How a Successful Supply Chain Management Strategy Requires Flexibility and Agility
In today’s post-pandemic, digital-first world a successful supply chain management strategy requires both flexibility and agility.
From B2B to B2C, customers and consumers have more supplier options than ever before, so your company’s competitiveness relies more than ever on your supply chain’s ability to adapt to change, and to do so quickly.
“Supply chains matter,” says McKinsey & Company in their “Future-proofing the Supply Chain” article. “The plumbing of global commerce has rarely been a topic of much discussion in newsrooms or boardrooms, but the past two years have pushed the subject to the top of the agenda.”
Continued technological advancements are only serving to heighten end-user fulfillment expectations so if your supply chain drops the ball on either flexibility or agility, there is a good chance that customers and consumers will turn to competitors to get their needs met.
“Customer loyalty is no longer a given,” explains McKinsey & Company, pointing out that 77 percent of U.S. consumers changed stores, brands, or the way they shop during the pandemic. “The big winners of the crisis were companies, often the largest players, that could keep products flowing to their customers in a difficult operating environment.”
Understanding the Supply Chain and Fulfillment
A supply chain is a network of people, organizations, resources, activities, and technologies involved in the creation and delivery of a product or service. It starts with the extraction of raw materials and ends with the delivery of the finished product to the customer.
The key to any manufacturer's supply chain is the "free flow" of materials, ensuring that products move seamlessly from inception to delivery.
Fulfillment, often overlooked, plays a pivotal role. Companies must monitor the entire supply chain, including order fulfillment, to meet increased customer expectations in our post-pandemic world.
Digital Advancements Test Customer Loyalty
The digital revolution has transformed the business landscape with customers now having increased options and access to a global marketplace with a simple tap of their smartphone or laptop screen.
In this era, flexibility and agility are more critical than ever, regardless of whether a company is engaged in B2B or B2C operations.
This abundance of choices has led to decreased customer loyalty, making supply chain reliability a make-or-break factor for retaining customers.
Supply Chain Management: Flexibility vs. Agility
Flexibility and agility are often used interchangeably, but they have distinct meanings in supply chain terms:
- Flexibility involves the ability to adapt to change, whether it's a shift in customer demand, supplier issues, or disruptions in the market.
- Agility is the speed at which an organization can react to these changes and make necessary adjustments.
Flexibility and agility in the supply chain are both essential for meeting customer expectations and staying competitive.
To differentiate between the two, here are examples of flexibility and agility in the supply chain:
Flexible Supply Chain
- Having multiple suppliers for the same raw materials or components.
- Using flexible manufacturing processes
- Having the ability to quickly scale production up or down.
- Having a diverse transportation network.
- Having a robust fulfillment network.
Agile Supply Chain
- Using real-time data to monitor and manage the supply chain.
- Having a decentralized decision-making process.
- Empowering employees to make decisions and act quickly.
- Having a culture of continuous improvement.
The Benefits of Both Flexibility and Agility in the Supply Chain
There are numerous benefits to your enterprise to having a supply chain management that is both flexible and agile, including:
- Increased customer satisfaction.
- Quicker response to changing customer preferences.
- Rapid decision-making and implementation of changes.
- Improved profitability.
- Efficient allocation of resources.
- Ability to incorporate new technologies and suppliers as needed.
- Enhanced risk management and mitigation.
- Increased competitive advantage.
- Seamless response to unexpected challenges.
On the flip side, if your supply chain management does not value flexibility and agility, then your company risks the ability to keep up with market fluctuations, and risks delays in addressing supply chain issues which can lead to customer dissatisfaction.
The Importance of Flexibility in the Supply Chain
Market changes occur swiftly and frequently, keeping every link in the supply chain in a constant state of flux.
The advantages of having flexibility in your supply chain include:
- Anticipating and responding to market shifts.
- Meeting customer demand promptly.
- Leveraging new opportunities as they arise.
Disadvantages of not having flexibility include:
- Risk of being left behind in a rapidly evolving market.
- Difficulty in adapting to unforeseen circumstances.
- Potential for loss of market share due to inflexibility.
The Significance of Agility in the Supply Chain
Agility is equally critical, especially in a digital-first world.
“The lesson is clear: move at the same speed as customers,” says McKinsey & Company. “That means creating innovative products and brands that meet the changing needs of different consumer groups as those needs emerge. And it means greater skill in managing complex portfolios of brands with different market characteristics and delivering their products through multiple channels. These same pressures increasingly hold true for B2B businesses as well, as increased consumer product complexity and demand volatility trickle down the supply chain.”
The benefits of an agile supply chain encompass:
- Swift response to customer demands and market trends.
- Reduction of lead times, enabling just-in-time production and delivery.
- Enhanced adaptability to disruptions, such as supply chain breakdowns or natural disasters.
Disadvantages of lacking agility:
- Missed opportunities due to delayed responses.
- Inefficient use of resources.
- Difficulty in maintaining a competitive edge in a fast-paced environment.
Best Practices for Improving Flexibility and Agility in Your Supply Chain
McKinsey & Company says that this fast-moving, fragmented, consumer-centric world will require a different sort of supply chain.
“Traditional supply chains sought to achieve stability and minimize costs. Future supply chains will need to be much more dynamic—and be able to predict, prepare, and respond to rapidly evolving demand and a continually changing product and channel mix,” says McKinsey & Company. “In short, supply chains will need to become agile.”
For those looking to enhance their supply chain management, here are some best practices:
- Collaborate closely with suppliers to adapt to changing demand.
- Invest in data analytics and forecasting to make informed decisions.
- Maintain multiple supplier relationships to mitigate risks.
- Streamline decision-making processes to reduce response times.
- Implement advanced inventory management systems for real-time visibility.
- Continuously train and empower employees to make rapid, well-informed decisions.
Flexibility and agility are not optional in today's supply chain management; they are essential for remaining competitive in a rapidly changing business landscape.
Companies that recognize their importance have a good chance of achieving a resilient and responsive supply chain that can meet the evolving demands of customers and the challenges of the modern digital marketplace.