What is Agile Supply Chain?

In this article, we will explain how the agile theories were developed and 7 actionable ways you can use to turn your organization into the agile supply chain.

What is Agile Supply Chain?

Supply chain agility is based on the concept of "Agility" which was developed at Lehigh University. The primary focus was to make a manufacturing system became more flexible and could adapt to change. The common definition is,

"Ability of the supply chain to anticipate and adapt to the changing international business situations quickly through product, process and people"

Is Agile Supply Chain Popular?

The agile concept is so popular in Europe, but people in the United States don't really care about it very much. There are many versions of the supply chain agility concept. Anyway, this article adapts “The Triple-A Supply Chain Framework” by Professor Hau Lee of Stanford University based on the article published in Harvard Business Review. The essence of this framework is presented in the infographic below,


How to Use Agile Supply Chain

1. Evaluate Needs of Final Customers
Can Apple bring the manufacturing of iPhone back home? We believe they can. Since they have 2 assembling plants in China, we believe they may use one plant for overseas customers and bring one plant back home to serve the home market. But, what are they going to do with the rising costs?

To sell a product at a higher price, you need to create more value. But what kind of value they should bring to its customers in the United States?

Apple is not a big fan of market research because Steve Jobs believed customers didn't know what they wanted until they saw something really cool. We believe this might change. You need to understand the preferences of final customers so you can determine how to improve.

2. Use Flexible Product Design
Product designers should know the market for raw materials, product commonality and product standardization. Choosing the right components can help companies to respond to engineering changes more quickly.

Should Apple use more standardized parts to lower costs?

3. Adopt Postponement Strategy
Postponement concept can be a bit confusing, but the simplest explanation is to produce or keep stock of semi-products and assemble them into final products quickly when demand is known. It's also the way to do mass customization (and sell products more expensive).

Should Apple allow people to customize the iPhone more than in the past?

4. Monitor World Economy
The change in the supply market can have an influence on the customer service's preference. Monitoring the world economy and try to identify new supply bases and markets will ensure that the team is one step ahead of its competition.

A trade war with China, no problem, just switch your procurement to its neighboring countries like Taiwan or even South East Asia.

5. Develop Collaborative Relationship
A company that provides suppliers and customers with proprietary tools and market information will cope with changes more quickly and accurately.

Apple is known to be the information hoarder. Should they change this practice? We are not quite sure how they can continue to create “excitement” by keeping everything so secret.

6. Specify Roles And Responsibilities
Companies that implement lean manufacturing or six sigma project are familiar with this principle very well. Because roles and responsibilities are clearly defined at staff level up to company level so people know-how and with whom to communicate a particular issue. This helps to cut down on a delay in response, especially during supply chain disruptions.

7. Develop a Contingency Plan
A classic case study of a contingency plan is a case of fire of Philips facility in New Mexico in March 2000. Nokia who had a contingency plan managed to locate 2 new suppliers and the new lead-time was only 5 days. Meanwhile, Ericsson who didn't have a contingency plan suffered from months of raw material shortage.

Do you think agile supply chain is easy to implement?



References
- Ketchen Jr, D. J., Rebarick, W., Hult, G. T. M., & Meyer, D. (2008). Best value supply chains: A key competitive weapon for the 21st century. Business Horizons, 51(3), 235-243.

- Naylor, J. B., Naim, M. M., & Berry, D. (1999). Leagility: Integrating the lean and agile manufacturing paradigms in the total supply chain. International Journal of production economics, 62(1-2), 107-118.

- Lee, H. L. (2004). The triple-A supply chain. Harvard business review, 82(10), 102-113.


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Last review and update: March 10, 2020
All contents are written by Ben Benjabutr unless marked as [Guest Commentary]

About the Author and Editor:
Ben Benjabutr is the author and editor of SupplyChainOpz. He holds an M.Sc. in Logistics Management with 10+ years of experience in supply chain management. You can connect with Ben via Twitter, and Quora or drop him a line via e-mail.