Agile Supply Chain

The concept of agility was given by Goldman. It means “readiness to change”, from business perspective, agility is defined as a strategy that is more responsive in a volatile market place, where this strategy is totally demand driven. As consumers buying patterns are changing on a very rapid pace, so does the whole supply chain management changes. The fundamental drivers of agile supply chain are Speed, Cost and Efficiency. Agile supply chains are based on the sensitivity to consumers demand. Here, sensitivity refers to the ultimate consumers demand, in terms of volatility of demand.

 The agile supply chain basically refers to the use of responsiveness, competency, flexibility, and quickness to manage how well a supply chain entity operates on a daily basis. Unlike the lean supply chain, the agile supply chain uses real-time data and updated information, as reported by Martin Christopher in Industrial Marketing Magazine, to leverage current operations and real-time data against demand forecast, which helps to improve the overall efficiency and productivity of the given entity.

 In a report by McKinsey & Company, up to 94 percent of companies that had implemented supply chain practices with other solutions, are able to deliver on time and in full, without keeping inventory in excess of 85 days. Similarly, companies that did not implement agile practices often had inventory levels remain in the warehouse for more than 108 eight days, and only 87 percent of deliveries were on-time. This does not even consider how many deliveries may not have been fulfilled, such as delays in shipping processes, customization, or errors in order picking processes.

Agility Benefits

Agility practices enable the supply chain to change how processes operate. With the use of lean concepts, the supply chain may have improved the workflow of individual employees. Yet, as explained by GT Nexus and Kurt Salmon, implementing agile supply chain solutions with real-time data modular and raw material reserve formulations need to be placed close as possible to the end-product. Furthermore, agility allows supply chain partners to work together to produce the amount of product that is needed daily, not based on quarterly, monthly, or yearly forecasts. Essentially, agile solutions are a means of taking the lean supply chain and improving it to respond and foster supplier-to-customer-to-manufacturer relationships. 

A key benefit of agility in the supply chain is focusing on avoiding potential shortages and eliminating excessively stocked inventory. In a sense, overstocking inventory was a typical response of lean concept. Since lean concept focuses on making processes more effective and efficient, many supply chain entities often ended up with a huge stock of merchandise. Unfortunately, changes in the economic market, consumer demand, and the growing customization of goods has led lost costs as inventory was incapable or became unwanted over time. 

Agility also provides other benefits to the supply chain industry. By maintaining agility, supply chain entities can adapt to high variety, sudden changes in volume describes Martin Christopher. Unfortunately, this implies the supply chain may not be able to produce a high volume of goods if certain materials are available. As a result, supply chain entities who have implemented agile supply chain solutions understand that real-time data means the sudden change in demand could occur without warning, which could undermine the relationship between suppliers. Therefore, these entities have sought to find ways to still arrive at the same finished product, but at a customized result for each order. 

For example, a supply chain entity in fashion or textile printing may not print the actual materials until those materials have already been ordered by a consumer. However, this implies the printing on the materials would not be able to take place until an order has been created, and subsequently, the printing processes would need to take place as close as possible to the area where the order would be fulfilled. Ultimately, this critical point in the agile supply chain goes back to breaking down organizational silos and rigid structures to better meet the demands on a local level.

Agility or Lean

The aforementioned information provides insight into how lean concepts in the supply chain differ from an agile supply chain. However, a true understanding of agility in the supply chain must address how lean concepts are applied to the agile supply chain. 

For supply chain entities who has used or implemented lean concepts in supply change management, the company has removed extra costs along the way.

For example, the use of a computerized system to automatically generate orders and robotics to pick these orders would refer to leaving concepts in the supply chain.

 However, the fallacy in the lean supply chain rests on the fact that this information that has garnered from that lean supply chain is not used to make a predictive, quantitative analysis of what will be needed in the future. As a result, the supply chain often has overstocking issues and is incapable of delivering a near perfect degree of visibility.

 Additionally, the agile supply chain is able to adapt to rapidly changing environments, such as the economy, customization, trends, and customer demands, among many other factors. By making a supply chain able to respond to such issues immediately, supply chain entities can successfully navigate the turmoil that may arrive and present itself throughout the course of manufacturing, shipping, and the reverse logistics supply chain.

Agile Constituents

Agile supply chain framework is based on four major constituents that are as  

Virtual Integration: in virtual integration information is shared among concerned departments for the real demand from market or end consumers. As demand information is gathered than it is collaborative planning among the various concerned departments that how to cater the demand from this particular market, and every department responds according to their capability and capacity to fulfill the demand. Virtually being integrated would result in end to end visibility, this is how this would be easy to identify the bottlenecks in the network and any other problem that creates hindrance in the network.

Process Alignment: In process alignment, three things are mainly concerned, that are Co-managed inventory, in present time mostly chains are managed through the VMI (vendor managed inventory) this is one of the best solution, as a co-managed inventory. Collaborative product design by the concerned departments, this is how the team works to shape the consumer need or want. The ultimate result is synchronous supply chain.

Network Based: Every individual actor in the chain has to put their efforts to make it the success of the chain. This will reduce the burden on individual actors and the task is divided among the actors as per their core competencies where they are best at. All actors in the chain are orchestrators of the chain, therefore, they equally own the chain and their performance level matters from each end.

Market Sensitive: Today’s chains are market sensitive where demand is sensed from the market. The demand forecasting is based on the daily Point of Sale (P.O.S), sensing demand from past trends is an obsolete way to predict the demand in such a volatile markets. Therefore, daily feedback from market or sales terminal feedback is taken to meet the future demand. In present time companies are focusing on future, therefore, their efforts are to make it from today, by executing best practices to capture the emerging trends. The one of the best practice would be to listen your customer. It is said that success of supply chain is based on the end consumer’s feedback. therefore, voice of consumer is the actual demand that drives the supply chain.

Agile Supply Chain Management Significance

Having understood the impact and the undisputable success of the lean philosophy applied in many organisations world over. Can we come to a conclusion that the next milestone, after the craft production and mass production, is going to be the lean production? To answer this question, one needs to first establish whether the lean approach can fit to all business environments now and in the future. Researches and literatures so far appear to believe the otherwise. 

The critical argument here is that the lean system was developed from a forecasting based volume production industrial sector where the market differentiator is reliability and cost, and today large part of our global market is variety dominated and the differentiator is speed and responsiveness. Hence, lean probably is not a cure-all approach after all.

 Agile supply chain is not the option available in market but a necessity for the success of the company. Agile supply chain is the solution to the many problems that exist in today’s supply chain management networks. This concept has been recognized, as a solution to increase the responsiveness of a supply chain in a more changing environment. Today’s supply chain compete on various strategies, but the most commonly used one is agile strategy. Because this strategy anticipates demand fluctuations in a volatile market demand patterns. Also this solution has facilitated the suppliers to manage their own data through self-service functionality.

Agile Supply Chain Management Parameters

This strategy become the priority, mostly preferred strategy in present era. It focuses on the inventory management. Excess inventory and potential shortages are eliminated by using this strategy. In present era, various software’s have been introduced in the market to manage the inventory. Agile supply chains are best at, getting more accurate and up to date demand. In simple words it is the reaction time how quickly respond to market demand and satisfy their end customer. To make it possible one should have a network based on electronically connected to retailers and all other drivers of the chain, this is how end to end visibility is achieved. To make it robust chain, it would be vital to use state of the art, planning applications, that supports the working teams in decision making and sometimes with what if scenario capability, usually companies go for backup plans that costs considered to be extra, than such applications make it more responsive and cost efficient. 

Lastly, According to Christopher (2000), We are now entering the era of “New Competition” where markets are dynamic, and prices will go to organizations that can better build structures, and do more integration. This solution of agile supply chain management is more information-centric rather than inventory centric. Therefore, agile supply chains are need of the hour. Since market and demand patterns are changing on a very rapid pace, than the ultimate strategy would be to opt for agile supply chain management. Through this strategy one can retain the market and also compete with the market.