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In Search of Supply Chain Agility

For more than two decades now, I have been in search of what actually mean when we talk about supply chain agility.

Increased agility seems to be near the top of many supply chain strategy and goals, based on surveys and anecdotal evidence. But I wonder if those seeking greater supply chain are after the same thing.

The reality is we have a variety of terms here:

• Supply chain agility

• Supply chain flexibility
• Supply chain adaptability
• Supply chain resilience
• Supply chain visibility

"Resilience" became the word du jure during the pandemic, with hundreds of columns written by various pundits on the need of supply chains to improve it.

"Visibility" comes into play as a foundational element in achieving agility/resilience.

I began thinking about this topic when I took my relative brief turn as an industry analyst in the late 1990s. I and many other pundits at the time frequently exhorted companies to make their supply chains more agility, though if I remember right now without a great deal of specificity on how to do it.

I suppose in part agility might come down in a way to the "I can't define it but I know it when I see it" sort of thing.

We can all agree, I think, that whatever it really is, supply chain agility is increasingly important.

Many surveys of CEOs find "the ability to respond more quickly to demand and opportunities," or something along those lines, at the top of the executive wish list.

That in no small part because the overall pace of change and the level of dynamics in markets are as high as they have ever been.

A long time, I broke down supply chain flexibility into two types

Micro agility: That meant how fast a supply chain could detect and respond to issues and opportunities in the short term - maybe even right now. The truck is late, demand suddenly surges, a customer needs some sort of special packaging or handling: how fast and how effectively can this these changes and needs be managed?

Macro agility: That referred to the speed at which a company's supply chain adapt and execute new strategies and programs to support changes in overall company strategies or market place changes. Easy example: company decides it wants to to build a direct to consumer ecommerce channel, maybe with new SKUs in the mix. How fast can the supply chain put in place what it needs to do to make that happen?

In retrospect, not sure "micro" and "macro" were really the best words to choose, but hopefully the sense of them is clear, and maybe you agree with the two categories and why it is important to look at this distinction.

Is "resilience" something different too? I am pondering. Would say the way the term is used it is closer to micro agility, but with some additional connotations.

It made me feel good when in 2004 Stanford's Dr. Hau Lee wrote a classic Harvard Business Review article on "The Triple-A Supply Chain," which was very consistent with my breakdown, at least for two of the three A's.

The first A was for "Agility," which was close to my Micro Agility construct. Lee said the objective of being more agile was to "Respond to short term changes in supply and demand more quickly." The concept as Lee described it was quite similar to the "demand-driven" supply chain concept.

Lee's second A was "Adaptability," which again was very similar to my Macro Agility, and can almost be seen as being "evolutionary" - the supply chain must constantly evolve and improve as times and conditions change.

Lee gives some characteristics of Agile and Adaptable supply chains, but not what I would call anything that helps us really measure either dimension.

About 10 years ago, Dr. David-Simchi-Levi of MIT introduced some other thinking on SCM flexibility. While focused specifically on manufacturing, he does offer a more specific definition around what flexibility means in this context. If you have 5 manufacturing plants for a given business and each one can only produce one family of products, you have 1X flexibility. If each can make two families, you have 2X, etc. "Full flexibility," or 5X in this example, would mean every plant can make every product.

Simchi-Levi has done some great work showing the trade-offs in costs and benefits at different levels of this type of flexibility. The short summary is that best bet is usually to invest in some levels of flexibility, but at a relatively low level (say 2X or 3X).

You almost never here the term any more, but there used to be the concept of "flex manufacturing." In the 2000s, I spoke at length with a former supply exec at Carrier Corp., which had been a pioneer in this area, and one of the foundations was being able to profitably produce and meet customer demand at plus or minus 20% of the base forecast.

At least there, we have a clear definition of what "flexible" means. Is there a way to use that approach to the broader supply chain? I am not sure.

Finally, all the way back in 1999 a Prof. Martin Christopher of London's Cranfield School of Management wrote a well-received article on "The Agile Supply Chain" that said agility had four dimensions: (1) a supply chain that is driven by true demand; (2) that is "virtual," replacing inventory with information whenever possible in the extended supply chain; (3) true process integration between trading partners; and (4) relatedly, a supply chain network working as one.

At one level, this feels a little dated; on the other hand, I think most companies still have a long way to go across all four dimensions.

Certainly, supply chain technology, more specifically software, is a key factor, either as an enabler or a barrier to agility I think most would agree.

So are we any clearer on what supply chain agility really means? Is there any way to really assess or even actually measure either type of agility - or reslilience?

I am going to be working on those questions in 2021. Think it would be good for the industry to have some better definition of these important concepts. What gets measures gets managed, as they say.

Do you have definitions for supply chain flexibility, agility, adaptability, etc.? Is there any way to actually measure these supply chain attributes? Would having such an assessment or measure be useful? Let us know your thoughs at the Feedback button below.