agility

The organizational Antecedents of a Firm's Supply Chain Agility

Daniel Dumke — Wed, 24 Aug 2011 12:54:00 +0000

This time I’d like to have a look at supply chain risk management from a strategic point of view: What are the prerequisites in the design and culture of an organization to mitigate supply chain risks? The title of the article I review today is: “The organizational antecedents of a firm’s supply chain agility for risk mitigation and response”.

Method

The authors use structural equation modeling technique to establish the relations within their model (figure 1).

Figure 1: Relationship Model (Braunscheidel and Suresh, 2009)

The model proposes a linkage between the organizational orientation of a company related to the market and continuous learning. Those design factors should lead towards internal and external integration of the company and its supply chain as well as external flexibility as practices within the organization. This in turn should lead to agility, which is defined as

the capability of the firm, internally, and in conjunction with its key suppliers and customers, to adapt or respond in a speedy manner to a changing marketplace, contributing to agility of the extended supply chain.

Agility is measured by the proxies: joint planning, demand response, increased visibility and customer responsiveness.
The authors augment their model by several proposed relationships / hypothesis shown in figure 2.

Figure 2: Augmented Model with proposed Relationships (click to enlarge; Braunscheidel and Suresh, 2009)

As the method of choice to validate or reject the established hypothesis a survey was created and validated by a panel of ten experts from research and business. Of a sample size (email addresses) of 2955, 218 usable responses were received.

Results

The final results for each hypothesis is shown in figure 3. The hypothesis regarding the relationship between learning orientation and internal and external orientation were not supported as were the hypothesis on the relationship between internal and external integration and internal and external flexibility.

Figure 3: Results (Braunscheidel and Suresh, 2009)

Nonetheless the authors can conclude:

All three organizational practices of internal integra tion, external integration and adoption of external flexible practices were found to be direct antecedents of a firm’s supply chain agility, explaining a significant portion of the variance in the FSCA construct. Among these three antecedents, external integration with key suppliers and customers was seen to be the strongest predictor of a firm’s supply chain agility.

Also the cultural antecedents are shown to have an impact on the organizational practices.

Of the cultural drivers, market orientation was seen to directly affect both types of integration. […] Learning orientation was shown to have a strong and significant influence on internal integration.

Conclusion

I think the article highlights several important aspects. Coming from the supply chain strategy it summarized different organizational practices / tactics which have to be implemented to create a agile company in the supply chain context. The authors do a good job in operationalizing these different states / activities and therefore define quite precisely what they mean by the cultural antecedents, practices and agility.

On the other hand after reading the title (”… agility for risk mitigation and response”) I was expecting some more research on the connection between a companies agility and the reduction of risk, but it seems that the impact of the firm’s supply chain agility was not part of the main survey but “only” elaborated in the literature review.

Reference:

Braunscheidel, M., & Suresh, N. (2009). The organizational antecedents of a firm’s supply chain agility for risk mitigation and response Journal of Operations Management, 27 (2), 119-140 DOI: 10.1016/j.jom.2008.09.006

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Agile Supply Chains and Uncertainty

Daniel Dumke — Wed, 27 Apr 2011 12:49:00 +0000

There are many definitions of agility. A supply chain can be defined as agile, when it is flexible and responds quickly to customer needs. Agility can also be seen as a measure to mitigate supply chain risks, building on this thought Dani and Ranganathan (2008) developed a model to mitigate risks using the concept of agility .

Concept for Agile Risk Mitigation

The authors develop the model based on two premises: (1) scenario planning is used to identify supply chain risks and (2) the system is designed to react fast and flexible to mitigate the risk.
Figure 1 shows the resulting concept.

Figure 1: Concept for agile Supply Chain Risk Mitigation (Dani and Ranganathan, 2008)

Two general mitigation “arms” are necessary. One for the foreseen risks which can be mitigated proactively and unforeseen risks which have to be reduced reactively.

Model Validation

This model constitutes a theory build by the authors on recent literature and own experience. To raise the credibility a theory has to be validated. In this case the authors decide to use the Ericsson case (if you are interested, have a look at my review of the case here).
After a breakdown of a Philips semiconductor plant in 2000, Nokia and Ericsson were competing over the remaining capacity. Nokia reacted fast and acquired spare capacity by Philips and other suppliers. Ericsson reacted more slowly and failed to obtain the necessary component and lost about 400 million USD.

When applying the above mentioned model, it is clear that both companies had not thought about this scenario, however Nokia already beforehand had established a fast communication structure which permitted it to react in a fast manner.

Conclusion

The article also contains a extended literature section defining the terms used, building from uncertainty and risk, to risks in supply chains, scenario analysis and the agility concept. Building on that the concept presented on less then one page seems to be quite underweighted. The main statement of the article is that: (1) planning of future scenarios is important to anticipate and mitigate possible risks, (2) depending on the planning mitigation of disruptions happening can be done proactively or reactively. (3) Especially for reactive mitigation the agility of the company plays a major role in the success.

Reference:

Dani, S., & Ranganathan, R. (2008). Agility and supply chain uncertainty: a scenario planning perspective International Journal of Agile Systems and Management, 3 ¾, 178-191

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Measuring agile Capabilities in the Supply Chain

Daniel Dumke — Wed, 13 Apr 2011 12:22:00 +0000

Today I introduce you to the process of measuring agility in a supply chain. Agility is a major concept in the research of the last 10 years or so. I already have written some articles on this topic:

Consequently, the goal of today’s article is to expand on those and define what are the key factors of SC agility and how it could be measured.

Method

The paper presented is based on two sources: an empirical investigation of agile capabilities in Europe and a literature review of the current research available.

The concept developed is based on the literature review and it is then tested using the survey.

Agility Framework

Agility has already been described early in four basic dimensions (according to Goldman et al.,1995): 1) Enriching the customer, 2) cooperating to enhance competitiveness, 3) organizing to master change and uncertainty, 4) leveraging the impact of people and information

An extensive literature review leads to the agility framework shown in figure 1. The dimensions are described below (quoted).

Figure 1: Presentation of the Agility Framework (van Hoek et al., 2001)

Customer sensitivity
Customer centred versus product centred logistics policies (ten questions): assumes that “agile” policies emphasize customers and markets, while “lean” policies focus on the elimination of waste in products and processes.
Virtual integration
Immediate conversion of demand information into new products using knowledge-based methods versus multi-stage, multi-function methods (three questions): assumes that agile policies focus on instantaneous demand capture, interpretation and response while lean policies emphasize stable production periods and protecting the “operations core”.
Process integration
Self management versus work standardization (five questions): assumes that agile policies focus on operator self- management to maximize autonomy and immediate response, while lean policies emphasize work standardization to ensure conformance to quality and productivity standards.
Network integration
Fluid clusters v. long term supply chain partnerships (six questions): assumes that “agile” policies emphasize fluid clusters of network associates, while lean policies focus on a more fixed set of long-term stable partnerships.
Measurement
Capabilities versus “world class” measures of performance (seven questions): assumes that agile policies are based on broad-based measures that underpin capabilities, while lean policies emphasize “hard” measures such as quality and productivity only.

The authors go further and analyze how these dimensions are represented other common supply chain concepts like just in time or lean production (figure 2).

Figure 2: Representation of Agile Dimensions in common SC Concepts (van Hoek et al., 2001)

Changed Approach

The “agile approach” changes supply chain management as a whole. The authors compare the traditional vs. agile approach very extensively. A summary can be found in figure 3.

Figure 3: Approaches to Agility in Supply Chain Management (click to enlarge; van Hoek et al., 2001)

Conclusion

Overall this article is a good starting point to answer the question “what is agility?”. For business it is important to transfer this framework into their measurement systems to get a benchmark how well they perform, since “you cannot manage what you don’t measure”.

Reference:

Hoek, R., Harrison, A., & Christopher, M. (2001). Measuring agile capabilities in the supply chain International Journal of Operations & Production Management, 21 ½, 126-148 DOI: 10.1108/01443570110358495

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Personalized Products and their Impact on Supply Chain Design

Daniel Dumke — Wed, 08 Dec 2010 09:41:00 +0000

Experts from research and business alike argue that within the last decades consumers have grown to be a more demanding factor for supply chain management. At the same time manufacturing and supply chain strategies adapted to this development (from lean to agile, see Christopher and Towill, 2000).

But how are customer demands going to develop? Are we already seeing the decentralized manufacturing world, where everybody uses his own 3D printer to produce individual products on their desks? Probably not yet.

But at least for some industries product personalization is one big issues these days. Poulin et al. 2006 analyzes what options companies have to personalize products for their customers and shows the possible effects on supply chain design.

Personalization

From the literature the authors summarize their framework for product personalization. It consists of the following eight options:

Poulin et al., 2006
Personalization Option	Characteristics
Popularizing	Limited number of product to match a wide variety of customer needs, for those who want off-the-shelf products. Focus on evolving the popular product mix in line ith evolving customer needs
Varietizing	Extensive mix of products to satisfy almost all customer needs. Retailers pick those they want to offer off-the-shelf and rely on quick delivery from the distribution network for fast delivery of the others
Accessorizing	A limited set of core products matched with a wide array of accessories. Final assembly of accessorized products performed to order either by the user, the retailer or a fulfillment center
Parametering	Customer defines the desired product through the setting of parameters and the selection of options. He is guided through the specification process. Manufacturing is strictly to order
Tailoring	Product designed/engineered to customer needs. The customer is closely involved in the product realization process
Adjusting	Product adjusted to customer needs after usage. Distributed information systems capture customer feedback
Monitoring	Product is replaced by more adequate product as the customer needs evolve, ensuring continually a best-fit product. This involves regular and interactive customer feedback
Collaborating	Client is viewed as a collaborator with an open dialog. Expert field systems interact with clients, seeking to continually optimize client return

Methodology

To gain insights on the effects on supply chain design the authors conduct a case study in the golf iron industry, where already now a high product variety is a standard. They build a systems model of the industry to improve understanding of the relevant factors and different clients.

After that they describe the deployment of each of the above mentioned personalization options within the industry. For example:

Golf clubs can be parameterized using different coloring
the tailoring option would be used if a customer asks for a different weight distribution in the cavity of an iron head to correct specific, personal miss-hits.
Adjustments would involve the post sale process, where the iron is adjusted to specific needs

Effects on Design

In the following table the effects on supply chain design are listed.

Table 2: Impact of Personalization Options on Demand and Supply Network Processes (click to enlarge, Poulin et al., 2006)

The authors then visualize the effects of the customer involvement and differing decoupling points within the supply chain, effectively generating multiple supply chains for the different customer demands (see figure 1).

Figure 1: Point of Customer Involvement and Decoupling Point of Personalized Offers (click to enlarge, Poulin et al., 2006)

Conclusion

Personalized products are going to be the order winners of the future. The supply chain design has to adapt to these challenges and Poulin et al. gives a good start to change the supply chain accordingly.

Reference:

Poulin, M., Montreuil, B., & Martel, A. (2006). Implications of personalization offers on demand and supply network design: A case from the golf club industry European Journal of Operational Research, 169 (3), 996-1009 DOI: 10.1016/j.ejor.2005.02.005

Christopher, M., & Towill, D. (2000). Supply chain migration from lean and functional to agile and customised Supply Chain Management: An International Journal, 5 (4), 206-213 DOI: 10.1108/13598540010347334

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Foundation for a Responsive Supply Chain

Daniel Dumke — Sun, 12 Sep 2010 23:25:00 +0000

In the following I summarize the major points of the article “Responsive supply chain: A competitive strategy in a networked economy” by Gunasekaran, Lai and Cheng (2008).

Responsive Supply Chain (RSC)

The authors define a RSC to contain both aspects of Agile Manufacturing and Supply Chain Management. They argue, that both complement each other in the objective to improve organizational competitiveness.

The concept of SCM, Agile manufacturing and RSC can be compared as follows:

Comparison of Supply Chain Concepts (Source: Gunasekaran et al. 2008)

Building Blocks

The framework consists of these major building blocks:

Strategic Planning
Focus on Strategic Alliances, global sourcing and Technology
Virtual Enterprise
The framework is especially based on the concept of the Virtual Enterprise, where companies specialize their core competencies and focus on their network of supply and demand side partner companies. To achieve this the planning processes have to be intensively IT supported.
Knowledge and IT management
Automation and IT play a dominant role in the development of a physically distributed or virtual enterprise. The most important elements for IT support are: strategy formulation, tactical management, operations control and systems

Framework

According to the authors “The proposed framework can be employed as a competitive strategy in a networked economy in which customized products/services are produced with virtual organizations and exchanged using e-commerce.”

Framework for a Responsive Supply Chain (Source: Gunasekaran et al. 2008)

Conclusion

I found one major drawback of this paper: The presentation is not what you should expect from an A-journal paper. Sometimes the content of the paragraphs does not match the caption (Caption: Strategic Planning, Content: the virtual enterprise), furthermore the literature review feels like a succession of short abstracts of papers, without obvious connection between each of them.

Reference:

Gunasekaran, A., Lai, K., & Cheng, T. C. E. (2008). Responsive supply chain: A competitive strategy in a networked economyOmega, 36 (4), 549-564 DOI: 10.1016/j.omega.2006.12.002

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Design of Agile Supply Chains

Daniel Dumke — Tue, 29 Jun 2010 13:28:00 +0000

I already reviewed two other articles about agile supply chains. One on the role of distribution centers in supply chains and one on the migration from lean to agile supply chains.

But the question comes to mind if lean and agile supply chains have to be mutually exclusive or if it is possible to combine them. Christopher and Towill (2001) had a look at this question regarding the supply chain design.

Factors for Leanness / Agility

Several factors influence the design decision if a supply chain should be more agile or lean. Nowadays more often than not supply chains compete, not companies. This implies that not only companies must act market orient, but also supply chains.
Market orientation can be analyzed using the market winner / market qualifier concept. This also means that there are different foci of the lean and agile supply chain.

Correlation of Agile / Lean Supply Chains to Market Winners / Market Qualifiers

Strategies

Christopher and Towill mention three ways to combine the lean and agile paradigm in one supply chain:

80/20 approach
Usually in a supply chain with multiple products only a few of them make most of the overall volume (20% make 80% of the volume). Result: for the high volume products choose a lean approach, while for the low volume products an agile strategy might be better suited.
Decoupling point approach
Strategic inventory can act as a decoupling point within a supply chain. If you select this point wisely, it can be beneficial to use a lean strategy up to this point and an agile strategy after this point.
Base and surge demand
the strategies can also be combined if the demand pattern shows a base demand. This demand could be produced using a lean strategy, while the surge implements a more agile approach.
Base and Surge demand
Source: Christopher and Towill (2001)

Conclusion

It is important to see, that not only leanness and agility can be combined, but also the strategies mentioned above can be used complementarily.

Reference:

Christopher, M., & Towill, D. (2001). An integrated model for the design of agile supply chains International Journal of Physical Distribution & Logistics Management, 31 (4), 235-246 DOI: 10.1108/09600030110394914

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Agile Supply Chains

Daniel Dumke — Thu, 15 Apr 2010 09:43:00 +0000

I have been reading a lot of interesting articles lately, hence I could not post as often as I wanted. I found an article by van der Vorst and Beulens (2002; “Identifying sources of uncertainty to generate supply chain redesign strategies”) which opens a new perspective on the SCRM issue. I am going to publish a review later this week and link it here.
Today I wanted to highlight the basics of supply chain management by talking about “Supply chain migration from lean and functional to agile and customised” by Christopher and Towill (2000).
Agile supply chains are a quite new concept which emphasis a change in the corporate mindset to adjust to the constantly changing customer demand.

Agility

Agility is described as a capability which contains organisational structure, information systems, logistic processes and mindsets.
Result of an agile supply chain is its flexibility. It has to be separated from the lean supply chains or the lean manufacturing concept which focusses on reducing “fat” (eg. inventory, cost, …) wherever possible.

Market qualifiers / Market winners

Why does this change happen? According to Christopher and Towill there is a constant change of the factors which contribute to the market qualifiers and the market winners (based on Hill (1993)).

Hence periodically a new market winner emerges and downgrades the previous market winner to a market qualifier

For example in the early 80s the market winner was quality, in the late 80s it was cost. Presently the authors identified lead time as the new market winner.

Agile Logistics

Agile Logistics are defined by the four basic elements shown in the graphics.

Elements of agile logistics

An agile supply chain can be devided into two parts one where the products are pushed based on planning and forecast and one where products are pulled from the upstream within the supply chain based on the real customer demand.
So one part of designing an agile supply chain is the decision about where to place the decoupling points. There can be two different decoupling points one for the information decoupling (up to where in the supply chain is the information about customer demand shared) and the placement of strategic inventory.

Conclusion

This is a very good article to explain the basics of agile supply chains. There are many followers building on this work. But up to now I have not been able to find one article dealing with the measurement of agility or flexibility. This should be very useful for analyzing adequate measures to achieve agility.

Reference:

Christopher, M., & Towill, D. (2000). Supply chain migration from lean and functional to agile and customised Supply Chain Management: An International Journal, 5 (4), 206-213 DOI: 10.1108/13598540010347334

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Distribution Centers in Agile Supply Chain Design

Daniel Dumke — Sun, 21 Mar 2010 15:54:00 +0000

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?

Reference:

Baker, P. (2008). The design and operation of distribution centres within agile supply chains International Journal of Production Economics, 111 (1), 27-41 DOI: 10.1016/j.ijpe.2006.09.019

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