Companies have focused their procurement practices around lean supply chain for many decades. In today’s competitive business scenario, where the consumer is highly demanding and the environmental factors largely volatile, following lean supply chain practices just isn’t enough. The shifting focus from cost reduction to increasing consumer satisfaction has made the modern supply chain increasingly complex. Today, digitization, augmented reality, IoT, and artificial intelligence are transforming how a supply chain functions and companies that are unable to keep up with the pace are losing out on lucrative opportunities. As a result, companies are considering agile supply chain, which is highly flexible and able to adapt quickly to changing conditions. Here are some of the reasons why supply chain professionals should consider an agile supply chain practices:
Ability to Respond to Change
Adopting agile supply chain practices enables the company to handle the market volatility, changes in the economy, changes in technology and equipment, and changes in other variables in a better way. The organizations can rapidly adjust to changing market conditions by helping the manufacturers to produce the correct amount of goods on a daily basis, rather than relying on monthly or quarterly forecasts.
There has been a drastic shift in consumer preferences from the time of Henry Ford, where mass-produced, low-cost products were preferred, to the present time where you can find your name on a bottle of Coke. In order to implement customization on an economically feasible scale, companies have to adopt agile supply chain practices to respond to changing customer preferences quickly.
Ability to Operate with Low Inventory
Procurement professionals are well aware of maintaining high levels of inventory; not only is there a risk of stock obsolescence and spoilage, it also freezes the company’s much-needed capital base. One industry where the dangers of keeping high inventory is imminent is in the fashion industry, where the summer collection gets outdated by the spring itself, forcing the company to sell the inventory at heavy discount. Zara, by adopting agile supply chain practices, has been able to maintain low inventory and replenish the stock fortnightly.
Agile supply chain practices can significantly improve performance in industries compared to lean supply chain where the market is volatile and unpredictable, the customer demand is ever-changing, or if there is a high level of innovation.
For more information on how your organization can implement agile supply chain practices: