How to Build an Agile Supply Chain
Make an agile supply chain your competitive advantage
When working to design agility into your supply chain, it’s always a good idea to consider the least agile aspects first.
At a very high level, your supply chain is the process that moves products from your suppliers to you and then on to your customers. Within your supply chain—and think of it as a real chain for a moment—there are certain links that would appear to be very fixed:
- Supplier Manufacturing Facility
- Modes of Transport
- Production Lines
And, yes, those are all things that would seem to be very hard to move.
What Is Supply Chain Agility?
An agile supply chain is a supply chain that is a competitive advantage for the company driving it. An agile supply chain can potentially give you the ability to:
- Ramp up products quickly
- Launch ahead of your competition
- Divert products from one destination to another
- Flex product changes with marketing plans
- EOL (end of life) a product without a negative financial/inventory impact
Agile supply chains afford their users the ability to react to market realities while minimizing unfavorable financial impacts. And, yes, management is going to love the idea of an agile supply chain.
But how do you create supply chain agility?
Ramping Products Quickly
If you’ve ever been an accessory supplier to Apple, you’d know the value in first-to-market product launches. Months in advance, you and your marketing teams are scouring the Mac forums and message boards, looking for any hint at what the latest i-Product is going to be.
Apple will then—possibly—announce that they will be making an announcement. So—at least you know something is likely coming (and not just an operating system upgrade).
You make a calculated-slash-educated guess that the new product will be a phone or iPod or tablet or MacBook. And you do what you can to estimate sizes (thank goodness for those publicly available patent drawings).
Apple then announces its latest and greatest will be in Apple stores in four weeks. And you’re off!
But so are all the other Apple accessory suppliers! And there are only so many pegs available to hang your accessories one. First accessory there, wins!
Supply chain agility to the rescue!
- Lock up production facility capacity
- Secure raw materials
- Pre-book air cargo space
While you may not have known exactly what was going to launch, you knew enough to pay your suppliers to lock up capacity at their production lines. That means paying factories for production capacity that you may not use but is worth the gamble.
You may not know the exact size of what you’ll need to cut-and-sew or injection mold but you know you’ll need the raw materials or molding pellets to run production. So you’ve secured them ahead of time.
And what’s the point of making all of those accessories before your competition, if you can’t get it to your distribution centers first? Your freight forwarders can secure air cargo space well before you need it.
Apple accessory suppliers aren’t the only companies who can benefit from these fast ramp-up tricks.
My Shipment Is Zigging, I Need It to Zag
Agile supply chains can also help you move product to Destination Plan B. Make sure your logistics providers have real-time GPS to track your shipments.
If you get the call from your inventory control team or your sales gurus that you need that Seattle-bound shipment diverted to Ontario, the right logistics provider can get the job done with a couple of clicks and swipes in their app.
The Marketing Plan Zigged, Now I Need to Zag
Marketing plans change. That’s a great immutable fact of supply chain execution. Forecasts are either going to be wrong by one or wrong by a million, but they will be wrong. Agile supply chains understand to that and know they’ll be called into action.
The forecast had been for a thousand blue ones and a hundred red ones. But they now they’re ordering a thousand red ones.
The forecast had been for ten thousand pieces per month for the next 18 months. Now, 12 months into the program, they’re talking about an early EOL.
Agile supply chains include supply agreements with suppliers that allow for production changes and inventory cost downs. Supply agreements that provide allowances for suppliers for raw material and other production commitments allow for agility in reacting to market changes.
An agile supply chain allows you to provide your customers what they want, when they want it—but also keeps the cost of that agility as low as possible.