In a world that is increasingly global, digital, and intelligent, modern supply chains are faced with challenges presented by complex and interconnected systems. As supply chains have become globalized, complexity has increased due to internationalization and physical distance.
One example of increased complexity is the additional communication required between partners in the last few years. There are more moving parts, more people to talk to, and more alignment required to get products manufactured on-time and in budget. Customer focuses have also shifted from the highest priority being placed on cost-consciousness, to a supply chain methodology that is data driven and more strategic in nature. Customers are increasingly placing value on data – from knowing how products are being sourced from end to end, to more predictive and time-definite supply chains – thus creating an almost constant state of disruption and innovation in the current supply chain environment.
Adding to supply chain complexity is the increase in volatility across industries. This increased volatility is driven by the rate at which technology advances, and it means that there are many market opportunities available. However, it also means that market opportunities present themselves as moving targets.
So how can modern supply chains adjust to such changing market opportunities?
Agile Supply Chains
At aPriori, we follow a software development methodology called agile.
The key benefit of agile development is that it provides flexibility within our development process that enable us to quickly adjust to market conditions and new technologies, and create new features in our software at a higher velocity with fewer errors.
While the agile methodology has been proven in the software industry in the last 20 years, the principles of this methodology have increasingly transcended into many different industries, including supply chain management. In 2004, Hau Lee, defined agility as the ability to respond quickly to sudden changes in supply or demand. Handling unexpected external disruptions smoothly and cost-efficiently, and the ability to recover promptly from shocks such as natural disasters, epidemics, and recessions.
agility & supply chain management best practices
In agile software development, specifically in “modern agile” development, companies aim to continuously develop and release new products in increments, rather than all at once. Agile supply chain management borrows from this idea of continuous release, but adds the concept of continuous forecasting, because, unlike the software world, supply chains deal with physical goods. Continuous forecasting requires continuously updated information, which challenges organizations to hire multi-skilled personnel who can leverage operations against demand forecasting.
Cross-functional Organizations and Highly Visible Processes
The next tenet that supply chain management borrows from agile is the need for cross-functional organizations with highly visible (end-to-end) processes. Once teams have more exposure to other business units and other functions, they will communicate with one another in a more effective way, which increases the velocity at which work is completed.
This exposure to other functions presents as an increase in communication with suppliers, vendors, customers, and the customer’s customers. Looking upstream, communication could be determining the capacity and constraints of suppliers. Once this level of communication is established, collaboration may shortly follow. Looking downstream, companies like Flextronics look not only for shipment data, but also for sell-through and point of sale data to help them stay on the right track. With both improved communication and collaboration, companies will be able to better predict and react to changes in market conditions.
Organizational and Process Flexibility
Lastly, agile principles dictate that organizations and processes should be built with flexibility incorporated into them. Agile supply chain processes such as product postponement and decoupling allow such flexibility, which is especially important in industries with short lead times, such as consumer electronics. Additionally, agile organizations must be flexible, and give power to capable employees to make the decisions necessary to react to an ever-changing market. Flatter organizations tend to enable such quick and effective decision making that is necessary for true agility.
Regardless of structure, flexibility is key; agile supply chains, like agile software development, cannot exist in a silo. The most successful companies that use an agile supply chain methodology such as Apple, Proctor & Gamble, Dell, and Unilever bring agility into multiple aspects of their businesses, from executive support to manufacturing processes.
Elements of an Agile Supply Chain
Flexibility, communication, and accurate data are tenets of an agile methodology that enables companies to nimbly shift direction in order to capture market opportunities. Communication with upstream and downstream companies enables mutually beneficial relationships and the aforementioned flexibility that is necessary for agility. This flexibility facilitates end to end communication and allows for a more holistic view of the supply chain.
Lastly, accurate and timely data is the key element of any agile supply chain. In manufacturing supply chains, understanding your cost at any point is critical to making appropriate market-based business decisions and aPriori provides such insight into cost.