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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
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
Agile supply chain
1980s
1990s
Efficiency, cost
Responsiveness
Focus
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() Consultative()
The concept of Agility
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
Comparison 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
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
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 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
D
e
m
a
n
d

v
a
r
i
a
n
c
e

Time
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
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