Supply Chain Agility - The agile supply chain for unpredictable times

Supply chain agility has received increasing attention due to two important developments. First, on average, the markets have become more dynamic. Several companies experience shorter product cycles and volatile demand patterns. In addition, despite the recent news that Apple and Foxconn are considering bringing more of their manufacturing back to developed countries, the overwhelming trend has been to see supply chains extend across the globe. This trend is unlikely to completely reverse, as growing markets are also in regions where companies initially moved to take advantage of the cost efficiencies. Secondly, there is increased awareness of supply chain management risks and the role of agile supply chains to recover from these risks.

The term "agile supply chain" is used widely with an assumption that there is one prevalent perspective of what supply chain agility entails. One perspective that has been gaining prominence is that supply chain agility is the capability of a firm, with conjunction of its supply chain partners to 'adapt and respond' the changes in its business environment in a swift manner. These changes may be due to new markets or new ways of doing business and they may be expected or unexpected. How the company views them affect whether they consider the change an opportunity to capitalise on or a threat to be managed. In either case an agile supply chain can be part of an effective response strategy. We consider the indicators of supply chain agility to be the level of responsiveness to customer requests, the ability to quickly identify changes in the marketplace and respond to it and finally coordination and collaboration with supply chain partners.

Of interest is what kind of investments the company has to make to acquire this capability. While this is only one of the potential many routes, this series considers investments in strategic sourcing and how these investments can contribute to the agility of a firm. A closer look at companies that have utilised strategic sourcing to this end suggests two routes: The first is about making decisions under strategic sourcing that directly feed into supply chain agility. The second is how to accumulate indirect effects by using strategic sourcing to strengthen operational flexibility which has been shown to be linked to supply agility. We will address in the next two parts: first by discussing operational flexibility and then by looking at how these all fit together.

This series was originally produced for the Procurement Leaders Network. Visit their website at www.procurementleaders.com