For many years, companies have organized manufacturing, procurement and logistics processes according to the principles of lean management. Lean and cost-efficient – this is how production and supply chains should be designed to maximize competitive advantage and profits. In view of challenging market environments, agile models that focus on adaptability, security and resilience instead of maximum efficiency are gaining in importance – agility therefore becomes a key success factor. So what is supply chain agility and how can companies use it to boost their success?
Supply chain disruptions require new strategies
In the global economic situation that has been unfolding since 2020, with a multitude of production bottlenecks and disruption scenarios, it becomes clear just how fundamental and critical to success a new assessment of supply chain strategies is. A majority of companies stated that they were suffering from bottlenecks in the procurement of intermediate products and raw materials. The design of agile supply chains as part of supply chain risk management is therefore becoming increasingly important.
Agility as an important factor for risk management
In a globalized and interdependent world economy, risks are unavoidable. Companies must anticipate potential disruptions and crises in the future and find ways to mitigate them. This, however, requires a changed view of the fields of production and procurement: The focus should not only be on cost efficiency and maximum cost-effectiveness, but also on the ability to react in the event of a disruption in a way that preserves the ability to act.
What does agility entail in the context of supply chain management?
Agility describes the ability of a system to react quickly, efficiently and independently to internal and external changes. Applied to supply chain management, the term refers to the ability of companies and value chains to adapt to the volatility of the economic environment. This also includes being able to reliably absorb the immediate consequences of disruptions and imminent market changes with suitable measures and by means of sometimes radical changes in process organization.
Significant factors contributing to supply chain agility
The early recognition of changes enables timely reactions. Ideally, companies develop structures that act in a self-learning manner, thus ensuring increasingly precise forecasts. Equally significant is the flexibility with which the company can initiate measures. This includes all product and process adjustments that can be implemented quickly internally and within the supplier and customer network. The third factor is the speed of implementation, with which even drastic changes in the decisive fields of action can be pursued without compromising quality.
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Here’s how companies can increase their supply chain agility:
- Supply chain transparency. Rapid response and adaptation require precise and up-to-date knowledge of market events, potential disruptive factors, and all relevant processes within the company and the corporate environment. Flexible procurement planning is only possible through permanent monitoring, the derivation of early indicators and a permanent optimization based on current information. The examination of risks must become a natural process.
- Inventory optimization. Strategic safety stock minimizes the risks of disruptions and supply bottlenecks. Focused on flexibility, inventory procurement with sufficient buffer is advantageous. However, the just-in-time method offers a higher implementation speed. It is therefore important to select the procurement types in a differentiated manner and in line with the respective requirements and to combine them in the best possible way.
- Supplier management. Cooperations should be evaluated according to agility-oriented criteria even before they are selected, and thus strategic supplier development should be pursued. To ensure cooperation oriented toward flexibility and transparency, open communication, joint process development and acting in partnership are advisable. Good networking and continuous optimization create the basis for an early identification of disruptions and a rapid response.
- Reducing dependencies. through dual or multi-sourcing strategies can compensate for failures and thus prevent restrictions on the company’s own ability to supply. Alternative sources of supply should be identified at an early stage. Wherever possible, the ability to provide services in a regional environment can also reduce risks. Emergency plans should be developed for the event that critical parts and materials suddenly become unavailable.
- Corporate organization. Staff allocation, knowledge management and quality assurance also serve agility. Flexible working time models ensure a rapid response to overcapacity or undercapacity. Self-responsible project groups and self-regulating work structures accompany change processes in a targeted manner and enable forward-looking decisions. Quality assurance through regular audits, certifications and common standards along the value chain guarantee process transparency and rapid improvements.
- Digitization and data management. Process chains should be visualized across the entire value chain. This requires the systematic integration of all supply chain partners. Consolidated data – ideally collected in real time – are the prerequisite for scenario calculations and precise analyses. Forecasting based on this data in turn enables forward-looking action. The use of artificial intelligence allows patterns in market volatility to be identified and makes disruptions predictable for supply chain risk management.
- Supply Chain Management. A precise instrument for achieving supply chain agility is the establishment of a supply chain management that focuses on flexibility, transparency and implementation speed, supported by a cloud-based supply chain management software. This enables visibility and predictability of all physical and digital processes along the entire supply chain, thus achieving higher process speed and successfully acting out risks.
Companies that take these recommendations into account when setting up agile supply chains are more likely to be able to maintain their ability to act in exceptional situations and thus to operate successfully on the global market.