We work in an increasingly competitive global market. It’s never been more crucial for companies to use their supply chain know-how to deliver that all-important competitive edge. The ability to quickly execute decisions to increase production, enter new markets or to tailor products to suit customer demand is an increasingly important differentiator. But how should businesses go about creating a supply chain with springy agility built in?
Maintaining an agile supply chain can help businesses to take advantage of peaks in demand which may be seasonal or driven by consumer tastes. Quicker, more responsive lead times can help businesses operating in fast-changing markets to get the right product to market at the right time.
But this degree of market sensitivity is not easy to maintain and requires real-time access to accurate point-of-use data, including valuable customer feedback.
For example, the current high level of demand for ‘notebooks’ is unmistakable, but do manufacturers know which colour or features are selling best at the moment and in which parts of the world? Armed with this data, agile businesses are designing supply chains that allow final stage configuration to deliver the right variant mix in the correct volumes in response to the emerging customer trend data.
In this way, agility flies in the face of traditional principles of lean. Whereas lean is focused on minimising inventories and streamlining production to improve overall operating efficiency, agility is oriented around the customer and the desire to give them the best possible buying experience. What agile supply chains methods lack in efficiency, they make up for in terms of market responsiveness and the ability to deliver value-added, innovative products that customers want to buy.
How agile do you really need to be?
The first step to building an agile supply chain is to decide how agile you need to be. Supply chains that are 100% agile are likely to require large sums of working capital and be costly to run, so they are not necessarily for everyone.
Supply chains that are purely lean on the other hand will be extremely efficient but will lack the flexibility to give customers bespoke features or configurations.
Invariably, different elements of the supply chain will be needed to deliver varying degrees of agility depending on what is being sourced – for example, an agile model for the production of the high-value notebook, which is produced according to the customer’s requirements, but a leaner, more efficient model for producing the cover that it is ultimately supplied in.
Ensure you have access to quality data
Agile supply chains require access to high-quality, reliable customer data. Everything that happens in an agile supply chain happens because it is what customers’ want. Such data must be shared across the supply chain to ensure all are in tune with market demand and so the business must be prepared to operate as an extended enterprise.
Don’t hire buyers, rather supplier relationship managers
Agile production methods demand a different approach to managing supplier relationships. It’s no longer a case of using buying power to negotiate the lowest possible price and then visiting the chosen supplier once a year to iron out any issues and, where appropriate, seek a rebate. While such tactics may still work when sourcing low-value parts that are widely available, they are not suitable when working in an agile way.
Get closer to your customer
It is impossible for an agile supply chain to be too close to its customers and this can allow scope for some efficiencies too. Locating production close to large, consumer-driven markets like China, for example, makes good sense and means that innovative products can be produced in volume, waiting for their final stage configuration.
Short-sightedness is fine
Agile supply chains are in it for the long term but they know that the highly-innovative nature of the products they make means they are likely to have a shorter life cycle than most others - anything from two months to about two years, which makes it easier for them to move on to the next big thing.
Michael Minall is a supply chain consultant at Vendigital, who specialises in working with businesses in the manufacturing sector.