morokoff

AI Procurement

How can a company build its procurement and supply chain processes using the Lagom philosophy?

04.01.2025

deepseek.com

Integrating the Swedish concept of Lagom (pronounced lah-gom), meaning “not too little, not too much” or “just the right amount,” into procurement and supply chain processes offers a profound shift towards balanced, sustainable, and resilient operations.

Lagom is fundamentally about moderation, fairness, sustainability, and collective well-being. It rejects excess, waste, and aggressive optimization at the expense of people or the planet.

Here is how a company can build its procurement and supply chain processes using the Lagom philosophy:

Core Principles of Lagom in Supply Chain

1. Balance & Moderation: Avoid extremes. Not just-in-time to the point of fragility, not overstocked to the point of waste.

2. Sustainability & Resourcefulness: Use only what is needed. Design for longevity and minimal waste.

3. Fairness & Equity: Treat all partners (suppliers, employees, communities) with respect and fairness.

4. Functionality & Quality: Prioritize “fit for purpose” and durability over flashy excess.

5. Collective Good: Decisions should benefit the entire ecosystem, not just the company’s bottom line.

Practical Application Across the Supply Chain

1. Strategic Sourcing & Supplier Selection

• “Just the Right” Partners: Move beyond price-only auctions. Select a balanced portfolio of suppliers—a mix of large (for scale) and small/local (for resilience and community benefit).
• Fair Relationships: Negotiate for fair prices that allow suppliers a healthy margin to invest in their workers and innovation. This is the opposite of squeezing them to the last penny.
• Long-term Collaboration: Prefer fewer, deeper partnerships (Lagom number) over a vast, fragmented base. This fosters trust, quality, and joint problem-solving.
• Transparency: Share forecasts and challenges appropriately, seeking a balanced view of risk and opportunity.

2. Inventory & Demand Planning

• “Just the Right” Inventory: Employ demand-sensing and advanced forecasting to avoid both stockouts and bloated warehouses. Aim for the balanced point where service level costs and holding costs are in equilibrium.
• Buffer Stock as a Thoughtful Choice: Hold moderate, strategic buffers for critical items, not as waste, but as a prudent investment in resilience (a Lagom buffer).
• Embrace Circularity: Design processes for repair, refurbishment, and take-back. This is the ultimate “not too much” for raw material extraction.

3. Logistics & Transportation

• Right-Sized Shipping: Optimize container and truckload fill rates to be “just full”—maximizing space without overloading. Consolidate shipments.
• Balanced Modal Mix: Choose the most appropriate (not just the fastest or cheapest) transport mode. Could a slower sea freight be “just right” for the environmental cost saved?
• Green Logistics: Invest in electric vehicles or carbon offset programs to achieve a “balanced footprint”—neutralizing the unavoidable impact.

4. Packaging & Materials

• Minimalist, Functional Packaging: Use the minimum material required to protect the product. Innovate with reusable, returnable, or compostable packaging.
• Design for Disassembly: Source and design products so components can be easily separated and recycled at end-of-life.

5. Performance Metrics (KPIs)

Shift from extreme, single-focus KPIs to a balanced scorecard:

• Instead of only: “Minimize Purchase Price Variance”
• Add: “Supplier Sustainability Score,” “Payment Terms Fairness,” “Innovation Ideas Co-developed.”
• Balance: Cost, Quality, Speed, Resilience, Sustainability, and Partnership Health.

6. Internal Culture & Process

• Avoid Burnout: Reject a “hero culture” of constant fire-fighting. Staff teams adequately (Lagom workload) for sustainable performance.
• Decentralized Decision-Making: Empower local teams to make “right amount” decisions that fit their context, within a framework of guiding principles.
• Mindful Consumption: Internally promote a culture of questioning every purchase request: “Is this necessary? Is this the right amount? Can we use something we already have?”

Visual Model: The Lagom Supply Chain

A Lagom supply chain would look less like a hyper-lean, global race and more like a balanced, regional network:

• Sourcing: Prioritized nearshoring for a balanced risk/cost profile.
• Inventory: Strategic hubs with moderate, optimized stock levels.
• Transport: A mix of modes chosen for total impact (cost + carbon + time).
• Relationships: Long-term, open-book partnerships with key suppliers.

Example: A Furniture Company Applying Lagom

• Procurement: Sources sustainably harvested wood from regional forests (not lowest-cost, global), paying a fair price to support sustainable forestry.
• Design: Creates modular, repairable furniture with minimal, biodegradable packaging.
• Inventory: Keeps core components in stock for quick assembly and repair, but assembles to order.
• Logistics: Uses hybrid electric trucks for last-mile delivery on optimized routes.
• End-of-Life: Offers a take-back program to refurbish or recycle products.

Contrast with Traditional Models

• Traditional Lean/JIT: “Minimize waste, maximize efficiency.” (Can lead to fragility and supplier squeeze).
• Lagom Balanced: “Optimize for resilience, fairness, and sustainability within efficient boundaries.”

Conclusion: The Lagom Advantage

Building a procurement and supply chain on Lagom isn’t about sacrificing profitability. It’s about achieving balanced, long-term prosperity.

Benefits include:

• Enhanced Resilience from balanced buffers and strong partnerships.
• Risk Mitigation through sustainable and ethical practices.
• Brand Trust & Loyalty from conscious consumers.
• Employee Engagement from meaningful, fair work.
• Sustainable Cost Structure through waste reduction and resourcefulness.

Ultimately, a Lagom supply chain is a mature supply chain—one that recognizes that true efficiency is not about relentless minimization, but about finding the “just right” point for all stakeholders: the company, its people, its partners, and the planet.