In today’s era of globalization intertwined with geopolitical shifts, the term “supply chain” carries dual weight, symbolizing both the lifeline of the global economy and its underlying fragility. Once defined by fluid, cost-driven efficiency, global supply chains are now being reshaped by national priorities and strategic realignments.
Among the leading voices in this field is professor Hau Leung Lee of the Stanford Graduate School of Business, who has spent four decades studying supply chain management. His “3A theory” on agility, adaptability, and alignment has guided corporations and governments in building resilient strategies. The theory was tested during real crises, including the 2004 financial meltdown and the 2011 Japan earthquake, demonstrating both predictive power and practical value.
“Back then, people only cared about efficiency and obsessed over being lean,” Lee said. “But the tighter and longer a chain is stretched, the easier it is to break.” In his framework, agility refers to the ability to respond swiftly to disruptions, adaptability describes the capacity to navigate structural shifts, and alignment ensures that each participant stops acting as an isolated profit seeker and instead operates as part of a shared system. Yet in recent years, he has observed a deeper transition:
“Our world is shifting from a single, globalized system to the coexistence of multiple world systems.”
The pandemic, trade frictions, and the climate crisis are not isolated events. They point to a core issue: the traditional, cost-optimized, globally stretched supply chain model has become unsustainable.
In 2023, Lee took on a new mission. He joined the Integral Institute as chairman, dedicating his academic focus to its vision. Located along the road from Guilin to Yangshuo, the Institute sits within a sustainable development park where every plant, structure, and energy-saving feature, including the dishes served at its restaurant, reflects environmental mindfulness.
Built by Esquel Group, the park was recently certified as “zero-carbon” by the China Energy Conservation Association, one of the first such recognitions in the country. For Lee, the park embodies his long-held ideal of a supply chain that harmonizes economic progress, environmental protection, and social well-being. “Integral Conversation,” an annual forum hosted by the institute, brings global thinkers together to discuss sustainability. 36Kr spoke with Lee during this year’s event.
The following transcript has been edited and consolidated for brevity and clarity.
36Kr: Why did you choose to join the Integral Institute?
Hau Leung Lee (HL): I’ve had a long relationship with Esquel, having served as an independent non-executive director. Esquel’s supply chain is fully vertically integrated from cotton cultivation to spinning, garment manufacturing, and retail. Over a decade ago, the company established its operations in Guilin to create a sustainable development park designed as a model for the future of Chinese manufacturing. That mission aligns closely with my academic work.
36Kr: What has been the main focus of your academic work there?
HL: I came to explore whether a green supply chain can be replicated technologically, from Esquel’s cotton seed R&D and organic cotton certification to water-saving spinning, low-carbon garment production, and sustainable packaging logistics. Transformation must occur across the entire chain at the same time.
36Kr: What progress have you made so far?
HL: We are conducting experiments on three levels, each corresponding to one dimension of the 3A theory.
First, environmental adaptability. We are developing closed-loop systems for industrial water reuse, textile waste recycling, and the use of solar and other clean energy sources, creating a cradle-to-cradle material cycle. It is the ultimate test of adaptability under resource constraints.
Second, social alignment. Integral’s work extends beyond the campus. We support upstream and downstream partners, including farmers, by providing stable orders and advanced technologies. We also redesign workflows to improve efficiency while protecting workers’ mental and physical health. This is about embedding social responsibility into the business model.
Third, technological agility. The park serves as a testbed for emerging technologies. Through the internet of things, big data, and artificial intelligence, we are developing a digital twin supply chain that can sense, predict, and respond to changes in real time.
36Kr: So the goal is not static efficiency, but balancing economic, environmental, and social forces amid constant change.
HL: Exactly. Two decades ago, China was becoming a major market, and companies had to adapt to a new economic system. Today, supply chains are far more complex. They are, in a sense, civilization’s bloodstream. They carry goods, but also values. In the past, supply chains powered globalization. Now, they must answer a new question: how do we meet human needs without consuming the planet’s future?
36Kr: Your 3A theory from 2005 is still widely applied. Does it need an update?
HL: The logic remains the same, but its application has evolved. The theory was designed to counterbalance the lean mindset dominant during globalization, when companies pursued zero inventory and just-in-time production while ignoring fragility.
Today, amid US-China decoupling and regionalized production, supply chains are moving from globalization toward localization and regionalization. The coexistence of multiple world systems is the deeper logic behind this restructuring.
The 3A framework strengthens resilience through three pillars:
- Agility: Rapid response mechanisms such as multi-sourcing and safety stock buffers for shocks like pandemic-era disruptions.
- Adaptability: Modular design and flexible production layouts that can adjust to structural changes like trade barriers or technological transitions.
- Alignment: Information and risk sharing across the value chain to form a true community of shared interests, as seen when automakers and chipmakers jointly addressed the semiconductor shortage.
36Kr: What should Chinese manufacturers prioritize during this restructuring?
HL: A supply chain has two halves: R&D and production. The shift from pure manufacturing to a combination of both is what makes it powerful.
During the early days of Covid-19, China lacked specialized infectious disease hospitals, and fixed facilities could not adapt quickly. Within two weeks, Haier developed a cloud ecosystem linking low-temperature freezers and biosafety cabinets for real-time sample tracking. It showed that a strong supply chain can transcend geography.
There are not many companies like Haier in China, although Huawei and JD.com are performing well. The real hope for Chinese manufacturing lies in strengthening R&D.
36Kr: Many firms hesitate to invest in R&D because it seems too costly.
HL: They should start from their strengths. Manufacturers understand materials and processes better than anyone. Innovation often begins there.
Esquel, for instance, has deep expertise in textile engineering and has developed functional fabrics such as water- and stain-resistant materials that repel spilled coffee. Its waterless dyeing technology, which took nearly a decade to develop, uses reactive dyes in non-aqueous media and saves about 40 liters of water per shirt, roughly the drinking water an adult consumes in 20 days. China’s manufacturers have an advantage: an intimate understanding of production processes, which is the best starting point for innovation.
36Kr: Under your idea of “multiple world systems,” Chinese companies face pressure. Is sustainability still possible?
HL: It’s not just possible, it’s inevitable. Sustainability is existential and not optional.
First, consumers are changing. Younger generations care about how products are made and their environmental impact. That’s true in China as much as in the West.
Second, regulation is tightening. The European Union’s “Carbon Border Adjustment Mechanism” (CBAM) now penalizes high-emission imports.
Third, competitiveness itself is being redefined from a focus on price to a focus on sustainability.
That said, companies need external support:
- Policy: Green finance, tax incentives, and better carbon markets.
- Technology: Partnerships between enterprises and R&D institutions to lower adoption barriers.
- Standards: Clear sustainability metrics and certification systems.
- Ecosystems: Industry clusters where transformation costs are shared.
No company can accomplish this alone, but ecosystems can. That’s why I keep emphasizing that the real competition ahead will be between ecosystems.
36Kr: With geopolitical tension, climate risk, and technological disruption, how should globalization be redefined?
HL: The old efficiency-first model is over. The new globalization must pursue efficiency within a foundation of security, resilience, and sustainability.
Future supply chains will undergo three transformations:
- Regionalization and specialization. Instead of centralizing manufacturing in China, companies will use a “China plus N” layout, placing production in Vietnam, Bangladesh, or East Africa depending on tariffs, logistics, and financing conditions.
- From cost-driven to value-aligned. Agility now means speed from design to retail. Adaptability means meeting diverse regulatory and technological standards. Alignment means ecological harmony: if we produce in Guilin, we must also protect Guilin’s environment and benefit its community.
- Resilience through innovation. Contract manufacturers increasingly recognize that their value lies not only in production but also in contributing to R&D and innovation. Competition will hinge on research capability.
36Kr: Which emerging technology is most transformative for building a demand-driven supply chain?
HL: Data and AI, without question. Supply chains are too complex to manage manually. Data must drive operations. AI can detect subtle issues, forecast disruptions, and trigger preventive responses. It is the strongest safeguard for stability and agility.
Challenges remain:
- To break down data silos, alignment is essential. Collaboration must include not only buyers and suppliers but also communities.
- To manage technology investment, companies need a long-term view and must treat AI spending as an investment, not a cost.
- To address talent shortages, firms should cultivate cross-disciplinary leaders who bridge technology and management.
36Kr: Performance measurement is shifting to the “triple bottom line.” How should firms track it?
HL: Companies must recognize that employee well-being, environmental care, and profitability are interconnected. When workers are healthy and supported, productivity rises.
Practically, this can be tracked across three dimensions:
- Employee well-being: Turnover rates, workplace injuries, and employee satisfaction.
- Environmental impact: Water and energy usage, waste recycling, and carbon reduction progress.
- Community contribution: Educational opportunities and local economic development.
The goal is balance: achieving sustainable profit while producing positive outcomes for people and the planet.
36Kr: If you had to sum up your vision for the future of supply chains in one phrase?
HL: Zero carbon, zero waste, and zero inequality. Through technological innovation, institutional reform, and behavioral change, supply chains can become the bridge that brings humanity and nature into harmony.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Ren Qian for 36Kr.