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Agile Supply Chain Management Benefits and Best Practices

26 Sep 2019

Supply chains are complex systems that encompass various industries and physical borders. 

There is a whole matrix of links and actors that form around this axis. What is more, fast-moving risks and opportunities are also a huge part of the industry.  To make matters even more complicated, the competition is heating up and getting ever more global. 

How to even approach this tough situation and live to tell the tale?

Well, the adoption of the Agile approach has a profound impact on performance for many supply chain management professionals. This approach gives you essential tools and a blueprint for attaining success. It bridges the gap between reality and plans, gap threatening to swallow many companies whole. 

Read on and find out why Agile supply chain management might just be the thing for you.

The Game Has Changed 

Traditional wisdom sees the supply chain as permanent and inflexible. 

There’s a set of hard rules and procurement requirements that guide all decision-making. Innovation and out-of-the-box activities aren’t encouraged— quite the opposite. 

However, this old way of looking at things no longer reflects what is happening in the field. The business landscape is awash with disruption and innovation. Customer preferences are shifting and imposing service customization and localization. 

Rigid supply chains are withering away because they cannot cope with these dynamic changes. Like it or not, you have to be way quicker on your feet and revise the basics of supply chain management. 

As you perhaps know, the Agile approach originated from software development. 

It was aimed at correcting faults with the more traditional Waterfall approach, which was simply too laggard and ineffective. It failed to produce software solutions that deliver true value to users. 

Exposing and making up for these weaknesses, Agile started building an impressive track record (with some caveats, of course). Soon enough, it started seeping into other industries, logistics included.

The takeaway is you don’t want to act as a policeman anymore, but more as a warden. Your task is to reorganize the flow of goods, set up teams, and recalibrate the margins accordingly. 

Supporting Pillars of Agility 

Being agile is about much more than just swift execution. 

You have to design the whole supply chain with flexibility and adaptability in mind. Of course, this process may call for the refurbishing of your business models and strategies. You need a complete, end-to-end picture that enables you to assess the current state of affairs.  

Once that is sorted out, take a look at the Agile rulebook. One of the governing principles is that people and processes take precedence over documentation. 

Self-organizing, small teams are basic organizational units of Agile project management. They are encouraged to closely collaborate and communicate. The result is rapid ideation and better cross-team coordination. 

To set the scenes for these outcomes, you have to achieve higher labor and asset flexibility. 

Furthermore, notice customer feedback is an integral part of the management process. Constant loops inform teams and lead to better prioritization of work. 

Testing is another recurring activity that holds the key to Agile transformation. It does away with issues that could underline customer satisfaction and market performance. 

To translate it into supply chain terms, Agile management promises to align output with the needs of real people. And to figure out those needs, you have to promote transparency of the entire chain. 

Addressing the Heightened Risks 

Risk mitigation is the chief Agile objective and redundancy its inevitable byproduct. 

To be more precise, it’s necessary to have more supplier relationships and ensure timely delivery of goods that way. If one supplier fails to deliver, there is another one to step right in.

In other words, Agile requires you to avoid putting all your eggs into one basket. This philosophy is the baseline of what is known as a multiple supplier strategy. It entails tools such as zero-volume and buy-back contracts, which support the building of Agile supply chain. 

You can take the example of what brands in the league of Zara are doing. They rely on local suppliers to cut the replenishment times. Yes, they had to forgo cheaper sourcing from Chine, but bold moves such as this one can pay dividends. 

They also look good from a public perception standpoint, don’t they?  

Moving on, note that groundbreaking technologies such as blockchain come into play as well. Among other things, they brought us the proliferation of smart contracts. These documents are digitally enforced by the parties involved, without the need for third-party intervention. 

Trust and transparency are key values that underpin these instruments. 

Reaping the Benefits

There are various benefits are related to Agile implementation. 

Studies on companies from multiple industries speak volumes. They tell a story of a two-fold advantage: higher product availability and lower supply chain costs. This is to say you can score better service level and lower overheads in one stroke. 

When it comes to service, benefits stem from optimal inventory management. You can draw lessons from the online retail sector here, which keeps close tabs on supply and demand. The market leaders are adept at replenishing stocks and minimizing wasted storage space. 

They easily allocate inventory across distribution networks and accurately forecast demand. Giants like Amazon even manage inventories and pricing based on real-time data. For them, low stock levels are a thing of the past. 

Better service level can also be observed through the lens of one other indicator. We’re getting at the percentage of orders completed on time/as promised. This benefit kicks in while at the same time, you have a chance to reduce days of inventory held.  

Hence, Agile turns out to be a win-win. It’s time to venture outside the comfort zone and take calculated risks with Kanban inventory management. You’re better off learning from your mistakes than to cling to a futile plan. 

Make sure to revamp the management framework and refine supply chain processes. Employ advanced analytics in order to predict demand and come up with a variable pricing scheme. 

You really cannot afford to be caught off-guard by sudden changes in supply and demand. Swimming against this current is always a treacherous proposition.  

Onward and Upward with Agile 

The days of fickle and stiff supply chains are numbered. 

Disruption is in full swing across industry sectors and economic volatility only adds fuel to the fire. This is to say that in order to perfect, one has to change often. So, do you want to be part of the future or left behind as one of the laggards?

Assuming the answer is the former, you have some homework ahead. Get familiar with the core set of Agile best practices. Start at the level of strategic planning and gradually work your way down to specifics of supply chain design. 

Moreover, improve your planning and forecasting capabilities to tap into emerging market opportunities. Elevate your service level while keeping the escalating costs at bay. Have an optimal number of products at precisely the right times. 

This is a great way to keep up the pace with the frantic pace of transformation and outmaneuver the competition.