Chapter 7

The agile supply chain

Content
1. The concept of agility

2. Agile practices

The concept of Agility

Key issue
1
What are the dimensions of the agile supply chain?

The concept of Agility

Market sensitive

Supply chain is capable of reading and responding to real demand Information-based supply chain, rather than inventory-based.

Virtual

Agile supply chain

The concept of Agility

Network based

EDI and internet enable partners in the supply chain to act upon the real demand Collaborative working between buyers and suppliers, joint product development, common systems and shared information

Process integration

Agile supply chain

The concept of Agility

Demand characteristics and supply capabilities

Lean supply chain 1980s Agile supply chain 1990s
Efficiency, cost

end-customers become more knowledgeable about product

Focus
Responsiveness

Demand characteristics and supply capabilities

Distinguishing attributes
Typical products Marketplace demand

The concept of Agility

Lean supply
Commodities Predictable

Agile supply
Fashion goods Volatile

Product variety
Product life cycle Customer drivers Profit margin Dominant costs Stockout penalties Purchasing policy

Low
Long Cost Low Physical costs Long-term contractual Buy materials

High
Short Availability High Marketability costs Immediate and volatile Assign capacity

Information enrichment
Forecasting mechanism

Highly desirable
Algorithmic()

Obligatory
Consultative()

The concept of Agility

Comparison of characteristics of lean and agile supply

Characteristic
Logistics focus Partnerships Key measure

Lean
Eliminate waste Long-term, stable

Agile
Customers and markets Fluid clusters

Measure capabilities, Output measure such as and focus on customer productivity and cost satisfaction
Work standardization, conformance to standards Focus on operator selfmanagement to maximize autonomy Instantaneous response

Process focus

Logistics planning Stable, fixed period

The concept of Agility

Source: Mason-Jones, Naylor and Towill (2000), Engineering the leagile supply chain

The concept of Agility

Supply characteristics
Long lead time

Plan and control

Hold inventory: hedge and deploy

Short lead time

JIT: pull scheduling

Predictable market

React and execute: agile capabilities Demand Unpredictable characteristics

markets

The concept of Agility

Application of leagility: separation of base and surge demands

Application of leagility: the Pareto curve approach

Source: Martin, Christopher and Denis Towill, An integrated model for the design of agile supply chains

Application of leagility: the de-coupling point approach

The concept of Agility

Preconditions for successful agile practice

Enterprise-level reality check Cost of complexity sanity check Lowering the cost of complexity: avoiding overly expensive agility Forecasting: reduce the need for last minutes crises

External: demand forecast Internal: financial forecast, asset forecast

Content
1. The concept of agility

2. Agile practices

Agile practices

Key issue
How can we use agile practices to benefit from turbulence in the marketplace?

Agile practices

Three characteristics of supply chain operations related to agile

Mastering and benefiting from variation in demand; Very fast response to market opportunities; Unique or low volume response.

Agile practices

Benefiting from variance

Three sources of demand uncertainty

Seasonality
Demand variance

Time

Product life cycles End-customer demand

Agile practices

Benefiting from variance

Three sources of demand uncertainty

Seasonality Product life cycles

Organize Adjust

Volume

Agile capability is needed

Start up Micro-markets

End-customer demand

variety

Agile practices

Benefiting from short time windows

Decreased D-time requires different levels of agility (VMI & QR)

Speed of replenishment Upstream time sensitivity Information dissemination and alignment

Agile practices

Benefiting from small volume

Small volume is a result of micro-markets, customization and rapid responsiveness. Three approaches of agile strategy related to small volume

Changeover flexibility Modularity at the network level Service-based and information-based solutions

Agile practices

Benefiting from small volume

Mass production Flexibility Modular supply network

Variety decrease

Craft production Volume decrease

An integrated model for enabling the Agile supply chain