Want to Thrive in Disruptive Times? Start With an Agile Supply Chain

Martin Christopher  – Cranfield University

Companies operating in every industrial sector and in every market around the world are facing significant challenges, ranging from economic recession to demographic shifts and geo-political upheavals, to name but a few. The healthcare and pharmaceutical industries are no exception. When confronting these changes, it will be crucial for companies to develop agile supply chains. From a healthcare perspective, agility helps organisations and their suppliers work in mutually beneficial ways, better utilising shared information. To bring these ideas together, a number of basic principles can be identified as the starting point for agile supply chains.

  1. Getting in sync

Synchronisation implies that all parties in the supply chain are marching to the same drumbeat. In other words, through shared information and process alignment, there is one set of numbers and a single schedule for the entire supply chain. This somewhat Utopian vision is increasingly becoming a reality as web-based technology and cloud computing enable different entities in a network to share information on demand, inventory and capacity.

  1. Work smarter not harder

Many steps in the supply chain are lengthy because the activities are performed in a linear fashion. It is often possible to compress lead times through supply chain mapping exercises, which can help to identify opportunities for activities to be performed simultaneously – thus enabling non-value adding time to be reduced.

  1. Partner to reduce in-bound lead times

Conventionally, firms have maintained an arm’s-length relationship with suppliers. Suppliers are often chosen on the basis of price rather than their responsiveness. A major opportunity exists for reducing in-bound lead times through closely working with key suppliers. For many companies, this could become a real competitive advantage.

  1. Keep it simple, stupid

Complexity comes in many forms in supply chains. It may be generated by different pack sizes or Bills of Material. It could be frequent product changes and so on. But complexity also comes from cumbersome processes that involve many different stages and hand-offs. Simplification is an obvious remedy. Don’t forget to question why things are the way they are.

  1. Consider postponement (really)

The idea of postponement ideally would begin on the drawing board so products are designed with late configuration in mind. The longer products can remain a work in progress the more flexibility there is to ensure the right product in the right place at the right time.

  1. Look past functions

For centuries, organisations have followed an organisational logic based upon a division of labour where activities take place within functions or departments. While this functionally-based organisational concept may ensure the efficient use of resources, it creates a silo-type mentality. As a result, companies are slow to respond to changes in the market or business environment.

Companies that respond rapidly to changing customer requirements tend to focus more on managing processes. Processes are the horizontal, market-facing sequences of activities that create value for customers. They are cross-functional by definition and are usually best managed through inter-disciplinary teams.

  1. Measure. Measure.

It’s a truism that performance measurement shapes behaviour. This is particularly the case in business organisations where formal measurement systems drive the business. Unfortunately, these measurements often are based on departmental budgets. This will not necessarily encourage agile practices within the organisation. If, for example, a manufacturing facility is measured on unit cost of production, then the incentive will favour big-batch sizes to take advantage of economies of scale.

However, such actions will probably limit flexibility and create additional inventory. If, on the other hand, time-based metrics were employed, the focus could be on cycle-time reduction and other measures that encourage agile practices. One thing is clear: Yesterday’s solutions will not work in tomorrow’s world.

Turbulent economic conditions and heightened uncertainty are likely to prevail for some time. As a consequence, all companies must be prepared to re-engineer their supply chains to build in greater levels of flexibility and adaptability. More than 150 years ago, Charles Darwin provided an insight that should be the guiding principle underpinning supply chain strategy:

It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.

 

Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.

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