Today’s global supply chain is characterized by constant change. From consumer preferences to technological advancements, this space is dynamic and evolving. What does this mean for organizations operating in this environment? They need to be able to adapt quickly, particularly if they want to hold a competitive edge. This is called supply chain agility, and it refers to an organization’s ability to swiftly adjust its strategy and adopt new techniques in response to changes.
This article will take a critical look at supply chain agility, and dive deep into what it looks like and the benefits it offers. We’ll also analyze the potential challenges that come with supply chain agility, so you can ultimately gain a comprehensive understanding of this concept, and how you can leverage it to build a resilient and successful business in this landscape.
Explaining Supply Chain Agility
Supply chain agility refers to how nimbly and quickly an organization can respond to and adopt change, and it’s a concept that has been growing in importance in recent years. To understand exactly what it is and why it matters, we need to dive into the state of the supply chain.
The supply chain has historically been characterized by change. Many factors constantly impact it, including market moves, consumer buying habits, technological advancements, competition from other businesses, and unforeseen circumstances (such as natural disasters).
Here are just some of the reasons why supply chain agility is essential to a high-performing business:
- Customer habits and expectations: Customer habits shift quickly, with new buying trends and expectations emerging seemingly overnight. Agile businesses in the supply chain can rapidly respond to these changes by adjusting production, inventory levels, and even products to meet evolving expectations. For example, in 2023, there was a 27% increase in the amount of customers who contacted a company through their social media account than the previous year.
- Ongoing disruptions: Disruptions are standard in today’s supply chain, and can include natural disasters, political instability, and economic conditions. Supply chain agility allows companies to adapt their logistics, sourcing, and distribution strategies to minimize the impact of these disruptions on business.
- Heightened global competition: Businesses today operate in a highly competitive environment, and a majority of businesses report that their industry has grown more competitive in the past few years. Agility allows businesses in the supply chain to respond quickly to competitor actions (such as new products or pricing changes), and deploy their actions as an industry leader.
- Customer satisfaction: Customers have very specific expectations for service today, such as personalization, speedy delivery times, and delivery accuracy. By adapting to customer needs, agile businesses can deliver a superior customer experience.
Supply chain agility is no longer just a luxury or a bonus: it’s a necessity for businesses that want to thrive in this unpredictable and evolving landscape.
Challenges to Achieving True Supply Chain Agility
If supply chain agility is ideal, why isn’t it the status quo? Creating an agile culture is a big undertaking, because it requires responsiveness in all areas of a business, from the technological infrastructure to employee performance.
Here are some of the potential challenges businesses might face in achieving full supply chain agility:
1. Scope of components
Many elements contribute to fully realized agility, and it can be difficult for an organization to check all of the boxes. For example, an organization might be able to achieve agility when it comes to employee behavior, but it might be slower to deploy new technologies.
2. Organizational culture
Traditional, hierarchical organizational structures might struggle to embrace the rapid decision-making, collaboration, and change that’s essential for agility.
3. Technological hurdles
Outdated technological infrastructure can impede real-time responses to changes, and it might be costly and time-consuming to update.
4. Cost considerations
It’s not just technology that can be costly. Training employees, diversifying suppliers, and improving warehouses can be expensive, particularly for smaller companies.
While these challenges might be present, they’re not prohibitive. There are still ways to achieve true supply chain agility, but it requires organizations to understand the potential roadblocks and know how to overcome them.
How to Achieve Supply Chain Agility
Achieving supply chain agility requires organizations to create and deploy a tactical strategy that addresses all of the different elements of business.
With that in mind, here is how your business can achieve true agility:
1. Assess your business’ agility
To improve the state of your business agility, it’s important to first understand where you stand. Assessing your supply chain agility can serve as the foundation for identifying areas for improvement and setting strategic goals.
To assess your supply chain agility, consider evaluating these areas:
- Inventory management: Evaluate your current inventory levels, turnover rates, and ordering practices.
- Supplier relationships: Assess the reliability and performance of your suppliers, considering factors such as lead times, quality of services, and responsiveness to demand fluctuations.
- Distribution network: Analyze your distribution network for its efficiency and effectiveness in delivering products to consumers.
- Technology infrastructure: Review the technologies and systems used within your organization, including your enterprise resource planning (ERP) systems, warehouse management systems (WMS), and supply chain planning tools. Determine where there are gaps in your infrastructure where you should add technology, and which systems should be updated.
- Risk management: Identify potential risks and vulnerabilities within your supply chain, and assess risk mitigation strategies.
This assessment should result in a comprehensive picture of where your organization’s strengths and deficiencies lie.
2. Streamline processes
Streamlined processes dictate efficiency in all areas of your business, from warehouse productivity to data analysis. Seek to improve processes so they’re efficient and simple, and that they eliminate waste and excess. You can consider adopting lean principles, which promote reducing excess, continuously improving, and simplifying systems.
What are some processes you should look to improve? Inventory management, order picking and fulfillment, packing and shipping, returns processing, and data analysis are some areas you could look to streamline.
3. Foster flexibility in logistics
Logistics play a large role in your organization’s ability to have supply chain agility. To start, diversify your supplier base and sourcing to reduce dependency on a single supplier, and to mitigate general supply chain risks. Multi-sourcing enhances flexibility and resilience by providing alternative sources of supply.
Also, leverage a mix of transportation modes to improve speed, cost, and reliability. This can improve your response to unforeseen disruptions.
4. Deploy new technology
The supply chain technology in your business is arguably one of the most critical factors in its ability to be agile and swiftly respond to change. That’s because supply chain technology gives you full visibility into your operations, allowing you to make strategic, speedy decisions. Here are a few ways technology impacts supply chain agility:
- Inventory analytics: Advanced inventory analytics tools gather and analyze large amounts of data regarding inventory levels, sales figures, and transportation schedules, so you can identify trends and make data-driven decisions.
- Demand Forecasting: Demand forecasting tools leverage historical data, market trends, and external factors to give you an accurate picture of future inventory needs.
- Automation: Automating repetitive tasks allows you to free up valuable resources for more strategic activities while improving efficiency.
Supply chain agility should be a goal for any inventory-based organization. By understanding the importance of supply chain agility, knowing its components, and overcoming the challenges of achieving it, businesses can improve their resilience and best meet the needs of customers.
StockIQ: Your Key to Unlocking Supply Chain Agility
Technology is the bedrock of achieving supply chain agility, and if you’re looking to improve visibility, leverage data, and monitor your suppliers, then StockIQ is what you’re looking for. StockIQ is an intelligent supply chain planning suite designed to help you run efficiently, improve forecast accuracy, and reduce inventory levels while providing top-tier service to your customers.
Find out how StockIQ can help you achieve full supply chain agility by contacting us today.
