Chapter 7 The agile supply chain

Content The concept of agility 1. Agile practices 2.

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

The concept of Agility Market sensitive Virtual Supply chain is capable of reading and responding to real demand Virtual Information-based supply chain, rather than inventory-based. Agile supply chain

The concept of Agility Network based Process integration EDI and internet enable partners in the supply chain to act upon the real demand Process integration Collaborative working between buyers and suppliers, joint product development, common systems and shared information Agile supply chain

The concept of Agility Demand characteristics and supply capabilities end-customers become more knowledgeable about product Lean supply chain Agile supply chain 1980’s 1990’s Efficiency, cost Responsiveness Focus

Distinguishing attributes The concept of Agility Demand characteristics and supply capabilities Distinguishing attributes Lean supply Agile supply Typical products Commodities Fashion goods Marketplace demand Predictable Volatile Product variety Low High Product life cycle Long Short Customer drivers Cost Availability Profit margin Dominant costs Physical costs Marketability costs Stockout penalties Long-term contractual Immediate and volatile Purchasing policy Buy materials Assign capacity Information enrichment Highly desirable Obligatory Forecasting mechanism Algorithmic(基于算法) Consultative(基于咨询)

Comparison of characteristics of lean and agile supply The concept of Agility Comparison of characteristics of lean and agile supply Characteristic Lean Agile Logistics focus Eliminate waste Customers and markets Partnerships Long-term, stable Fluid clusters Key measure Output measure such as productivity and cost Measure capabilities, and focus on customer satisfaction Process focus Work standardization, conformance to standards Focus on operator self-management to maximize autonomy Logistics planning Stable, fixed period Instantaneous response

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 Short lead time Supply characteristics Demand characteristics Predictable market Unpredictable markets Plan and control JIT: pull scheduling React and execute: agile capabilities Hold inventory: hedge and deploy

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 The concept of agility 1. Agile practices 2.

Agile practices Key issue 1 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 Product life cycles End-customer demand Demand variance Time

Agile capability is needed Agile practices Benefiting from variance Three sources of demand uncertainty Seasonality Product life cycles End-customer demand variety Volume Start up Micro-markets Organize Adjust Agile capability is needed

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

Modular supply network Agile practices Benefiting from small volume Variety decrease Volume decrease Mass production Flexibility Modular supply network Craft production

An integrated model for enabling the Agile supply chain