Chapter 7 The agile supply chain

Chapter 7
The agile supply chain
Content
1. The concept of agility
2. Agile practices
The concept of Agility

Key issue
1
What 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 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 chain
The concept of Agility

Demand characteristics and supply
capabilities
end-customers
become more
knowledgeable
about product
Lean supply chain 1980’s
Efficiency, cost
Focus
Agile supply chain 1990’s
Responsiveness
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
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
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
Measure capabilities,
Output measure such as
and focus on customer
productivity and cost
satisfaction
Process focus
Work standardization,
conformance to
standards
Logistics planning Stable, fixed period
Focus on operator selfmanagement to
maximize autonomy
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
Plan and
control
JIT: pull
scheduling
Predictable
market
Hold inventory:
hedge and deploy
React and
execute: agile
capabilities Demand
Unpredictable characteristics
markets
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
1. The concept of agility
2. Agile practices
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
Demand variance


Product life cycles
End-customer demand
Time
Agile practices

Benefiting from variance

Three sources of demand uncertainty


Seasonality
Product life cycles
Organize
Agile capability
is needed
Volume
Start up

Adjust
End-customer demand
Micro-markets
variety
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
Agile practices

Benefiting from small volume
Variety
decrease
Mass production
Flexibility
Modular supply network
Craft production
Volume
decrease
An integrated model for enabling the Agile supply chain