Logistics and Supply Chain Management, 4th Edition

LOGISTIC S & SUPPLY CHAIN MANAGEMENT

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The foundations of agility

It will be apparent that agility is not a single company concept but rather it extends

from one end of the supply chain to the other. The concept of agility has significant

implications for how organisations within the supply/demand network relate to each

other and how they can best work together on the basis of shared information.

To bring these ideas together, a number of basic principles can be identified as

the starting point for the creation of the agile supply chain.

1 Synchronise activities through shared information

Synchronisation implies that all parties in the supply chain are ‘marching to the

same drumbeat’. In other words, through shared information and process align-

ment there is in effect one set of numbers and a single schedule for the entire

supply chain. This somewhat Utopian vision is increasingly becoming reality as

web-based technology enables different entities in a network to share information

on real demand, inventory and capacity in a collaborative context.

In the fast moving consumer goods (fmcg) sector there is a growing number of

examples of supply chain synchronisation made possible by the retailers’ increas-

ing willingness to share point-of-sale data with manufacturers. One such instance

is the web-based system established by the UK’s biggest retailer, Tesco. The

Tesco Information Exchange (TIE) is an extranet that enables Tesco’s suppliers to

access their own sales data, item by item. This data is updated several times a day

and potentially can provide manufacturers with the means to link their production

schedules to Tesco’s replenishment requirements.

In the automobile industry most of the volume car manufacturers have estab-

lished ‘seamless’ processes with their first tier suppliers based upon providing

immediate access to production plans and schedules. This enables just-in-time

deliveries to be achieved without the need for major buffers of inventory at the first

tier level.

In the US the ‘quick response’ initiative in the apparel industry has linked retail-

ers to garment manufacturers and also to the fabric producers through shared

information. The impact of this collaboration has been a significant improvement in

the competitiveness of that industry.

2 Work smarter, not harder

Detailed examination of the processes that together constitute a supply chain

inevitably highlights the fact that a large proportion of the end-to-end time is ‘non-

value-adding’. In other words, time is being spent on activities that typically create

cost but do not create a benefit for the customer. Time spent in inventory is a clas-

sic example of non-value-adding time. Supply chain mapping can reveal where this

idle time occurs; to attack it then requires a review of the processes that precede or

follow that idle time. Process time is directly correlated with inventory, e.g. if it takes

three weeks from raising a purchase order to receiving the goods, at least three

weeks of inventory will be required to buffer ourselves during that lead time.