Chapter 7

The agile supply

chain

Content
1. The concept of agility
2. Agile practices

The concept of Agility

Key issue
1

What are the dimensions

of the agile supply chain?

The concept of Agility

Market sensitive

Supply chain is
capable of reading
and responding to
real demand

Virtual

Information-based
supply chain, rather
than inventory-based.
Agile supply chain

The concept of Agility

Network based

EDI and internet

enable partners in the
supply chain to act
upon the real demand

Process integration

Collaborative working
between buyers and
suppliers, joint product
development, common
systems and shared
information

Agile supply chain

The concept of Agility

Demand characteristics and

supply capabilities

endcustomers
become
more
knowledgeab
le about
product

1980s Efficiency, cost

Lean supply chain

Focus
1990sResponsiveness
Agile supply chain

The concept of Agility

Demand characteristics and supply capabilities

Distinguishing
attributes
Typical products

Lean supply
Commodities

Agile supply
Fashion goods

Marketplace demand Predictable

Volatile

Product variety

Low

High

Product life cycle

Long

Short

Customer drivers

Cost

Availability

Profit margin

Low

High

Dominant costs

Physical costs

Marketability costs

Stockout penalties

Long-term
contractual

Immediate and
volatile

Purchasing policy

Buy materials

Assign capacity

Information
enrichment

Highly desirable

Obligatory

The concept of Agility

Comparison of characteristics of lean and agile supply

Characteristic
Lean
Agile
Logistics focus

Eliminate waste

Customers and
markets

Partnerships

Long-term, stable

Fluid clusters

Key measure

Output measure such Measure capabilities,

as productivity and
and focus on
cost
customer satisfaction

Process focus

Work standardization, Focus on operator

conformance to
self-management to
standards
maximize autonomy

Logistics
planning

Stable, fixed period

Instantaneous
response

The concept of Agility

Source: Mason-Jones, Naylor and Towill (2000),

Engineering the leagile supply chain

The concept of Agility

Supply
characteristi
cs
Long lead time

Short lead time

Plan
and
control

JIT: pull
schedulin
g
Predictabl
e market

Hold inventory:
hedge and
deploy
React and
execute:
agile
Demand
capabilities
characteristi
Unpredicta
cs
ble markets

The concept of Agility

Application of leagility: separation of

base and surge demands

Application of leagility: the Pareto curve approach

Source: Martin, Christopher and Denis Towill, An

integrated model for the design of agile supply chains

Application of leagility: the de-coupling

point approach

The concept of Agility

Preconditions for successful agile

practice

Enterprise-level reality check

Cost of complexity sanity check
Lowering the cost of complexity: avoiding
overly expensive agility
Forecasting: reduce the need for last
minutes crises

External: demand forecast

Internal: financial forecast, asset forecast

Content
1. The concept of agility
2. Agile practices

Agile practices

Key issue
1

How can we use agile practices

to benefit from turbulence in the
marketplace?

Agile practices

Three characteristics of supply chain

operations related to agile

Mastering and benefiting from variation

in demand;
Very fast response to market
opportunities;
Unique or low volume response.

Agile practices

Benefiting from variance

Three sources of demand uncertainty

Demand variance

Seasonality

Product life cycles

End-customer demand

Time

Agile practices

Benefiting from variance

Three sources of demand uncertainty

Seasonality
Product life cycles
Organize

Adjust

Start up

Micro-markets

Volume

End-customer demand

Agile
capability is
needed
variety

Agile practices

Benefiting from short time

windows

Decreased D-time requires different levels

of agility (VMI & QR)

Speed of replenishment
Upstream time sensitivity
Information dissemination and alignment

Agile practices

Benefiting from small volume

Small volume is a result of micro-markets,

customization and rapid responsiveness.
Three approaches of agile strategy related
to small volume

Changeover flexibility
Modularity at the network level
Service-based and information-based solutions

Agile practices

Benefiting from small volume

Variety
decrease

Mass production
Flexibility
Modular supply network
Craft production
Volume
decrease

An integrated model for enabling the Agile supply cha