Many of us have heard the terms Lean, Six Sigma ISO 900 series – all great disciplinary ways to take waste out of the business processes and run operations more efficiently and accurately. As we continue to accelerate to new ways of conducting business in the 21-century tech era, the emerging eCom markets make it very difficult to predict the sales outcome perfectly.
To quote from the article in Aioneers.com, “Today the market is defined by an acronym – VUCA, Volatility, Uncertainty, Complexity, and Ambiguity.”
Let us talk about the differences of being Lean versus Agile within a market of VUCA.
The Lean supply chain operates in a way to remove inefficiencies and lowering cost to optimize the supply chain, which is great. However, its practices are unable to react to changing market conditions quickly in the present and/or future. In the new emerging eCom markets you need to rely on a more agile supply chain, with the ability to have a high level of adaptability and respond at a very fast pace.
Some of the main properties of having an agile supply chain according to Aioneers.com is the ability to respond to variations in your market and being able to shift with it; the capacity to produce highly customized products based on demand, and the use of technology to visualize and implement changes in real time. The agile supply chain needs more flexible contract/arrangements with suppliers in terms of MOQs, firm planning windows and liability discussions. For an agile supply chain design, it is advisable to have secondary suppliers that can cope with shorter lead time and/or sudden demand changes.
However, I feel in today’s Global 24/7 economy it is most beneficial if your supply chain can operate in both a Lean and Agile combination. This you could call a hybrid supply chain strategy like how some carriers utilize other external services to support their core business products, such as, UPS SurePost or FDX Smart Post now Ground Economy. They can adapt quickly with lean concepts to customers’ unique needs and demands.
For example, UPS using USPS for a final mile delivery, lowering their operating costs and support infrastructure by utilizing the most efficient residential delivery system, but at the same time adapting to customer demands for a more cost-effective service. This same concept can be applied to those organizations that are trying to meet demand of their customers, but at the same time run efficiently, keeping the inventory levels predictable and flexible.
This can be done by managing your manufacturing arm with a hybrid approach. It will require your organization to carefully plan your approach. There is of course more than one way to accomplish this. You could incorporate a variable manufacturing and flexible distribution model. In this model a company may have subcontractors perform distinct manufacturing processes and be ready to change as demand requires. This is especially good when trying to promote new products even when demand is higher or lower than expected.
Another way is to partially do in-house manufacturing that will allow you to add or delete certain components. You could perform the finishing functions such as labeling and packaging functions that are the lower cost ones in house. This provides much more flexibility for change management. It Also allows an organization to move the product through the manufacturing process from a model of multiple sub-contractors much quicker and with ability for change orders.
In a rapidly changing retail environment with the emerging global economy, your competitive advantage may require both a Lean and Agile supply chain model.
To learn more check out this article in Aioneers.com.