In this, the latest installement in a series of posts by Cass Business School academic Canan Kocabasoglu Hillmer, she looks at ways in which procurement has looked to structure its supply chains and why agility has been a driver behind those structures.
Supply chain agility has received increasing attention over the last decade due to two important developments.
First, companies experience shorter product cycles and volatile demand patterns. In addition, despite the recent news that Apple and Foxconn are considering bringing more of their manufacturing back to developed countries, the overwhelming trend has been to see supply chains extend across the globe.
A second issue that has helped supply chain agility gain prominence is the increased awareness of supply chain management risks and the role of agile supply chains to recover from these risks once they are realised.
Many different interpretations exist of what it means to have an agile supply chain. Even worse, the term is used widely with the assumption that there is one prevalent perspective of what supply chain agility entails. One perspective that has been gaining prominence is that supply chain agility is the capability of a firm, with conjunction of its supply chain partners to ‘adapt and respond to’ the changes in its business environment in a swift manner.
These changes may be due to new markets or new ways of doing business and they may be expected or unexpected. How the company views changes affects whether they are considered as an opportunity to capitalise on or a threat to be managed. In either case, an agile supply chain can be part of an effective response strategy.
In our research, we have found that there are three indicators of supply chain agility: the first is the level of responsiveness to customer requests (from the point of view of the customers); the second is the ability to quickly identify changes in the marketplace and respond to it; the third is the coordination and collaboration with supply chain partners.
The question is what kind of investments the company has to make to acquire this capability. While this is only one of the potential many routes, this series considers investments in strategic sourcing and how these investments can contribute to the agility of a firm. A closer look at companies that have utilised strategic sourcing to this end suggests two routes. The first route is about making investments under strategic sourcing that directly feed into supply chain agility.
The second is more indirect; by using strategic sourcing to strengthen operational flexibility a company can improve its supply chain agility. We will investigate these two routes further in the next two parts: first by discussing operational flexibility and then by looking at how strategic sourcing, operational flexibility and supply chain agility all fit together.
Canan Kocabasoglu Hillmer is a faculty member at the Cass Business School.