chain performance framework have been
developed through review of literature on supply
chain performance (Naylor et al., 1999; Katayama
and Bennett, 1999; van Hoek, 2000; Christopher,
2000; Prater et al., 2001; Aitken et al., 2002; Power
et al., 2001; Stratton and Warburton, 2003; Bruce
et al., 2004) and through discussion with experts
from the case supply chain, which incorporates
network of suppliers, manufacturer, distributors
and retailers for fast moving consumer goods
(FMCG). These experts have more than ten years
of experience in the area of purchasing and supply
chain management. The group consists of four to
ve experts and they are informed about alterna-
tive supply chain paradigms. It is believed that ex-
perts know relative weights between alternative
paradigms during the process of capturing the rel-
ative weights. The case supply chain is involved in
31
To analyze the Supply Chain
performance
Lean supply chain
Agile supply chain
Leagile supply chain
Supply Chain Performance Weighted
Index
Lead Time Cost Quality
Service Level
Market sensitiveness Process integration
Information driver Flexibility
Delivery Speed
(DS),
New product
introduction (NPI),
Customer
responsiveness(CR)
Collaboration across each
partners core business process
(CPB),
Company specific issues on
demand side (CDS),
Company specific issues on
supply side(CSS)
Electronic data interchange
(EDI),
Means of information
(MOI),
Data accuracy (DA)
Source flexibility
(SF),
Make flexibility
(MF),
Delivery flexibility
(DF)
CPB
CSD
CSS
DS
NPI
CR
EDI
MOI
DA
SF
MF
DF
Supply chain performance determinants
Supply chain performance dimensions
Supply chain performance enablers
Supply chain performance paradigms
Fig. 1. ANP-based framework for Modeling Metrics of Supply Chain Performance.
A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225 215
functional as well as innovative products. The
functional products have long product life cycles
and their demand is predictable. The innovative
products have short product life cycle and their de-
mand is unpredictable. The management of the
case supply chain is not able to decide which sup-
ply chain performance criteria should be given pri-
ority over other performance criteria. They are
also unable to adopt the proper supply chain strat-
egy for their products.
5. Mutual interdependence of enablers
Overall objective of the present work is to
model performance of three paradigms for a sup-
ply chain, which enables it be more exible in
responding to market demand. Cost, quality, ser-
vice level and lead-time are the major determinants
of the proposed framework. These determinants
have dominance over the identied dimensions in
the framework. The impact of one determinant
on supply chain performance is aected by the
inuence of the other determinants. Using pair
wise comparison matrix with a scale of one to nine,
the relative weight of each determinants is ob-
tained and given in Table 2. These values have
been obtained through experts opinions that are
heading the supply chain operation. Enablers of
the framework are those, which assist in achieving
the controlling dimension of supply chain perfor-
mance. Therefore, these are dependent on the
dimensions, but there is also some interdepen-
dency among enablers, hence the arrows in Fig. 1
are shown as arching back to the enablers decision
level. For example enablers under dimension
process integration are interdependent to some
degree. ANP uniquely captures the interdependen-
cies at dierent levels of the control hierarchy as
well as interdependencies that are inherited among
dierent hierarchies. We would illustrate this as-
pect through an example of the case supply chain.
This would illustrate interdependencies among dif-
ferent enablers under cost determinant.
6. Capture of relative weights obtained through
expert opinion
The relative weights in the pair wise comparison
matrices of ANP have been obtained through dis-
cussion with group of experts of the case supply
chain. The group consists of those experts from
the trading partners of the case supply chain,
which have vast experience in the area of supply
chain management. For obtaining the relative
weights in Table 2, the research group asked dier-
ent questions. A sample question is: what is the
relative impact on supply chain performance in
timely responding to market demand by cost when
cost is compared to quality? The answer is 2 on a
scale of 19 and this is incorporated as second en-
try of cost row in Table 2.
Saaty (1980) has suggested a scale of 19 for
comparing two components. In the scale of 19,
1 implies equal impact while 9 implies stronger
impact of row element than column element. If
experts feel that column element has stronger im-
pact than row element, reciprocal of number from
1 to 9 is assigned accordingly (Saaty, 1996).
For obtaining the relative weights in Table 3,
the research group asked the question, What is
the relative impact on market sensitiveness by ena-
bler new product introduction (NPI) when com-
pare to enabler customer responsiveness (CR),
for the cost minimization? The answer was 1/3
Table 2
Pair-wise comparison matrix for the relative importance of the determinants (consistency ratio: 0.016)
Lead-time Cost Quality Service level
Lead-time 1 2.000 3.000 0.111 0.162
Cost 0.500 1 2.000 0.250 0.123
Quality 0.333 0.500 1 0.125 0.063
Service level 9.00 4.000 8.000 1 0.652
216 A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225
(0.333), which is incorporated as the second entry
of NPI row in Table 3.
Experts opinion is similarly ascertained in all
the tables of ANP framework.
A graphical summary of ANP model and its
decision environment related to supply chain per-
formance (SCP) is shown in Fig. 1.
The overall objective in the ANP approach is to
select a paradigm, which helps in improving the
performance of supply chain. As an illustration
we have considered four criteria: lead time, cost,
quality, and service level.
7. Application of ANP framework
The ANP methodology is applied to the illus-
trative supply chain problem as follows:
STEP 1: Model construction and problem
structuring
The top most elements in the hierarchy of
criteria are decomposed into sub criteria and attri-
butes. The model development requires identica-
tion of attributes at each level and a denition of
their inter-relationships. The ultimate objective of
this hierarchy is to identify alternatives that will
be the signicant for improving the performance
of supply chain. We shall evaluate four-supply
chain performance hierarchy whose results will
be aggregated in supply chain performance
weighted index evaluation step. This form of
analysis is similar to Saatys recommendation of
using a unique network for benets, costs, risks
and opportunities (BCRO) (Saaty, 1996). Instead
of using the BCRO categories supply chain perfor-
mance determinants (lead-time, cost, quality and
service level) are used as the overlying network cat-
egories. Cost and quality are important criteria in
lean supply chain; lead-time is an important crite-
rion in agile supply chain and service level is
an important criterion in leagile supply chain. In
order to analyze the combined inuence of four
supply chain performance determinants on the
selection of three alternative paradigms a single
weighted index is calculated, which can prioritize
three alternatives. This weighted index also cap-
tures the inuence of dimensions and enablers on
the selection process.
STEP 2: Pair-wise comparison matrices between
component/attribute levels
On a scale of one to nine, the decision-maker
has been asked to respond to a series of pair-wise
comparisons with respect to an upper level con-
trol criterion. These are conducted with respect
to their relative importance towards the control
criterion. In the case of interdependencies, compo-
nents within the same level are viewed as control-
ling components for each other. Levels may also
be interdependent.
Through pair-wise comparisons between the
applicable attributes enablers of performance
dimension cluster, the weighted priority (e-Vector)
is calculated (Saaty, 1996). For example, Table 3
presents the comparison matrix for enablers under
the dimension of Market sensitiveness, and control
hierarchy network of the cost.
Similarly, comparison matrices for other ena-
blers are prepared and the resultant e-Vectors are
imported as forth column in Table 5. For captur-
ing the weightages an illustrative question is, what
is the relative impact on market sensitiveness by
attribute enabler, a, when compared to attribute
enabler, b, under cost determinant?
Additional pair-wise comparison matrix is re-
quired for the relative importance of each of the
dimensions of SCP clusters (MS, PI, ID, and F)
on the determinant of SCP level. There will be four
more matrices, one for each of the determinants.
Table 3
Pair-wise comparison matrix for market sensitiveness (consistency ratio: 0.003)
Cost e-Vector
Market sensitiveness (MS) Delivery speed (DS) New product introduction (NPI) Customer responsiveness (CR)
DS 1 5 2 0.581
NPI 0.200 1 0.333 0.110
CR 0.5 3.00 1 0.309
A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225 217
This result is presented as second column of Table
7.
The nal standard pair-wise comparison evalu-
ations are required for the relative impacts of each
of the alternative for SCP improvement. The num-
ber of pair-wise comparison matrices is dependent
of the number of SCP attribute enablers that are
included in the determinant of the SCP improve-
ment hierarchy. There are 12 pair-wise comparison
matrices are required at this level of relationships.
STEP 3: Pair-wise comparison matrices of
interdependencies
To reect the interdependencies, in network,
pair-wise comparisons among all the attribute ena-
blers are conducted. Table 4 illustrates one such
case.
For brevity the nal scores of this and remain-
ing matrices are shown in Table 5.
STEP 4: Super matrix formation and analysis
Table 5 shows super matrix M, detailing the re-
sults of the relative importance measures for each
of the attribute enablers for the cost determinant
of SCP clusters. Since there are 12 pair-wise com-
parison matrices, one for each of the interdepen-
dent SCP attribute enablers in the cost hierarchy,
there will be 12 non-zero columns in this super ma-
trix. Each of the non-zero values in the column in
super matrix M, is the relative importance weight
associated with the interdependently pair-wise
comparison matrices. In this model there are four
super matrices, one for each of the determinants of
SCP hierarchy networks, which need to be
evaluated.
The Super matrix (Table 5) is converged for get-
ting a long-term stable set of weights. For this
power of super matrix is raised to an arbitrarily
large number. In our illustrative example conver-
gence is reached at 32nd power. Table 6 illustrates
the value after convergence.
STEP 5: Selection of best alternative
The equation for desirability index, D
ia
for
alternative i and determinant a is dened as
(Meade and Sarkis, 1999):
D
ia

X
J
j1
X
Kja
k1
P
ja
A
D
kja
A
I
kja
S
ikja
; 1
where P
ja
is the relative importance weight of
dimension jon the determinant a, A
D
kja
is the
relative importance weight for attribute enabler
k, dimension j and determinant a for the
dependency (D) relationships between enablers
component levels, A
I
kja
is the stabilized relative
importance weight for attribute enabler k of j
dimension in the determinant a for interdepen-
dency (I) relationships within the attribute ena-
blers component level, S
ikja
is the relative impact
of SC alternative paradigm i on SCP enabler k of
Table 4
Pair-wise comparison matrix for enablers under market sensi-
tiveness, cost and delivery speed
Delivery speed (DS) NPI CR e-Vector
New product introduction (NPI) 1 0.125 0.111
Customer responsiveness (CR) 8.00 1 0.889
Table 5
Super matrix for cost before convergence
Cost DS NPI CR CPB CDS CSS EDI MOI DA SF MF DF
DS 0.00 0.333 0.800
NPI 0.111 0.00 0.200
CR 0.889 0.667 0.00
CPB 0 0.889 0.143
CDS 0.667 0 0.857
CSS 0.333 0.111 0
EDI 0 0.200 0.667
MOI 0.833 0 0.333
DA 0.167 0.800 0
SF 0 0.333 0.800
MF 0.111 0 0.200
DF 0.889 0.667 0
218 A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225
dimension of SCP j of SCP hierarchy network a,
K
ja
is the index set of attribute enablers for dimen-
sion j of determinant a, J is the index set for the
dimension j.
Table 7 shows the calculations for the desirabil-
ity indices (D
i
cost) for alternatives that is based on
the cost control hierarchy by using the weights ob-
tained from the pair-wise comparisons of the alter-
natives, dimensions and weights of enablers from
the converged super matrix. These weights are
used to calculate a score for the determinant of
Supply chain performance improvement desirabil-
ity for each of the alternatives being considered.
The second column in Table 7 presents about
the results obtained from step 2, which is enu-
merated based on relative impact of each of
dimensions on cost determinants. The pair-wise
comparison matrix for the relative impact of the
attribute enablers on the dimensions of SCP is pre-
sented in the fourth column. The values in fth
column are the stable interdependent weights of
attribute enablers obtained through super matrix
convergence. The relative weights of three alterna-
tives for each dimension are given in sixth, seventh
and eighth columns of Table 7. These weights are
obtained by comparing three alternatives for every
dimension of supply chain performance. The nal
three columns represent the desirability index
(P
ja
A
D
kja
A
I
kja
S
ikja
) of each alternative for attribute
enablers. For each of the alternatives under cost
Table 6
Super Matrix for cost after convergence (M
32
)
Cost DS NPI CR CPB CDS CSS EDI MOI DA SF MF DF
DS 0.41 0.41 0.41
NPI 0.14 0.14 0.14
CR 0.45 0.45 0.45
CPB 0.40 0.40 0.40
CDS 0.42 0.42 0.42
CSS 0.18 0.18 0.18
EDI 0.30 0.30 0.30
MOI 0.36 0.36 0.36
DA 0.34 0.34 0.34
SF 0.41 0.41 0.41
MF 0.14 0.14 0.14
DF 0.45 0.45 0.45
Table 7
Supply chain performance desirability index for cost
Dimension # P
ja
Attribute # A
D
kja
A
I
kja
S1 S2 S3 Lean Agile Leagile
MS 0.478 DS 0.581 0.41 0.577 0.160 0.263 0.066 0.018 0.030
0.478 NPI 0.110 0.14 0.600 0.144 0.256 0.004 0.001 0.002
0.478 CR 0.309 0.45 0.544 0.110 0.346 0.037 0.007 0.023
PI 0.266 CPB 0.467 0.40 0.579 0.187 0.234 0.029 0.009 0.012
0.266 CDS 0.376 0.42 0.548 0.211 0.241 0.023 0.009 0.010
0.266 CSS 0.157 0.18 0.490 0.312 0.198 0.004 0.002 0.001
ID 0.166 EDI 0.615 0.30 0.525 0.142 0.334 0.016 0.004 0.010
0.166 MOI 0.093 0.36 0.537 0.268 0.195 0.003 0.001 0.001
0.166 DA 0.292 0.34 0.490 0.312 0.198 0.008 0.005 0.003
F 0.090 SF 0.615 0.41 0.539 0.297 0.164 0.012 0.007 0.004
0.090 MF 0.093 0.14 0.286 0.143 0.571 0.0003 0.0002 0.001
0.090 DF 0.292 0.45 0.333 0.167 0.500 0.004 0.002 0.006
Total desirability indices of cost for alternative frameworks 0.205 0.073 0.097
A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225 219
determinant, the summation of these results ap-
pears in the nal row of Table 7. The result shows
that the impact on cost is considered an important
criterion in lean supply chain (0.205) followed by
leagile (0.097) and agile (0.073) supply chain.
STEP 6: Calculation of Supply Chain Perfor-
mance Weighted Index (SPWI)
To complete the analysis supply chain perfor-
mance weighted index (SPWI) is determined for
each alternative paradigm. The SPWI
i
for an alter-
native i is the product of the desirability indices
(D
ia
) and the relative importance weights of the
determinants (C
a
) of the SCP.
The results (Table 2) show that the service level
determinant (C
a
= 0.652) as most important for
supply chain performance improvement. The re-
sult indicates that the management of the case sup-
ply chain should focus on improving the service
level. This result could be due to the competitive
or customer pressure for improving service level.
Lead-time (0.162) and cost (0.123) play the next
most important role but are less important than
service level.
The nal results are shown in Table 8.
The Table 8 indicates that for the illustrative
problem the most signicant alternative paradigm
for better supply chain performance is leagile sup-
ply chain followed by agile supply chain.
8. Sensitivity analysis
Sensitivity analysis is an important concept for
the eective use of any quantitative decision model
(Poh and Ang, 1999). In the present work sensitiv-
ity analysis is done to nd out the changes in the
SPWI for lean, agile and leagile supply chain par-
adigms with variation in the expert opinion to-
wards lead-time with respect to cost, quality and
service level. Overall objective of sensitivity analy-
sis is to see the robustness of proposed framework
due to variation in the experts opinion in assign-
ing the weights during comparison.
For the case supply chain experts opinion has
been sought to analyze the performance of supply
chain. Table 8 indicates how the supply chain per-
formance weighted indexes (SPWI) for proposed
framework of three supply chains varies with
changing priority of lead-time, cost, quality and
service level. When overall objective is to reduce
lead-time, desirability indices is lower for lean sup-
ply chain than agile supply chain. In a strategy to
minimize the cost and to improve quality, lean
supply chain has the highest desirability indices
among the three supply chains. In an eort to im-
prove service level, desirability indices for leagile
supply chain is slightly higher than agile supply
chain. Here it is pertinent to mention that in the
uncertain environment desired supply chain per-
formance cannot be alone achieved either by lean
or by agile supply chain. Lean and agile paradigms
are not mutually exclusive paradigms (Christopher
and Towill, 2001), therefore proper combination
of lean and agile (leagile) is required to suit the
need for responding to a volatile demand (Naylor
et al., 1999).
In Fig. 2, X-axis represents the relative weight
of lead-time as compare to quality. These relative
weights are in the scale of 1/99 (Saaty scale). Y-
axis represents the normalized value of supply
chain performance weighted index (SPWI). These
weights are obtained using ANP framework,
which captures the interdependence among supply
chain performance variables. This framework con-
Table 8
Supply chain Performance Weighted Index (SPWI) for various alternative frameworks
Alternatives # Criteria Calculated weights for alternatives
Lead-time Cost Quality Service level SPWI NORM
Weights for criteria: 0.162 0.123 0.063 0.652
Lean 0.067 0.205 0.133 0.081 0.0974 0.316
Agile 0.162 0.073 0.075 0.099 0.1049 0.340
Leagile 0.106 0.097 0.093 0.109 0.1058 0.343
Total 0.308 1.000
220 A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225
sists of 117 pair wise comparison matrices. The
purpose is to analyze the eect of variation in
relative weight assigned to SCP determinants on
the priority level of alternative supply chain
paradigms.
In the present ANP framework, experts have
assigned relative weight 3 to lead-time in compare
with quality (X
LT/Q
) on supply chain performance
improvement. With this relative weight, SPWI for
leagile supply chain is the highest followed by agile
and lean supply chain. This implies when the per-
ception of experts is more inclined towards lead-
time in comparison to quality, they will prefer
the supply chain which favors lead-time reduction.
Lead-time is an essential metric for leagile and
agile supply chains. Here lead-time indicates the
time between raising the demand by customer
and receiving the product of his choice. This prior-
ity level does not change if X
LT/Q
lowers from 3 to
0.125. This indicates that if experts lower relative
importance of lead-time to quality (or give more
importance to quality as compare to lead-time),
priority of leagile supply chain paradigm does
not change. When X
LT/Q
is further lowered from
0.125 to 0.111, lean supply chain attains top prior-
ity followed by leagile supply chain. If weight as-
signed to lead-time in comparison to quality is
between 0.5 and 0.333, policy towards supply
chain performance improvement would be combi-
nation leanness and agility. This point indicates
that advantages of both leanness and agility can
be achieved. When the priority weight is further re-
duced beyond 0.125, lean supply chain gets top
priority followed by leagile and agile supply chain.
Fig. 3 indicates eect on values of SPWI for
lean, agile and leagile supply chains due to varia-
tion in the priority weight of lead-time with respect
to cost (X
LT/C
). In the present framework accord-
ing to experts opinion, X
LT/C
is 2. When the rela-
tive weight X
LT/C
lies between 0.667 and 3, experts
0.280
0.290
0.300
0.310
0.320
0.330
0.340
0.350
0.360
0.111 0.125 0.143 0.167 0.200 0.250 0.333 0.500 0.667 1 2 3 4 5 6 7 8 9
Variation in priority of lead-time with respect to quality
N
o
r
m
a
l
i
z
e
d

v
a
l
u
e
Lean
Agile
Leagile
Fig. 2. Variation in priority of supply chain paradigms with changes in weight assigned to lead-time with respect to quality.
0.250
0.270
0.290
0.310
0.330
0.350
0.370
0.111 0.125 0.143 0.167 0.200 0.250 0.333 0.500 0.667 1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 9.000
Variation in priority of lead-time with respect to cost
N
o
r
m
a
l
i
z
e
d

v
a
l
u
e
Lean
Agile
Leagile
Fig. 3. Variation in priority of supply chain paradigms with changes in weight assigned to lead-time with respect to cost.
A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225 221
favour strategy for leagile supply chain in meeting
the unpredictable demand. SPWI for agile supply
chain improves when experts opinion deviate
and X
LT/C
varies from 3 to 9. In this situation pri-
ority for lean supply chain declines. In the range
between 0.667 and 0.111 of X
LT/C
, experts favor
strategy for cost minimization. In this strategy ex-
perts are partially trading o importance of lead-
time reduction to cost minimization. Here, the case
supply chain partially looses its agility, which is
indicated in the graph (Fig. 3) and the priority le-
vel for lean supply chain improves.
In Fig. 4 eect on the values of SPWI for lean,
agile, and leagile supply chain due to change in rel-
ative weight of lead-time with respect to service
level (X
LT/SL
) is shown.
In proposed ANP framework, X
LT/SL
is 0.111.
At this priority experts favor service level improve-
ment. Since service level is the most important
criteria for leagile and agile supply chain (Naylor
et al., 1999), SPWI for leagile supply chain gets
top priority at this relative weight followed by
agile supply chain (Fig. 4). If the X
LT/SL
is changed
from 0.111 to 0.167, SPWI for agile supply chain
improves but leagile supply chain remains at top.
When the value of X
LT/SL
is higher than 0.167, ex-
perts relatively consider lead-time more important
than service level agile supply chain gets top prior-
ity followed by leagile and lean supply chain.
The purpose of selecting lead-time, cost, quality
and service level is straightforward. These are
order qualifying and order winning criteria. With
changes in objective these criteria changes their po-
sition. Leanness and agility of a supply chain lar-
gely depends on these four criteria (Naylor et al.,
1999).
9. Discussions
Agility is needed in less predictable environ-
ments where demand is volatile and the require-
ment for variety is high (Lee, 2002). Lean
works best in high volume, low variety and pre-
dictable environments. Leagility is the combina-
tion of the lean and agile paradigm within a total
supply chain strategy by positioning the de-cou-
pling point so as to best suit the need for respond-
ing to a volatile demand downstream yet providing
level scheduling upstream from the de-coupling
point (Naylor et al., 1999; Bruce et al., 2004).
The ANP model proposed in this paper is an aid
to supply chain managers in arriving at prudent
decision when the complexities of decision vari-
ables and multi-criteria decision environment
make their decision task quite complicated. This
ANP model is used for selecting appropriate para-
digm for improved SC performance of a case com-
pany. This could serve as one of the important
tools for taking a strategic decision of this type.
The criteria and attributes that are used in the
model focus on the strategy and requirements of
SC performance. The model is capable of taking
into consideration both qualitative and quantita-
tive information. Here it is pertinent to discuss
the priority values for the determinants, which
0.270
0.290
0.310
0.330
0.350
0.370
0.390
0.111 0.125 0.143 0.167 0.200 0.250 0.333 0.500 0.667 1 2 3 4 5 6 7 8 9
Varition in priority of lead-time with respect to service level
N
o
r
m
a
l
i
z
e
d

v
a
l
u
e
Lean
Agile
Leagile
Fig. 4. Variation in priority of supply chain paradigms with changes in weight assigned to lead-time with respect to service level.
222 A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225
inuence the decision of selecting the paradigm for
better SC performance.
From Table 2, it has been observed that the ser-
vice level (0.652) is the most important criteria in
the selection of the framework for the supply chain
paradigm. This is followed by lead-time (0.162),
cost (0.123) and quality (0.063). For the case sup-
ply chain of fast moving consumer goods, the re-
sult favors improvement in service level and
reduction in lead-time. Cost and quality are less
supported because improvement in service level
and reduction in lead-time would also help in
reducing cost and improving quality. Though the
results do not favor cost and quality, the implica-
tion is not straightforward. The lower values for
these two are due to their interdependency on
lead-time and service level. For example, a low
value of lead-time will lead to lesser waste and
quality improvement opportunity. The converse
may not be true. The ANP is capable of handling
interdependencies of this type. The present deci-
sion model provides the priority values in the form
of weighted index for dierent paradigms for im-
proved SC performance (Table 8). The nal values
for supply chain performance weighted index rela-
tionship are 0.343 for the leagile, 0.340 for agile,
and 0.316 for lean supply chain. For supply chain
of the case company, the ANP framework suggests
that with existing priority levels of supply chain
performance determinants, normalized value of
SPWI for leagile paradigm is slightly higher than
that of a mere lean or agile paradigm. The higher
value of SPWI for leagile supply chain favors
the policy for combining the lean and agile ap-
proaches. For handling innovative products the
case supply chain should adopt a lean manufactur-
ing approach before decoupling point and agile
approach after decoupling point (Olhager, 2003).
Consistency ratio (CR) is calculated for all the
pair-wise comparisons to check the inconsistency
in decision-making. In the proposed model CR
varies from 0.002 to 0.19, which is within tolerable
limit (Saaty and Kearns, 1985). An analysis of the
robustness of the decision model using sensitivity
analysis is carried out to observe the impact of var-
iation in the opinion of decision-makers in assign-
ing the weights. Sensitivity analysis indicates that
the priority levels of SC paradigms do not signi-
cantly change with variation in the opinion of
decision-makers in assigning the weights to
enablers.
10. Limitations and scope for future work
As compared to analytic hierarchy process
(AHP), the analysis using ANP is relatively cum-
bersome as in the present work 117 pair-wise com-
parison matrices are required. To arriving at the
relationship among enablers, it requires long and
exhaustive discussion with experts from the case
supply chain. Therefore, the advantages of ANP
technique could be derived for making strategic
decisions that are vital for the growth and survival
of supply chains.
The values for pair-wise comparisons depend
on the knowledge of the decision-makers. There-
fore group of decision-makers should include
those experts who understand the implications of
enablers on the supply chain performance in lean,
agile and leagile paradigm.
The proposed framework has been developed
for a supply chain in fast moving consumer goods
(FMCG) business. Therefore results obtained
from the proposed framework cannot be
generalized.
11. Conclusion
Improved supply chain performance implies
that a supply chain is capable of quickly respond-
ing to the variations in the customer demand
with eective cost reduction. Leanness in a supply
chain maximizes prots through cost reduction
while agility maximizes prot through providing
exactly what the customer requires. The leagile
supply chain enables the upstream part of the
chain to be cost-eective and the downstream
part to achieve high service levels in a volatile
marketplace.
The ANP methodology adopted here arrives at a
synthetic score, which may be quite useful for the
decision-makers. The purpose of the present work
is to analyze the relative impact of dierent enablers
on three SC paradigms considered for a supply
A. Agarwal et al. / European Journal of Operational Research 173 (2006) 211225 223
chain. The ANP methodology is a robust multi-
attribute decision-making technique for synthesiz-
ing the criteria, enablers and dimensions governing
the SC performance. It integrates various criteria,
enablers and alternatives in decision model. The ap-
proach also captures their relationships and inter-
dependencies across and along the hierarchies. It
is eective as both quantitative and qualitative
characteristics can be considered simultaneously
without sacricing their relationships.
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