Balancing Speed & Risk - The Quest for Supply Chain Agility
Posted by Ben Tao
What is agility and why is it important for a supply chain? Agility means being able to move quickly and nimbly with resourcefulness.
An agile supply chain can create competitive advantage, while enabling a business to recover from disruptions and adapt to rapid changes in the market. Having an agile supply chain can enable businesses to quickly ramp up or scale down production, launch new products ahead of the competition, change the destination of products rapidly, incorporate changes to products based on market feedback, and discontinue products with minimum negative financial impact. The benefit of having an agile supply chains is the ability to quickly respond to market changes, while ameliorating negative financial impact.
Supply chain agility is about speed, how to respond rapidly to external changes in the market environment, customer preferences, competitive dynamics and other forces. The challenge comes in squaring traditional sales and operations planning, (which typically take place within established cadences, organizational structures, networks of suppliers and logistics providers) with the need to accommodate rapid changes in supply/demand, supplier availability, geographic preferences and logistical constraints. These are a few of the challenges that businesses face:
How to create the ability to quickly switch suppliers given differences in pricing, contract terms, product quality, lead time and the supplier’s own constraints?
How to balance the need to operate at maximum efficiency on a day-to-day basis, while keeping flexibility on hand to respond quickly to unforeseen disruption?
How to embrace the principles of an agile supply chain throughout the organization so that sales, management and operations can proceed with their own mandates while preserving the ability to change course quickly and with minimum financial impact?
To solve for supply chain agility, traditional approach to sales and operational planning needs to evolve to include continuous mid-cycle adjustments, which will enable the business to achieve an acceptable balance of efficiency, flexibility, cost management and risk containment.
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