How agile is your supply chain management system?
Dr. Hau L. Lee* describes objective of an agile system to be able to “handle short-term changes in demand or supply quickly;handle external disruptions smoothly”. You can get Dr. Lee’s paper (Triple-A Supply Chain as published in Harvard Business Review) at the following link:
Why do we need Supply chain system to be agile?
SCP (supply chain planning) engine should be able to reflect changes in supply picture as soon as possible. If engine can’t reflect supply changes quickly enough, your planners will schedule orders manually leaving you to figure out : why no one is using the system?
There are many factors that can result in supply changes, for example,
– Yield rates
– Procurement of additional capacity
– Unscheduled disruptions at your suppliers’ sites
– Delays in shipments
Dr. Lee advises following six rules of thumb to improve supply chain agility:
1. Provide demand data to your suppliers so that they can respond quickly.
2. Develop collaborative relationships with suppliers. so that any changes in supply are received quickly and electronically.
3. Use inventory postponement concept effectively.
4. Keep an inventory of small and bulky components that are often the cause of bottlenecks.
5. Build a dependable logistics system that can enable the company to regroup quickly in response to unexpected needs.
6. Put together a team that knows how to invoke backup plans.
Agility is a key attribute of any supply chain system.
i2 (now JDA) promotes 7 Principles of Supply Chain Agility”: agile organization, closed-loop plan management, demand management, supply management, fulfillment management, rapid business reconfiguration and agile IT systems. A common theme across these principles is closed-loop management with speed.
Your supply chain system may be best of the breed, cost-effective, scalable etc., but if it is not agile (supply and demand is not reflected quickly), then you better watch out!
* Dr. Hau Lee is the Thoma Professor of Operations, Information, and Technology at the Graduate School of Business, Stanford University.