1. Chapter 7
The agile supply chain

2. Content
The concept of agility1.
Agile practices2.

3. The concept of Agility
 Key issueKey issue
11
What are the dimensions
of the agile supply chain?

4. The concept of Agility
 Market sensitive
 Supply chain is capable
of reading and
responding to real
demand
 Virtual
 Information-based
supply chain, rather
than inventory-based.
Agile supply chainAgile supply chain

5. The concept of Agility
 Network based
 EDI and internet enable
partners in the supply
chain to act upon the real
demand
 Process integration
 Collaborative working
between buyers and
suppliers, joint product
development, common
systems and shared
information Agile supply chainAgile supply chain

6. The concept of Agility
 Demand characteristics and supplyDemand characteristics and supply
capabilitiescapabilities
end-customers
become more
knowledgeable
about product
Lean supply chain
Agile supply chain
1980’s
1990’s
Efficiency, cost
Responsiveness
Focus

7. The concept of Agility
 Demand characteristics and supply capabilities
DistinguishingDistinguishing
attributesattributes
Lean supplyLean supply Agile supplyAgile supply
Typical products Commodities Fashion goods
Marketplace demand Predictable Volatile
Product variety Low High
Product life cycle Long Short
Customer drivers Cost Availability
Profit margin Low High
Dominant costs Physical costs Marketability costs
Stockout penalties Long-term contractual Immediate and volatile
Purchasing policy Buy materials Assign capacity
Information enrichment Highly desirable Obligatory
Forecasting mechanism Algorithmic( 基于算法 ) Consultative( 基于咨
询 )

8. The concept of Agility
Characteristic Lean Agile
Logistics focus Eliminate waste Customers and markets
Partnerships Long-term, stable Fluid clusters
Key measure
Output measure such as
productivity and cost
Measure capabilities,
and focus on customer
satisfaction
Process focus
Work standardization,
conformance to
standards
Focus on operator self-
management to
maximize autonomy
Logistics
planning
Stable, fixed period Instantaneous response
Comparison of characteristics of lean and agile supplyComparison of characteristics of lean and agile supply

9. The concept of Agility
Source: Mason-Jones, Naylor and Towill (2000), Engineering the
leagile supply chain

10. The concept of Agility
Long lead time
Short lead time
SupplySupply
characteristiccharacteristic
ss
DemandDemand
characteristiccharacteristic
ssPredictable
market
Unpredictabl
e markets
PlanPlan
andand
controlcontrol
JIT: pullJIT: pull
schedulinschedulin
gg
React andReact and
execute:execute:
agileagile
capabilitiescapabilities
Hold inventory:Hold inventory:
hedge and deployhedge and deploy

11. The concept of Agility
 Application of leagility: separation of ‘base’
and ‘surge’ demands

12. Source: Martin, Christopher and Denis Towill, An integrated model
for the design of agile supply chains
 Application of leagility: the Pareto curve approach

13.  Application of leagility: the de-coupling point
approach

14. The concept of Agility
 Preconditions for successful agilePreconditions for successful agile
practicepractice

Enterprise-level reality checkEnterprise-level reality check

Cost of complexity sanity checkCost of complexity sanity check

Lowering the cost of complexity: avoidingLowering the cost of complexity: avoiding
overly expensive agilityoverly expensive agility

Forecasting: reduce the need for lastForecasting: reduce the need for last
minutes crisesminutes crises

External: demand forecastExternal: demand forecast

15. Content
The concept of agility1.
Agile practices2.

16. Agile practices
 Key issueKey issue
11
How can we use agile practices
to benefit from turbulence in the
marketplace?

17. Agile practices
 Three characteristics of supply chain
operations related to agile
 Mastering and benefiting from variation in
demand;
 Very fast response to market opportunities;
 Unique or low volume response.

18. Agile practices
 Benefiting from varianceBenefiting from variance
 Three sources of demand uncertainty

Seasonality

Product life cycles

End-customer demand
Demandvariance
Time

19. Agile practices
 Benefiting from varianceBenefiting from variance
 Three sources of demand uncertainty

Seasonality

Product life cycles

End-customer demand
variety
Volume
Start up Micro-markets
Organize Adjust
Agile capabilityAgile capability
is neededis needed

20. Agile practices
 Benefiting from short time windowsBenefiting from short time windows
 Decreased D-time requires different levels of
agility (VMI & QR)

Speed of replenishment

Upstream time sensitivity

Information dissemination and alignment

21. Agile practices
 Benefiting from small volumeBenefiting from small volume
 Small volume is a result of micro-markets,
customization and rapid responsiveness.
 Three approaches of agile strategy related to
small volume

Changeover flexibility

Modularity at the network level

Service-based and information-based solutions

22. Agile practices
 Benefiting from small volumeBenefiting from small volume
Variety
decrease
Volume
decrease
Mass production
Flexibility
Modular supply network
Craft production

23. An integrated model for enabling the Agile supply chainAn integrated model for enabling the Agile supply chain