What is the Agile Supply Chain?
Agile is a method that has been used to develop and create new software. The approach undertaken for agile is an iterative approach. This means whenever new developments or any form of requirements are discovered or needed, they are added to the software. The agile supply chain is a very basic term for understanding and comprehending the flow of goods and services. These can be various types of goods and services. It takes into consideration the motion of products and services as to how they will be stored if storage is a necessity and need. Any work in progress items that need to be taken into consideration and lastly delivery of these goods and services to its ultimate user, the customer.
We will now look at both of these terms together by combining them as this will better help us understand the topic, agile supply chain. However, before we look into that, we should also look at the meaning of the word agile, but in a different context.
Agile simply means flexibility; in the context of organizations, they are expected to be responsive to change in their immediate surroundings, adapt as per the current movements and trends in the markets and customer behaviors. The quicker they can change their strategy, the more comfortable they find themselves in the long run. One particular area for the organizations where agile is important is in the supply chain management division. The way goods and services move from origination and the network or path they follow to reach the final consumer.
Definition
Agile supply chain focuses on key points like
- Efficiency,
- Productivity
- Cost-saving
- Flexibility
- Innovation
An agile supply chain is about delivering goods and services quickly, achieving cost-saving while doing so, being flexible to changes in market conditions and consumer demands, and maintain the overall productivity of the organization.
At times company’s ability to innovate existing goods and services in a way to better suit customer demands and how quickly it is able to implement this innovation is also a crucial component of the agile supply chain.
Companies need to have well established internal principles in place, which can serve as a reference point to have efficient and productive agile supply chain management.
These principles may be based on a market study and a review of all previous situations when the business faces many difficulties in the leadership of its supply chain management. These principles should enable the company to make quick changes to its process without disturbing other parts of the organization.
They should also allow the company to adjust to sudden changes in raw material quantities, customer demands, increase in transportation cost like strikes by unions or accident of their carriers, increase in petroleum costs and natural calamities like floods or storms.
List of Some of these Factors in Agile Supply Chain
An agile supply chain will take into consideration not only above mentioned factors but a wide range of micro as well as macro factors. Below is a list of some of these factors
- Shortage of essential raw materials
- Increase in the cost of raw materials
- Increase in labour costs due to a shortage
- Strikes by labour unions
- Disruption to networks
- Disruption due to natural calamities
- Legal factors specific to each region
- Political factors
Example of Successful Agile Supply Chain
As an example, we will look at the world’s second-largest clothes retailer H&M, with over 950 stores in 19 countries and an overall turnover of $15Billion per annum; H&M is a good example to study efficient and integrated systems it has for inventory management.
- H&M: One of the main components of supply chain management for this industry, H&M focuses on cost efficiency for its production unit and reducing lead times for its inventory. Successful implementation of both of these factors has resulted in it being a global brand name for years.
- Nike: Nike is well-known footwear and apparel firm; it has close to 700 factories spread over 42 countries around the world. It focuses on labour productivity, consolidation materials to reduce wastage and to introduce modern technologies in their manufacturing process.
- Walmart: Walmart is the second largest employer in the United States; it has more than 11,000 stores in 27 countries and an inventory worth 32billion; this shows how important it is for them to have efficient and agile supply chain management. Walmart has been successful by having fewer links in their supply chain management, partnering with vendors that add strategic value for the innovative and modern technology to cut costs and cross-docking of inventory.
Agility is Different from Lean Concepts-
We have mentioned numerous points of agility above; now, we will look at lean concepts, and the two differ. Lean is a traditional form of the supply chain, and at a point in time was the most effective and efficient. Lean often overstocked inventory as this can lead to an increase in storage costs, wastage of inventory due to spoilage and high maintenance cost. Also, a high probability inventory will become obsolete.
On the other hand, an agile supply chain uses real-time data and updated information to forecast demands and improve overall efficiency and productivity.
Benefits of Agile Supply Chain
- The main benefits of an agile supply chain are to enable the process that is existing to change quickly without causing disturbances to other parts of the organization.
- By using real-time data, firms can alter their production to meet the current demands. This way, they reduce wastage and save on storage costs and other expenses
- By using real-time data, firms can project trends in the future and accordingly have plans in place to meet those demands and contingencies if there are deviations from other demands.
- Overall, the industry as a whole learns to deal with volatility in terms of demands which in turn could impact their profit levels, but all concerned parties have accepted this and found ways to work efficiently with one another and satisfy the customers.
Conclusion
Thus I would like to conclude this article by stating that an agile supply chain is the latest trend where adaptability, flexibility, and forecasting future consumer trends are of utmost importance.
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