Distribution Centers in Agile Supply Chain Design

Today I want to have a look at “Design and operation of distribution centres within agile Supply Chains” by Peter Baker (2008; Cranfield University).
The main part of the article describes the results of a survey conducted with nine business units to assess challenges and measures for supply chain agility.

Agility

is defined as “management concept centered around responsiveness to dynamic and turbulent markets and customer demand”. But it also involves exploiting these changing markets to take advantage from it.

Supply chain design

According to Stevens (1989) the supply chain system can be divided into three parts: external, internal and functional. Distribution centers fall into the functional level, since they connect different parts of the supply chain. To design the supply chain therefore also includes decisions on the number, size and location of distribution centers as well as formal aspects like the ownership.

The distribution centers are the focal issue of the survey conducted.

Challanges

Achieving an agile supply chain can be challenging. The major issues are:

• Variance in volume (especially due to growth, seasonality, promotions and demand fluctuations)
• Time variance (adjustments of manufacturing / delivery times)
• Quantity variance (fluctuations in order quantities)
• Inbound variance (volume and time)
• Presentation of goods (added by participants of the survey)
• Handling of returns

Measures

The following measures have been taken by the participants to achieve agile supply chains despite these challenges (extract):

• Flexible usage of space used within shared-user 3PL warehouses (for smaller operations)
• Routing of flows through the network in line with changing circumstances
• Design buildings and equipment for growth and flexibility
• Adopt flexible staffing arrangements (for own and temporary staff)

Conclusion: Risk and agility

The article did not focus on the risk side of the suggested measures.
But there are connections. On the one hand an agile supply chain can reduce risks by designing for flexibility (eg. hiring practice or flexible contracts with 3PL provideres).

Can agile supply chains also increase risk exposure of a company or supply chain?