1. Agile or lean? “Lean” works best in high volume, low
Volume per variant
Variety/
Variability
“Lean” works best in
high volume, low
variety and predictable
environments.
“Agility” is needed in
less predictable
environments where
the demand for variety
is high.

2. Demand/supply characteristics determine supply chain strategy
Lean Plan &
optimise
Agile
Quick response
Long
lead-times
Short
Predictable
Unpredictable
Demand characteristics
Supply characteristics
Kanban
Continuous
replenishment
Hybrid De-couple
through
postponement

3. Lean Agile The decoupling point Forecast at generic level
Economic batch quantities
Maximise efficiencies
Demand driven
Localised configuration
Maximise effectiveness
Strategic
Inventory

4. The Volume/Variability Matrix
High
Sales Variability
Low
Low
Sales Volume Hi

5. Supply Chain Differentiation
LOW VOLUME
HIGH VARIABILITY
Unpredictable, ‘spikey’ volumes
SIMPLIFY AND JUSTIFY
HIGH VOLUME
Base volume with unpredictable surges
SEPARATE BASE
AND SURGE
LOW VARIABILITY
Predictable but small volumes
LEAN AND EFFICIENT
Large predictable volumes
CONTINUOUS REPLENISHMENT
High
Variability
Low
Low
Volume
High

6. Finished Products (demand forecast level)
‘Push’ versus ‘pull’ in the logistics chain
Demand
‘pull’
Customers
Finished Products (demand forecast level) D1 D2 D3 D4
Regional
Distribution
Centres
RDC1
RDC2
Finished Products
Factory
Warehouse
Finished Products
Factory
Work-in-Progress
Sub-assemblies
Components
Product
‘push’
Vendors/Suppliers

7. The reorder point method of stock control
quantity
Reorder point
Stock level
Average
lead-time
demand
Lead time
Safety stock
Order
placed
Order
arrives
Time

8. The review period method of stock control
Replenishment level
Stock level
Review
period

9. Order point and dependent demand
1. Regional distribution centre (RDC) inventory: many small independent demands from customers
Order point
Inventory

10. Order point and dependent demand
2. Central warehouse inventory: few large demands dependent on RDC demand
Order point J F M A S O N D

11. Order point and dependent demand
3. Plant inventory: irregular demand dependent on warehouse demand
Order point J F M A S O N D

12. Causes of uneven demand at plant level
Combined
demand at the factory
750
250
500
Quantity
ordered*
250
500
200
150
350
Combined
demand
Regional centre 1
Regional centre 2 50
150
100
250
Quantity
ordered**
Basic demand
(pallet loads) 10 10 10 10 10 10 60 60 60 60 60 60 30 30 30 30 30 30 70 70 70 70 70 70
Depot A
Depot B
Depot C
Depot D
*Orders placed in multiples of 250 pallet loads
**Orders placed in multiples of 50 pallet loads

13. Determining the economic order quantity
Total cost
Inventory carrying cost
Cost
Ordering/ set-up cost
EOQ
Quantity

14. Inventory hides the problemsA
Inventory B
Volatile
Demand
Inaccurate
Forecasts
Unreliable
Suppliers
Quality
Problems
Bottlenecks

15. Reducing set-up costs/ordering costs
Order/batch quantity

16. Reducing the economic batch/order quantity
Total cost (1)
Total cost (2)
Cost
Inventory carrying cost
Set-up cost (1)
Set-up cost (2)
EOQ (2)
EOQ (1)
Order/batch quantity

17. The agile supply chain Agile supply chain Network based Virtual Market
sensitive
Process
alignment

18. Route map to the responsive business
Vendor managed inventory
Economies of scale
Standardization/ modularization
Synchronized production
Waste reduction
Lean production
Capacity management
Agile supply
Process management
De-couple the supply chain
The Responsive Business
Flexible response
Organizational agility
Quick response
Setup time reduction
Demand driven
Cross-functional teams
Process re-engineering
Continuous replenishment programmes
Non-value-adding time reduction
Visibility of real demand