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

Here are seven ways logistics can help you find a competitive advantage in today’s marketplace.

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.

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It will be crucial to develop agile supply chains.

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 organizations and their suppliers work in mutually beneficial ways, better utilizing shared information.

To bring these ideas together, a number of basic principles can be identified as the starting point for agile supply chains.

[Also on Longitudes: On the Road to Disruption]

 info button 1Getting in sync

Synchronization 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.

info button 2 yellowWork 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.

info button 3 yellowPartner 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.

info button 4 yellowKeep 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.

info button 5 yellowConsider 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.

[Also on Longitudes: Leveraging a Small-Business Mindset for Long-Term Success]

 

info button 6 yellowLook past functions

For centuries, organizations have followed an organizational logic based upon a division of labour where activities take place within functions or departments.

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Yesterday’s solutions will not work in tomorrow’s world.

While this functionally-based organizational 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.

info button 7 yellowMeasure. Measure. Measure.

It’s a truism that performance measurement shapes behaviour. This is particularly the case in business organizations 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 organization.

If, for example, a manufacturing facility is measured on unit cost of production, then the incentive will favor 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. goldbrown2

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Martin Christopher is Emeritus Professor of Marketing and Logistics, Cranfield University, UK.

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