WHAT IS AGILITY IN THE SUPPLY CHAIN
The word “Agility” means to act fast or to act quick. The term “Supply Chain Agility” can be defined as how efficiently the organization practices functional and operational activities within the company within an end-to-end supply chain to meet the market demand at the right time and required place. Even though the demand is volatile, companies can win the market by establishing agile supply chain practices to deliver customers in a quick responsive manner.
CURRENT CHALLENGES IN BUSINESSES
In a dynamic world, demand is uncertain and businesses are facing challenges to reach the market at the right time at the requirement of customers. Due to a variety of products, branding, trending, innovation of new products, and market instability; the customer expects to consume the trending product as soon as it reaches the market. For instance, smartphone versions keep on updating with new ideas constantly, if the company fails to supply on time, the device may be out of date to the customers.
Therefore, businesses need to focus on agile supply chain practices end to end (not only a single company but the entire chain of companies involved to be quick and responsive to customer’s expectations.
TEXTBOOK DEFINITION OF WHAT AGILITY IS
Accordingly, Martin Christopher says “To a truly agile business volatility of demand is not a problem, its processes and organizational structure as well as its supply chain relationships enable it to cope with whatever demands are placed upon it”. “Agility is not a simple company concept but rather it extends from one end of the supply chain to the other”
Nigel Slack et al., mentioned, “Agility is the capacity of operating profitability in a competitive environment of continually changing customer opportunities”. “If implies being responsive, quick moving, flexible, nimble, active and constantly ready to change”.
Baily Peter et al., state that the attributes of the agile supply chain is that focusing on customer service is the key attribute, “total value provided to the customer is that service is the critical factor for agility, while cost, and hence the sales price, crucial for leanness”. “Agility The key point is that the marketplace demands are extremely volatile. The business in the supply chain must therefore not only cope with but also exploit this volatility to their strategic advantage”. Therefore, it is the key factor to prioritize customer service by ensuring the right product in the right place at the right time to win the volatile marketplace, whereas cost and minimizing waste are the key elements in the lean approach.
Accordingly, Martin Christopher has identified seven basin principles for businesses to establish in order to aim for the agile business.
PRINCIPLES OF AGILITY
- Synchronize activities through shared information
This is where the company shares the real-time data in the web-based system, enabling the required departments/teams to view the data and get the information for forecasting and demand planning, production planning and scheduling, shipment planning, and so on. For instance, the FMCG goods ordering process can be planned with the POS data, and the fashion industry can be highly responsive in supplying on time with the market-required trend.
- Work smarter, not harder
Order processing time is directly related to inventory planning including buffer stock allocation. Therefore, instead of processing the orders linearly, if the company could parallelly process the orders by eliminating no longer existing processes, the company could save order processing time. Thus, business process reengineering could help to be agile in the market. For instance, in earlier days there was a practice of obtaining approval on paper for the ordering, but now the companies are functioning with fully integrated systems with digital approvals, therefore, eliminating the paper approval could save time in processing the order, or if the company requires documentation, better in processing the orders with any one of the approval and obtaining the next in parallel would help to manage quick responsiveness.
- Partner with suppliers to reduce inbound lead time
In general, suppliers are chosen by comparing the price among the huge competition, instead of analyzing their production capability and effective information sharing. Other factors like Inbound logistics cost and time can be managed by having close relationships with suppliers, the best practice to relate suppliers for responsiveness is the implementation of Vendor Managed Inventory processes. This is where the customer shares the sales data production planning, raw materials usage, and so on, so that, the supplier can plan their stock allocation/manufacturing and delivery enabling them to meet the customer’s requirement, By practicing VMI both suppliers and customers will be benefited by reducing buffer, avoid raw materials shortage and cost optimization as well.
- Seek to reduce complexity
By forecasting or demand planning the individual products with different segments, if the company can process the orders with the greater commonality of components or sub-assembly across a family of products will help to meet customer requirements on time...
- Postpone the final configuration
By postponing the final configuration on assembling / finishing, the orders can quickly meet the customer’s requirements at the right place and right time with the right product. This is the existing process practiced by automobile industries. If the ready-to-configure parts are available with the supplier, once a customer requires a customized model, it is easy for the supplier to fix and complete the delivery in a short time. Or if the supplier already fixed the product and the customer orders for different models, then the supplier will have to remake or order the next order bulk for the manufacturing of the newly required model.
- Manage the process not just function
The business functions are traditionally practiced by paperwork earlier, following these functions in this era is not realistic. For instance, the product innovation/ development approvals function is a lengthened process to reach the market, while the companies who respond quickly will immediately launch their new model and act upon customer needs. Thus, instead of operating functions vertically, if the processes are managed to operate horizontally develop agility in the businesses. For the same company needs to have proper supplier relationship management, customer management as well as product R&D team coordination.
- Utilize appropriate performance metrics
Practicing performance measures in each company is common to measure the functions within the firm as well as the external parties (such as suppliers, manufacturers, customers, logistic providers, and clearance teams). This measurement is done to evaluate the performance and to improve the same effectively and efficiently as well as for the incentive plan. It is common for companies to measure cost optimization, optimal resource utilization, wastage reduction, marketing team performance, and so on. However, agility improvement is important to measure the lead time obtained in every function, such as production, delivery, and packing. Order processing. Shipment processing and clearance, order to customer delivery, and measuring customer satisfaction level. By evaluating these parameters, the company can ensure quick responsiveness to the customer order with the right product at the right time in the right place.
This topic has given a brief idea about agility and the principles that a company needs to establish in this digital era to accomplish customer responsiveness (act agile). Martin Christopher says “Fundamental tenet of agility is customer responsiveness”. Achieving an agile business strategy is not a simple company process, it can be accomplished by having updated information technology, good supplier and customer relationships by sharing the data and information, simplifying the processes, setting time measuring KPIs, and being smart to configure the end product at customer’s request.
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