Supply Chain Optimisation: Part 3
... Having developed this provide a convenient and useful conceptual framework for us to consider the lean vs agile debate as per the diagram below. Lean, with its efficiency focus, is more suited to relatively stable markets where cost (and therefore the risk of substitution) is an issue. Agile, on the other hand, with its focus on responding quickly to market needs, is better suited quickly changing markets such as are experienced by fashion goods. Complex products having uncertain demand being better suited to a project management style of control. This leaves the fourth quadrant which was deemed to be under the remit of the approach recently coined as ‘leagile’. ...
Supply Chain Optimisation: Moving Beyond Estimates, Expediting and Excel
Part 3: Having developed this provide a convenient and useful conceptual framework for us to consider the lean vs agile debate as per the diagram below. Lean, with its efficiency focus, is more suited to relatively stable markets where cost (and therefore the risk of substitution) is an issue. Agile, on the other hand, with its focus on responding quickly to market needs, is better suited quickly changing markets such as are experienced by fashion goods. Complex products having uncertain demand being better suited to a project management style of control. This leaves the fourth quadrant which was deemed to be under the remit of the approach recently coined as ‘leagile’.
Leagile supports the view that both lean and agile practices can be employed within supply chains for certain types of products, i.e. those where the production lead-times tend to be quite long in relation to the delivery lead-times imposed by the market. The interface between the application of the lean and agile approaches in the leagile supply chain, i.e. the de-coupling point, is the separation between the ‘front end’, i.e. responding to customer orders, and the ‘back end’, i.e. manufacturing to forecast.
The exact position of this interface within the supply chain / business will vary from supply chain to supply chain. For instance, before the decoupling point stock will be held intentionally to buffer fluctuations in demand and the build schedule reflects a make to forecast (MTF) scenario. Conversely, after the de-coupling point the focus is on the responsiveness to the marketplace (i.e. agility) and the ability to meet needs i.e. a make to order (MTO) environment. Looking at the leagile supply chain as a whole, there are many similarities with it and the notion of ‘mass customisation’.
Using the demand uncertainty vs product complexity matrix again we can overlay systems types appropriate to supporting businesses that are in each quadrant as follows:
Systems to support lean processes:
Systems to support agile processes:
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Effective demand management
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Effective supply mapping to demand
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Inventory & obsolescence management focus
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Visibility across the extended supply chain
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Continuous rescheduling
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Quick response
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Short planning cycles
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ATP & CTP focus
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Customer relationship focus
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Knowledge management
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E-commerce & collaboration
Considering the above diagram again we can see that supply chain optimisation (SCO) has a valid role to play in both the agile and leagile quadrants, SCO as a solution would be inappropriate overkill for lean supply chains / manufacturers.
Read the, hopefully unfamiliar, syndromes prevalent in businesses before the successful implementation of an effective SCO system:
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Forecasting - We have no idea what our customers are likely to buy… We have a forecast but then the sales guys do special deals to make their commission…
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Customer Service - We promise delivery dates based on our best guess… We would like to collaborate with customers but don't have the tools…
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Planning - “10 headless chickens”… Every department does its own thing… We have bottlenecks - if only we knew where they were…
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Procurement - Our short lead-time orders on suppliers are always at a high level… We are very agile but are let down by our suppliers…
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Manufacturing - Factory priorities change by the hour… We need 2 weeks firm programme… We have a hierarchy of progress chasers - the MD is the senior expeditor…
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Shipping - We meet our shipping targets by value but our customer due dates are awful… Overtime is costing us a fortune… We always arrange transport on an ad-hoc basis…
These scenarios are surprisingly common even though the supply chain management as a discipline is now well established and good practice is well understood, namely:
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‘End to end’ view of supply chain
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Board level ownership
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Optimisation across the supply chain, not by function
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Exchanging inventory for information
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Closely coupled processes
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Postponement
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Effective S&OP
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Communication & Collaboration with supply chain participants
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Use of IT and internet technologies (i.e. for Demand planning, Collaboration, Inventory visibility & optimisation, Supply planning and Early warning)
