An agile supply chain can be defined as a chain of supply that has the potential to respond to changing requirements in a way that accelerates the delivery of ordered goods to customers.
In simple words, supply chain agility is a custom adopted by many companies for choosing a dealer. As we know, a supply chain with flexibility and the ability to quickly react to emergency requirements can help the business answer more efficiently to its customers. Apart from flexibility, speed and accuracy are also signature marks of this type of supply chain.
To acknowledge the advantages of an agile supply chain, we have to learn about the elements of any type of supply chain. These include elements like a collection of orders and processing, the supply of materials to create the goods used to complete orders, packaging and transport of finished goods, and the quality of customer service that is advertised throughout the process from the point of sale to the actual delivery and beyond.
Thus, for considering the functions of the supply chain as agile, each one of these elements must be managed efficiently and coordinated in such a way that makes it possible to adapt to changing circumstances.
With the help of an agile supply chain, merchants can easily respond to the varying requirements of the customer with relatively less time required. For example, if a client has already placed a sizable order but demands the product to be delivered few days prior to the projected delivery date, a merchant with a truly agile supply chain can easily accommodate that change in the client’s situation, at least in part. Working collaboratively, the merchant and the customer develop a strategy to permit the delivery of as much of the order as possible within the new time frame required.
There are times when merchants need to think creatively along with some flexibility in terms of scheduling production time, selecting shippers and basically looking closely at each step in the order completion process to search for ways to reduce the time required to successfully accomplish those tasks and abide with the customer’s request.
Agile Supply Chain Concept
Agility is a supply chain-wide capability that embraces organisational structures, value chain configurations, information systems, logistics processes and in particular mindset and culture. A key characteristic of an agile supply chain is flexibility, which should be interpreted from two sides of the supply chain. From the inside of supply chain, such flexibility means configurations and structures are not fixed. They may transform quickly as the needs arise. From outside, i.e. from market and consumer perspective, the supply chain must deliver timely products and services; and deliver them at the beginning of the usually short profit widows; often to be innovative and to be the market leader.
Thus ‘agile supply chain’ is essentially a practical approach to managing supply networks and developing flexible capabilities to satisfy the fast-changing customer demand. It is about moving and transforming a supply chain that is structured around the focal company and its product categories to the one that is centred on end-consumers and their requirement. As the Chairman of Li and Fung Group – the largest export trader in Hong Kong, says that one of the key features of his approach is to organise for the customer, not on country units that may end up competing against each other.
The capabilities of an agile supply chain are created and measured from the ‘outside in’ as opposed to pushing product offerings into the market – the ‘inside out’. The strategic focus of an agile supply chain is a relentless pursuit of customer value in every part of its fabric. The operational planning of agile supply chain is focused on the capabilities for responsiveness and constantly in anticipation of unpredictable sudden changes in demand. Such capability building and customer attention cannot be achieved without a cost. Typically, in order to ensure availability, extra production and service capacity need to be reserved; this will incur an additional cost of over capacity. However, when the strategic positioning of the supply chain is rightly set, the gains from the agility are worth the effort and cost. This actually raised an important question. In which business circumstances that the agile supply chain is worthwhile?
To answer this question, we may do some comparative observations between lean and agile by looking at some most common variables in supply chain management. First, we can make an observation on the volume and variety of the product that supply chain produces. As shown in Figure 25, lean works best for high volume, low variety and more predictable operating environment; whilst agility is needed in a less predictable environment where the demand for variety and choice is a dominant feature.
The new breed of enterprises such as Zara, Dell, Cisco and Li & Fung are certainly demonstrating apparently different success models when it comes to responding to customers in a fast-moving environment, where life cycles are short and variety reigns. The winners in this environment are those that can respond quickly and efficiently. This renewed competitive arena calls for more nimble businesses and more agile supply chains.