Chapter 7

The agile supply chain

Content

The concept of agility1.

Agile practices2.

The concept of Agility

Key issueKey issue

1111What 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

Virtual Information-based

supply chain, rather than inventory-based. Agile supply chainAgile supply chain

The concept of Agility Network based

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 chainAgile supply chain

The concept of Agility

Demand characteristics and Demand characteristics and supply capabilitiessupply capabilities

end-customers become more knowledgeable about product

Lean supply chain

Agile supply chain

1980’s

1990’s

Efficiency, cost

Responsiveness

Focus

The concept of Agility Demand characteristics and supply capabilities

Distinguishing Distinguishing attributesattributes

Lean supplyLean supply Agile supplyAgile 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 Low High

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 )

The concept of Agility

Characteristic Lean Agile

Logistics focus Eliminate wasteCustomers and markets

Partnerships Long-term, stable Fluid clusters

Key measureOutput 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 periodInstantaneous response

Comparison of characteristics of lean and agile supplyComparison of characteristics of lean and agile supply

The concept of Agility

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

The concept of Agility

Long lead time

Short lead time

Supply Supply characteristicharacteristi

cscs

Demand Demand characteristicharacteristi

cscsPredictable market

Unpredictable markets

Plan Plan and and

controlcontrol

JIT: pull JIT: pull schedulinschedulin

gg

React and React and execute: execute:

agile agile capabilitiescapabilities

Hold inventory: Hold inventory: hedge and hedge and

deploydeploy

The concept of Agility Application of leagility: separation of

‘base’ and ‘surge’ demands

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

Application of leagility: the Pareto curve approach

Application of leagility: the de-coupling point approach

The concept of Agility

Preconditions for successful agile Preconditions for successful agile practicepractice Enterprise-level reality checkEnterprise-level reality check Cost of complexity sanity checkCost of complexity sanity check Lowering the cost of complexity: avoiding Lowering the cost of complexity: avoiding

overly expensive agilityoverly expensive agility Forecasting: reduce the need for last Forecasting: reduce the need for last

minutes crisesminutes crises External: demand forecastExternal: demand forecast Internal: financial forecast, asset forecastInternal: financial forecast, asset forecast

Content

The concept of agility1.

Agile practices2.

Agile practices

Key issueKey issue

1111How 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 varianceBenefiting from variance Three sources of demand uncertainty

Seasonality

Product life cycles End-customer demand

Dem

an

d v

aria

nce Time

Agile practices

Benefiting from varianceBenefiting from variance Three sources of demand uncertainty

Seasonality Product life cycles

End-customer demandvariety

Volume

Start up Micro-markets

Organize AdjustAgile Agile

capability is capability is neededneeded

Agile practices

Benefiting from short time Benefiting from short time windowswindows 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 volumeBenefiting 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 volumeBenefiting from small volumeVariety

decrease

Volume decrease

Mass production

Flexibility

Modular supply network

Craft production

An integrated model for enabling the Agile supply chainAn integrated model for enabling the Agile supply chain