Supply chain agility. It’s a topic we’ve heard a lot about in the past year. With the disruptions of the pandemic, many of us have felt the unfortunate side effects of rigid, inflexible supply chains.
But even beyond extreme events like global shutdowns, experts have been touting the benefits of an agile supply chain for years. In fact, Gartner recently released a report detailing why resilience and agility are the future of supply chain.
But what exactly is “supply chain agility”? What does agility mean in the context of logistics and supply chain? Continue reading to find out.
Let’s start with a basic definition. Merriam-Webster defines agility as “marked by ready ability to move with quick easy grace” and “having a quick resourceful and adaptable character”.
Simply based on this, you can probably make some assumptions about why agility is so important in the supply chain. Logistics operations are marked by a changing environment. The only consistency in warehousing and transportation is the lack of consistency. Organizations that can be quickly adaptable and resourceful stand a much better chance at operating a successful supply chain.
Let’s get more specific to the supply chain. We can build off of Merriam-Webster’s definition to create a definition of an agile supply chain: “an organization that has the ability to move quickly and adapt to a changing business landscape, capitalizing on existing resources and new technologies to better serve their customers”.
Anyone that works in supply chain knows all too well how quickly business requirements change. Your business users come to you, frantically asking for new capabilities to support a customer requirement. Supply chain professionals are often caught simply trying to keep up.
Whether it’s due to changing customer behavior, shifting political climates, or anything in between, supply chains must be able to adapt at lightspeed. That is supply chain agility. Being able to respond quickly to these changes, with little disruption and minimal required human-hours to implement, is what defines an agile supply chain.
Concrete examples always make a concept easier to understand. Let’s take a look at San Francisco-based food distributor Truffle Shuffle. The company was started to provide restaurants with a steady source of truffles, a very sought after ingredient in fine dining. When the pandemic hit, however, restaurants were forced to close, and Truffle Shuffle’s revenue streams all dried up. In order to stay afloat, they started live streaming instructional cooking videos, and shipping ingredients (including truffles) directly to consumers as part of the experience.
A brilliant pivot amid global chaos, and in a time when everyone was stuck at home, but think about the challenges of this change from a logistics perspective. Instead of shipping large quantities to a small number of restaurant customers, Truffle Shuffle was now going to be individually packaging ingredients and shipping individual kits to end consumers. This is a totally different supply chain. The Truffle Shuffle team was able to stay agile and flexible, and has seen huge success over the last 12 months (including a major investment from Mark Cuban on ABC’s Shark Tank earlier this year).
Another COVID-era example. Most people are painfully aware of the global shortage in hand sanitizer the world experienced in March and April of 2020. At the same time, local breweries had to close their taprooms. Up to this point, small craft breweries earned a majority of their revenue from in-person experiences.
In another brilliant pivot, many of these businesses realized they had all the ingredients and machinery required to produce hand sanitizer. Many breweries began making the germ-killing good stuff, but this presented a host of new logistics problems - namely, how to get the product to customers safely. To tackle these challenges, many breweries began operating drive-thrus, allowing customers to contactlessly pickup hand sanitizer (and beer). While most breweries had never operated in this capacity in the past, many credit their survival to these innovating ideas.
So what makes it possible for companies like this to be agile enough to pivot their supply chain operations? What qualities embody agility in the supply chain?
Physical agility is the ability to quickly and readily pivot your physical resources. This is everything from having multiple backup suppliers located in various regions of the world, to being able to quickly redeploy your people to address changing requirements.
If for any reason, a certain part of the world is no longer able to fulfill orders (think natural disaster, political upheaval, etc.), your organization needs to have processes in place to quickly pivot to new suppliers to keep your supply chain flowing smoothly.
Additionally, as business requirements change (due to the external disruptions, shifting of internal goals, etc.), having cross-functional teams that can readily be refocused allows your company to more effectively adapt with less downtime.
Arguably the most important aspect of an agile supply chain is your technology. Outdated systems make agility almost impossible. Even with the most resilient people and processes, if your software requires extra hours of workarounds to adapt to changes your supply chain cannot truly be agile.
Many legacy systems require months of reworked configuration and custom code when business requirements shift, which is simply contrary to modern agility requirements. With systems that allow for quick and straightforward changes, your people can continue to work with fewer disruptions, even if the world is falling apart around them.
Additionally, an often forgotten piece of technological agility is having the people in-house that can support your systems. If your organization is handcuffed to your software vendor, you will struggle to adapt in times of change (because if your company is having to adapt, chances are all of your vendor’s customers are needing the same level of support). With modern systems that empower your own people, you can make functionality changes in hours instead of months.
The final piece of an agile supply chain resides in your company culture. If your organization is bogged down in bureaucracy and tedious processes, it will be difficult to adapt in chaotic times. You need to foster creative thinking, and encourage innovation amongst your people, as often the most agile ideas come from the employees on the ground and in the weeds of the problems.
Unfortunately, fostering an innovative and agile culture is one of the hardest parts of your resilience journey. Company culture is often set by example from the top, so it requires buy-in from your organization’s senior leadership in order to be successful.
We hope this article has shed some light on agility in the supply chain, and demystified the topic we’ve come to hear so often emerge in research and surveys. Your organization’s supply chain agility journey starts with agile technology, and bringing in a flexibility layer on top of your existing supply chain systems is a great place to start.