While supply chain executives identify agility in the supply chain as one of their most important priorities, it is an area where many of them have the least confidence in improving, according to research from The Hackett Group.
Supply chain agility can be defined as an organization’s ability to profitably manufacture and deliver a broad range of high-quality products and services with short lead times and varying volumes, while providing enhanced value to customers. To achieve agility in today’s world, the following strategic questions need to be answered:
• How fast can the supply chain respond to demand or supply changes?
• How much change in demand or supply can the supply chain absorb and within what time period, addressing both short-term and long-term opportunities?
• How quickly can a new product be designed, produced and distributed?
There are two main categories of supply chain agility that businesses can work to improve—structural and operational.
To achieve structural agility, an organization needs to:
• Optimize its complex global supply chain
• Respond to shorter product life cycles by adopting faster product commercialization
• Operate an efficient omnichannel distribution system and sales
To achieve operational agility, an organization needs to:
• Manage product line complexity
• Satisfy the escalating expectations of customers
Some common methods of increasing supply chain agility are not without their downfalls.
Although these challenges seem daunting, they can be overcome with the right integrated business planning (IBP program) and supporting toolset.
An IBP program integrates strategic and financial planning with traditional sales and operations planning (S&OP). As an industry best practice model, IBP extends the principles of S&OP throughout the supply chain, product and customer portfolios, customer demand, and strategic planning to deliver one seamless management process.
A best-in-class IBP toolset will allow an organization to achieve the two categories of supply chain agility: structural and operational. Inherently, the tool should have access to real-time data and provide assessments on what-if scenario planning analysis, production planning and logistics and transportation planning, etc. These assessments allow an organization to identify supply chain volatility and allow for faster decisions to adjust and update its supply chain plan to achieve structural agility. With faster and more informed decisions, an organization can attain operational agility and efficiently execute against actual demand.
Overall, a best-in-class IBP program should resolve the limitations and challenges often encountered in supply chain planning as well as offset many of the traditional costs.
The Hackett Group recommends a three-phased approach of rapid assessment, implementation and scale to drive the transformation needed to implement an IBP program, including the supporting tool set, and attain both structural and operational supply chain agility.
• Rapid assessment (~1 month). Consists of current state assessment and gap analysis against IBP best practices and the selection of an IBP tool and prioritization of the modules within the tool.
• Implementation (~4-6 months). Comprises four subphases: implementation planning, design and configure, test and train, and launch and enhance.
• Scale (~6-8 months). Involves deploying the implementation to the remaining business units in the organization by leveraging the developed playbook in the first implementation, as well as continuous improvement.
If implemented effectively and run efficiently, an IBP program can drive both structural and operational supply chain agility. By combining IBP process best practices, an effective IBP governance structure and an IBP tool optimized to meet an organization’s requirements, supply chain agility is within reach as are the associated benefits of faster and more informed decision-making, improved collaboration, improved service levels, inventory reduction and cost reduction.