Top 10 Benefits of an Agile Supply Chain
Benefits of an agile supply chain include faster order tracking, increased productivity, and more. Learn what they are in this article.
Heraclitus, a Greek philosopher, is quoted as saying “change is the only constant in life.” Although Heraclitus was kicking it in ancient Greece around 500 B.C., this saying still rings true today – especially when it comes to the change to which a supply chain must adapt. Change in customer demand. Change in materials and labor. Change in transportation.
The best way to handle change? With flexibility. At its most basic level, an agile supply chain is one that emphasizes flexibility.
An agile supple chain requires reorganization around a new set of principles that emphasize the need for new structures, value chain configurations, communications and information systems and a new mindset when it comes to how a supply chain should operate. This new supply chain management paradigm allows an organization’s supply chain to operate without fixed configurations and static structures. An agile supple chain makes the supply chain less vulnerable to sudden changes, much like a flexible foundation makes a building less vulnerable to earthquakes.
However, in day-to-day operations, an agile supply chain has the flexibility to be centered around rapidly changing customer demand. The ability to react to sudden fluctuations in customer demand allows companies to reach the market first, be innovative, and to act as a market leader while their competitors struggle to realign more rigid supply chains.
Agile Supply Chain vs Lean Supply Chain
For years, you’ve been focused on a lean supply chain. What’s the difference between an agile supply chain and a lean one? There is a fair amount of crossover between lean and agile supply chain management, and they can coexist in the same supply chain. Here are the main differences.
- An agile supply chain focuses on flexibility and the ability to handle changes in demand and sudden crises.
- A lean supply chain focuses on maximizing savings by continuous improvement coupled with minimal redundancies.
As you can see, there is no reason why they can’t coexist in the same supply chain.
Top 10 benefits of an agile supply chain
1. Reduced inefficiencies
An agile supply chain can reduce inefficiencies by focusing on flexibility and the ability to handle changes in demand and sudden crises. Companies using agile supply chains can effectively ensure all goods are appropriately stored, reducing waste, damage, and inefficiency. Agile supply chain management minimizes extra costs, extends supply life, and enables a manufacturing company to reduce unnecessary personnel.
2. Increased flexibility
An agile supply chain can increase flexibility by allowing companies to react quickly without interruptions or delays. They can move toward agile processes to adapt to new trends and customize their supply chains to their needs. Flexibility makes it easier for supply chain entities to make changes and better prepare for future demand in the market.
3. Meeting or exceeding customer demand
An agile supply chain can help meet or exceed customer demand by enabling companies to be both internally and externally flexible. Internally, businesses can transform their supply chain when the need arises. Externally, they can rapidly deliver on customer demand and take full advantage of short profit windows, giving them a significant competitive advantage.
4. Increased operational efficiency
An agile supply chain helps increase operational efficiency by enabling the existing process to change quickly without causing disturbances to other parts of the organization. Companies can alter their production using real-time data to meet the current demands. This way, they reduce wastage and save on storage costs and other expenses.
5. Increased productivity
An agile supply chain can help increase productivity by enabling businesses to channel resources more efficiently, enhance inventory management, and prioritize resources for significant orders. Incorporating an overall system into a supply chain that can provide real-time information, improve efficiency and continuity, and increase productivity is key to this process.
6. Reduced inventory carrying costs
Companies using an agile supply chain can reduce the risk of producing products that do not meet current customer demand, which can lead to lower inventory levels and reduced storage and carrying costs. By producing smaller batch sizes and more frequent deliveries, an agile supply chain can help organizations reduce inventory levels and improve efficiency, leading to lower inventory costs and improved cash flow.
7. Faster order tracking
An agile supply chain can help with faster order tracking by building automated systems that provide downstream order information directly to upstream suppliers, speeding processing times for orders and deliveries. This type of supplier collaboration can greatly increase supply chain agility.
8. Ability to change quickly without causing disturbances to other parts of the organization
An agile supply chain can adapt to ever-changing needs and demands without fixed configurations and static structures. It uses up-to-date information acquired with artificial intelligence and machine learning to leverage current operations and avoid potential shortages and overstocked inventory. It also emphasizes speed and accuracy in delivering goods and services.
9. Reduced wastage and saved storage costs and other expenses
An agile supply chain uses real-time data to alter production to meet current demands. Companies using agile supply chains can effectively ensure all goods are appropriately stored, reducing waste, damage, and inefficiency. Agile supply chain management minimizes extra costs, extends supply life, and enables a manufacturing company to reduce the necessary personnel.
10. Increased margins
An agile supply chain can increase margins by offering higher service levels even though their inventories are lower. This is because agile supply chains can react speedily to sudden changes in demand or supply, adapt over time as market structures and strategies evolve, and align the interests of all the firms in the supply network so that companies optimize the chain’s performance when they maximize their interests.
Final Thoughts
We can’t emphasize the benefits of an agile supply chain more. Agile supply chains offer higher customer service levels even though their inventory on hand is lower. Agile practices can also help companies thrive in an increasingly volatile and unforgiving global economic environment.
Incorporating an overall system into a supply chain that can provide real-time information, improve efficiency and continuity, and increase productivity is key to an agile supply chain. Agile logistics systems can react quickly to unexpected delays, changes in the environment, and more, which can result in growth and higher customer satisfaction.
To learn more about agile supply chain benefits reach out to Velosio today!