Supply Chain Agility
What is Supply Chain Agility | What Are The Characteristics Of An Agile Supply Chain? | What Are The Dimensions Of An Agile Supply Chain? | Ways To Improve Supply Chain Agility | How ERP Can Make Your Supply Chain Agile | Upgrade Your ERP, Upgrade Your Supply Chain
The data doesn’t lie — organizations practicing supply chain agility have customer-service rankings a minimum of seven points higher than competitors’. These same brands also hold inventory levels that are, on average, rotated 23 days faster than less agile peers, among other key competitive differentiators.
These performance metrics aren’t magic. They’re based on the strategic adoption of supply chain agility models and principles your organization can also wield — plus integrative software better tying core business functions together.
What Is Supply Chain Agility?
At its simplest, supply chain agility is a company’s ability to smoothly and profitably respond to external market changes. Those changes themselves are multifaceted and interrelated, involving everything from evolution in consumer preferences to competitor disruption to broader economic and market volatility.
Supply chain agility is not a company tweaking day-to-day workflows and operations to meet its own internal KPIs. However, improving manufacturing supply chain agility will naturally trigger the adaptation of fresh internal processes, most often new enterprise technology usage, data management and even service agreements with third-party vendors.
The goal of supply chain agility mirrors its name — maintain fluid, responsive and data-informed supply chain logistics more primed to navigate inevitable industry change. Whether those changes are negative or positive, your company is in a position to respond.
Successful supply chain agility for manufacturers today relies on these core tenets:
- The understanding that external factors shape your supply chain logistics, no matter how steady things are now.
- The exploration of value chain components most affected by industry disruption.
- The integration of more proactive technology and process workflows to address value chain pain points.
- The ongoing monitoring and analysis of new processes, cross-function collaboration and production cost-savings, continuing to tweak practices if needed.
What Are the Characteristics of an Agile Supply Chain?
Agile supply chains will vary by organization. The movement is not a prescriptive formula for companies to meticulously follow, but rather a guiding vision for how your organization can run.
Inherent in that vision, though, are four key characteristics. Manufacturers practicing these characteristics will find themselves in the agile supply chain success category versus late-adopters and laggards.
1. Proactive Decision-Making
Producers can readily respond to industry aggravations or disruptions, both those on the horizon as well as ones already underway. What’s more, those decisions are made based on objective, real-time data informing rapid but insightful operational changes that are clearly communicated and contextualized for everyone in the organization — not just the C-suite.
2. Innate Flexibility
Agile supply chains are far more adaptive to market, vendor and consumer demands, as well as how these shifts inform internal business needs or new strategic priorities. Organizations have the tools and models in place to coordinate high-velocity process tweaks quickly, then follow the down-chain repercussions of those changes in real-time. Data is collected at every step, in turn generating next-phase reports to fuel tomorrow’s adaptive evolutions.
3. Cost-Effective Operations
Cost-savings is not the main objective of an agile supply chain done right — but it’s certainly a byproduct and a significant one at that.
Manufacturers implementing more fluid, flexible processes can “cut losses” quicker during sales or inventory disruptions. Likewise, organizations are far better at predicting potential shortages or interruptions in the supply chain itself, plus have greater visibility over the current process or product waste, such as excessive safety stock.
4. Profitable Production and Distribution Workflows
Combined, the trimmed waste, speedier decision-making, continual data review and better cross-discipline communication create a production environment that’s faster, smarter and leaner. This is an innate approach to increasing business profits. While at first it may seem easier said than done, implementing a more agile supply chain is pivotal for producers today looking to stay in business tomorrow.
What Are the Dimensions of an Agile Supply Chain?
There are five key frameworks for minimizing uncertainty and owning a competitive supply chain in today’s manufacturing environments.
- Stage 1: Alertness and awareness: Alert organizations are those best positioned to forecast industry changes, growth opportunities, upcoming disruptions and competitor threats. The more alert and aware an organization is to these realities, the quicker they can respond to shifts in product demand, material procurement, supplier trends, customer feedback, market pricing and much more.
- Stage 2: Accessibility: Organizations cannot make changes in the dark. After spotting an emerging pattern or trend, those alert businesses must then have immediate access to specific industry data and relevant historical logs that all decision-makers can conveniently view, share and co-analyze.
- Stage 3: Decisiveness: Decisive organizations are those that quickly and clearly translate noted industry shifts and the accompanying data into an action plan. In other words, it’s the organization whose leaders have the tools and ability to execute a quick process change — then communicate the how and why of that change downstream. The most decisive organizations are often the ones with simplified or unified chains of command, sensibly reducing the number of touchpoints necessary to make a swift judgment call.
- Stage 4: Swiftness: Swift manufacturers implement their action plans quickly. There are little-to-no impediments when introducing a process change to relevant value chain functions, as well as few communication silos or enterprise technologies to reconfigure. The swifter changes are made, the more cost-effective the entire supply chain, and the more profitable your business. This dimension also proves the realities of your agility cycle, since — up till this point — all work has been data-driven and preparatory.
- Stage 5: Flexibility and adaptability: Last but not least, flexible organizations have the power and the buy-in to modify ongoing processes when new opportunities present themselves without disrupting the entire business. Those proficient in this dimension understand that action plans are bound to change, even ones initiated under a smooth, data-backed cycle fitting a value chain need at the time. In summary, organizations are not rigid, going at day-to-day operations based on sunk-cost fallacies of what worked in the past.
Ways to Improve Supply Chain Agility
See improvements across your organization’s logistics functions with any of these supply chain agility strategies.
1. Adjust Your Expectations
Successful supply chain agility isn’t about reinventing the wheel. It also doesn’t start in isolation within your organization, putting blinders on to create shiny KPIs for their own sake.
Instead, true agility is how you respond to changes happening in the broader industry landscape. It sharpens your organization’s ability to see what’s happening in the marketplace, why it’s happening and what you can realistically do about it.
With such a macro lens, some organizations struggle to grasp manageable facilitation of truly agile systems and workflows. Leaders expect everything and anything to change, from labor to inventory practices to product development to third-party logistic (3PL) relationships. Yes, some of these processes will adapt with the investment in supply chain agility — but never permanently, and never without objective data backing its improvement.
2. Better Engage Point-of-Sale-Driven Demand Data
Recent years have seen many manufacturers push themselves to use software for demand planning. Pulling insights from aggregate historical data, many have focused on improving inventory ordering and shipping schedules based on previous cycles, assuming similar patterns in the future.
While this is an essential part of supply chain agility, it’s not the only one. Organizations can see equal — and sometimes more — success by balancing demand-driven planning capabilities as well.
Specifically, the demand information cued from real-time point-of-sale systems allows even more granular production and fulfillment responses translated instantly. This, in turn, creates fluid sourcing and procurement functions, as well as smarter planned versus actual inventory levels. By adopting demand-driven decision making across key functions, producers move away from anticipating pure unknowns and closer to the five real dimensions of supply chain agility.
3. Harmonize Production and Scheduling Data
A recent P&G industry report found consumer retail and apparel companies have an average ongoing stockout rate of around 8%. In some niches, those figures are even higher.
Even more alarmingly, nearly one in two small and medium-sized retailers still manages production planning and scheduling in separate data systems — and sometimes just on spreadsheets. This is an inefficient and uncommunicative system, one preventing these two innately connected functions from being optimized.
Align production planning and scheduling data systems with demand-driven sales figures to create a more robust, efficient and effective supply chain network. Integrating these databases immediately improves your response times to variable demand cycles, plus reduces out-of-stock issues and improves overall inventory controls.
4. Focus Training on Key Technology
Thanks largely to technology, the line between knowledge workers and unskilled labor continues to blur in the manufacturing, warehousing and wholesale world. Production workers must be more technologically fluent than ever, familiar with tasks from machine programming and coding to AI robotics.
In fact, industry surveys continually report the top pain point in implementing an agile supply chain isn’t a lack of direction, funds or strategic buy-in — but skilled talent to use the agile technology itself. This mirrors the wider skills gap bemoaning the manufacturing industry and puts the onus on industry leaders to rethink relevant on-the-job training.
5. Prioritize Automated Alerts
Automated inventory alerts, such as ones integrated into your enterprise resource planning (ERP) system, make a range of business functions easier.
For starters, an automated inventory alert can generate re-order quantities based on historical system data as well as current demand-driven figures. This orchestrates accurate forecasting and procurement strategies for upcoming production timelines, as well as helps organize better delivery schedules tailored to seasonal cycles as well as geographic demand.
The more extensive your product lines and supply chain networks, the more you benefit from automated reports and alerts — especially those tailored to end-to-end inventory management.
6. Reinvest in Industry Bots
Modernizing your supply chain involves more technologies than ever. From AI-guided picking and packing wearables to blockchain-designed customer order ledgers and machines on the floor connected to the Internet of Things, manufacturers have a list of dynamic yet complex infrastructure to integrate into their ecosystem.
Few technologies contribute as fundamentally to supply chain agility as robotic process automation (RPA). RPAs can contribute significantly to inventory picking and shipping operations, many times improving order fulfillment. More broadly, RPAs can be scaled to communicate simultaneously across systems, make automatic updates and trigger downstream alerts and transactions. This allows employees to move on from menial data entry and communications tasks to value-additive work, such as mediating exceptions or customer service issues requiring human intervention.
7. Review Geographic Warehousing
Cyclical sales calendars and seasonal flux are instabilities for many consumer goods manufacturers. When mismanaged, each eats a significant amount of operating budgets without generating equitable returns.
Analyzing your warehousing and distribution network is a core place to see supply chain improvements. Performing these can reveal serious flux in regional demands as well as seasonal cycles, which directly informs more cost-effective shipping and storage operations. In some cases, it can even show full or part-time outsourcing opportunities far more profitable for your current scale, plus reduce stockouts and improve order fulfillment timelines.
8. Don’t Forget 3PLs
Third-party logistics providers can manage some of those notoriously cumbersome aspects of the supply chain, such as autonomous dispatching services like last-mile delivery. With their own fleets, their own warehouses, their own forwarders, their own consolidators and more, these outside partners provide a cost-effective alternative to shouldering every function of the supply chain on your own.
What’s more, 3PLs employ several of the latest technologies in the industry, investing in these resources as a means to stand apart from their own competition.
Consider the largest logistics pain points currently felt by your organization. More than likely, there are 3PLs dedicated to that function, to manufacturers in your vertical or a specific product niche that could save you time and money.
How ERP Can Make Your Supply Chain Agile
Enterprise resource planning software remains in the IT spotlight, with over half of businesses naming it a top investment priority by 2022. This same all-important system can also help unlock greater supply chain agility, bringing these benefits.
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1. Streamlined End-to-End Communications
ERP software serves as an informational home base for all parties in your organization. From research and development technicians to customer service agents to distribution managers — and everyone in between — users have a one-stop repository to get the answers they need, right when they need it. Data silos are removed, workflows clarified and decisions made faster — the hallmarks of supply chain agility.
2. Improved Supplier Agreements
The shareable enterprise data stored in the ERP lends objective insights into current supply vendor partnerships. Those insights relay vendor performance, which manufacturers use to draw up improved agreements tackling data-tracked pain points or issues. Plus, it cuts down clunky paperwork, back-and-forth emails and all other forms of legacy documentation.
3. Better Customer Deliverables
ERP systems can directly cut down on order lead times, plus help resolve open customer service cases by giving reps instant access to the breadcrumb trail of order information, including:
- Order history
- Payment method
- Shipping delays
- And more
You practice better customer service, while your agents themselves have a smoother, easier time performing their roles.
4. Time and Money Saver
With ERP software, manufacturers have one central operational and informational system. They know where to log in to review reports, documents, communications and track workflows. They know who to contact with questions or concerns. They know how to access relevant data. As a result, business functions get executed far quicker using resources understood by all, saving everyone time and money.