Supply chain agility is key to winning new business
Collapsing product lifecycles and accelerated growth of low cost economies is leaving manufacturing industry struggling to win business through traditional product differentiation and overhead cost reduction. So companies are turning more and more to the supply chain to provide differentiation, reduce costs and mitigate risk through innovative management of resources and assets.
Recent studies confirm that the companies' financial success is clearly linked to their supply chain performance; those at the forefront of supply chain management consistently show a market capitalisation 5%-20% greater than their counterparts. This raises a fundamental question: how can companies take and maintain supply chain leadership in today’s complex and volatile market?
The key to the future for most companies is re-engineering the supply chain, both physically and logically, for agility. An agile supply chain can not only respond to customer requirements during periods of uncertainty and rapid change, but out of necessity must be lean and unencumbered by waste and a fixed constricting cost base.
Companies pursuing an agile supply chain strategy need to focus on accelerating information and product flow, and as well as the rate of decision making - deferring the commitment of resources and product configuration until as late as possible and creating an adaptive organisation predicated on change as a norm.
The starting point is product development. The nature of the product and speed of development - together with its ease of adaptability and configuration, range of materials, components, technologies and profile of suppliers - all impact responsiveness. The use of rapid prototyping, 24-hour design studios, concurrent engineering, integrated computerised design, modular configuration, lifecycle management and supplier collaboration all helps to streamline and accelerate the development phase.
Developing an agile supply chain means focusing on its the end-to-end performance. Sourcing for agility requires companies to co-ordinate and synchronise a network of suppliers - based on collaboration and timely information sharing coupled with competitive benchmarking, value analysis of bought-in products, and market intelligence to inform open-book negotiations.
Supply chain agility is also directly affected by the way fulfilment resources are configured and managed. Outsourcing logistics has long been regarded as a way of offloading non-core activities and increasing flexibility, but it has done very little to increase supply chain agility and enable flexible fulfilment. The increased length and complexity of the supply chain is leading to a shift away from outsourced point solutions to the establishment of strategic partnerships with 4PL logistics providers able to knit together diverse solutions into a comprehensive fulfilment solution.
In addition, an agile supply chain requires an adaptive organisation that is structured for change, unencumbered by heavy layers of bureaucracy and centralised control, with a strong culture of communication and empowerment.
Performance management has long been recognised as a core competence for any responsive organisation. The struggle has been to develop a set of performance indicators that is relevant and timely - so that they highlight impending issues and provide the 'intelligence' to support decision-making.
Business intelligence has invariably been complex and inflexible, involving data extraction, transformation and loading into pre-configured models and structures. This is generally too slow to expose short to medium term trends or issues, effectively rendering a company 'blind' in volatile and uncertain markets. New click-and-view technologies and solutions based on a single architecture, are starting to address the issue by providing real-time, end-user capabilities.
The challenge in pursuing increased flexibility and responsiveness is not the elimination of planning, but developing an approach that supports the extended supply chain and increased rate of change through better integrated and more responsive planning. Solutions such as collaboration technologies, event management software, rapid simulation tools and product tracking are starting to provide real-time feedback and quick response capabilities, allowing organisations to continually update and maintain viable plans.
Potentially, one of the most influential technologies is radio frequency identification. RFID is acknowledged as benefiting asset tracking, anti-counterfeiting, access control, condition monitoring, transacting and locating products. However, its real potential could well be the opportunity to track and record product flow throughout the extended supply chain, providing real-time feedback on customer demand and product availability across the supply chain; enabling, for the first time, management of a true end-to-end virtual supply chain.
In summary, forward thinking companies are making their supply chains more agile by moving away from a vertically integrated business model to a virtually integrated model, based on managing information not inventory, collaboration not conflict and networks not chains!
Those that take the lead will succeed; those that follow will at best survive.
