Logistics and Supply Chain Management, 4th Edition

LOGISTIC S & SUPPLY CHAIN MANAGEMENT

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The problem now is that the context has changed. We have seen a move from the

lower left-hand quadrant in Figure 14.1 to the upper right-hand quadrant and yet

many companies have not recognised the implications of this shift for supply chain

design. What is now required are supply chains that are far more agile and better

able to cope with rapid change and higher levels of variety and even customisation.

Seeking structural flexibility

It has long been recognised that flexibility in operations and supply chain manage-

ment is a desirable attribute. Generally flexibility in this context has usually been

defined in terms of the ability to respond rapidly to demand changes in volume

or mix for existing products. This capability might be defined as dynamic flexibility

and it is linked to ideas such as set-up time reduction and the use of flexible manu-

facturing systems (FMS). However, in the world we have described earlier in this

chapter, characterised by change which is discontinuous rather than incremental,

a different type of flexibility is required.

In effect what is needed is something we might term structural flexibility.

Structural flexibility reflects the ability of the supply chain to adapt or reconfigure its

architecture in response to major changes on the demand side or the supply side.

Supply chains with high levels of structural flexibility are well able to cope with the

levels of volatility that are a feature of the twenty-first century business environment.

Equally, when fundamental shifts in the supply chain’s centre of gravity occur

they are capable of rapid adaptation to meet the changed conditions.

Tomorrow’s model

• Virtual networks

• Information based

• Customer value oriented

Yesterday’s model

• Independent entities

• Inventory based

• Low-cost production

Mass production

mass marketing

Supplier driven

Market driven

Mass customisation

one-to-one marketing

Figure 14.1 The supply chain of the future