Supply Chain Agility Key Amid Uncertainty: Measure it to Improve it

SC_B_201365_D200519_May_Cover

COVID-19 and the response has left me with more questions than answers.

How were some companies able to shift all production to hand sanitizer in days, while others took weeks? When Italy needed more ventilators, 3D printing technology was mobilized to meet needs dramatically faster, in higher volumes and with lower costs than existing supply chains. One brand of food stayed on shelves and boosted sales, demonstrating that its supply chain operations could flex to match the needs of the situation, while another had stockouts.

All of these situations are about how fast a process is able to react to new conditions. In the business world, that is agility. Agility is a process attribute describing how fast a response to changing requirements delivers significantly different outcomes effectively.  

SC_B_201365_D200519_May_Graphic 1
How Can We Define Agility?

Supply chain leaders know they need agility, but there is little consensus on how to define it and compare it between processes. In a March 2020 webinar poll of 223 supply chain leaders, agility in changing the design, operations and flexibility of the respondent’s supply chain were all important in the response to COVID-19. At the same time, a doctoral dissertation listed 48 different definitions of agility and in a Gartner survey of supply chain leaders, there was a fairly equal distribution around four to five definitions.[1]

So how do we describe agility in a way that is precise and flexible to use for processes like sensing and responding to new requirements in any portion of the supply chain? Color could be used to describe a shirt, car, tree or dog. Mixing various amounts of primary colors (those which cannot be created by mixing other colors) creates any color of the spectrum. Similarly, any spectrum of process agility can be defined using five “primary colors”:

  • Speed — Time to achieve a shift In performance
  • Response — The reaction to new conditions or requirements described by its magnitude and direction
  • Adaptation — Of what process changes and where described by its scope and focus
  • Performance — Measures the results of the process described by what the targeted shift is and its resulting impact
  • Coordination — of how process changes are implemented based on the effort to complete it and how it is enabled

The result of this approach is a very specific definition for the agility of a supply chain process. For example, “our fulfillment agility is 10 days to achieve 40% more product, generating demand fulfillment volume at 20% higher cost, with a low complexity change of contract manufacture and transportation volume within contractual parameters.”

What are the Benefits of a Framework to Define Agility?

As shown in the chart below, the vast majority of the 223 supply chain leaders polled expressed confidence in handling disruptions pre-COVID-19, but a much greater percentage conveyed not having the right agility for the COVID-19 response.

SC_B_201365_D200519_May_Graphic 2
“If you can’t measure it, you can’t improve it.” – Peter Drucker

If you do not know what you need or what you have, you cannot adjust your process. While we cannot know what the future holds, we can plan responses to likely events and prepare to act quickly when they arrive. I have come across four main benefits of crisply defining process agility.

  • Conversations are more productive. When a supply chain leader can say, “We can launch a high-priority product one month faster in Europe by using our existing contract manufacturer in Vietnam, but it costs 40% more, the discussion can be specific and actionable.
    1. Does this work for your business? If not, what exactly would need to change?
    2. Does the cost need to be a certain value due to profitability concerns?
    3. Does the speed need to be higher based on your assessment of risk?
    4. Do we need to do it for more SKUs?
  • Reactions are faster and more effective. You can enact previously determined plans rather than having to figure out how you can react first.
  • Lower risks, higher business value. Appropriate agility for processes of strategic importance for resilience, recovery from disruptions and supporting business objectives reduces costs and enables growth and profit.
  • It is easier to gain investment. Supply chain agility and resilience have suddenly become the focus of dinner conversations around the world when people focus on the lack of toilet paper or personal protective equipment. New weak spots of supply chains have been exposed. Leaders who can specifically define agility are better able to articulate what gains investments will provide, using this environment to gain executive approval before the risks fade from memory.

Uncertainty, volatility, change and complexity all drive new conditions and requirements in business. These were all increasing in the years before COVID-19, in a world transformed by new technologies like video conferencing, streaming entertainment, artificial intelligence, machine learning and Internet of Things. They are accelerating due to COVID-19.

Do you know how much agility you need? Do you have the right agility? Now is the time for specifics.

Jennifer Loveland,
Senior Director Analyst,
Gartner Supply Chain
[email protected]

[1] The Agility Supply Chain Imperative: Defining How Companies Can Sense and Respond to Change

 

Avatar

Author Guest

More posts by Guest