Lean and agile strategy for managing supply chain functions

Supply chain functions comprise of activities that include the flow of products and services starting from the origin of the products and end with consumption and purchase (Heckmann et al., 2015). The primary objective of the supply chain functions is to supervise the production, distribution and shipment of the products and services (Touboulic and Walker, 2015). The supply chain functions also include effective management of internal inventories, production, distribution, domestic production and sales. Businesses use different strategies and models for managing supply chain functions.

Basic strategies of efficient supply chain functions

A ten step method is presented for fundamental strategies of best practices of supply chain functions. These are the basic key strategies and practices to build a road map for effective functions and operations. Excellent supply chain strategy requires excellent tactical execution. The following strategies help in effective and efficient operations (Hugos, 2018).

Key strategies of the supply chain functions
Key strategies of the supply chain functions

It is very important that functions are mapped against a standard model for each of the function, and determine its ideal state according to organizational strategy and compare differences (Hugos, 2018). Supply chain strategies must develop metrics and information flow across all functions. Synchronization of the functions is needed for speed and flow of information.

Elements of supply chain strategy

According to the APICS Supply Chain Council, (2016), the elements the strategy includes all management tactics and decision making to consistently deliver products and services to meet the customer’s needs and the business’s overall plans. APICS Supply Chain Council, (2016) formed a framework of components important for forming a supply chain strategy. These include;

  • The strategic partnership includes the inclusion of communications, rules of engagement, expectations, trust and risk sharing.
  • Make-buy must comprise of insourcing or outsourcing optimization, and tradeoffs of cost, speed, quality and trade secrets.
  • Drivers must include quality, speed, delivery fidelity, flexibility, pre and post service and cost, as well as facilities, inventory, transportation, information, sourcing and pricing.
  • Synchronization for the end-to-end speed and flow of information and services.
  • The integration of suppliers, internal supply chains and customer systems are essential.
  • The structure and quality of relationships. Networks and alliances among all supply chain partners to ensure communication, trust and collaboration as a strategic advantage.
  • The breadth and depth of all activities (including designing, planning and controlling), capabilities and expectations required.
  • Reverse logistical functions that may include remanufacturing, recycling, warranty, recall and similar capabilities.
  • Project sustainability with the ability to produce and distribute products over time that minimizes the impact on the environment.
  • Regulatory compliance with governmental regulations and required compliance.
  • Trade open to global sources and customers and the many considerations needed to cover a wider array of possibilities in customer requirement.

The strategy of lean management

Lean supply chains are mostly used where the demand is relatively easy to predict, and plans and schedules are prepared on the basis of demand forecasts and easy realization. A lean strategy comprises of a cyclic route, where the companies seek perfection by eliminating possible waste. Wastes comprise of non-value-adding activities such as, delay, inspect, store and transport. The businesses make sure that the end-customer do not pay for the cost, time and quality (Qrunfleh & Tarafdar, 2013).

However, companies adopting lean supply chain management remain sufficient until the cost reduction process, further which, businesses have to adopt another strategy. The businesses adopting this strategy eliminates all waste including time, inventory or unnecessary costs and creates a production schedule. Businesses continuously focus on the elimination of all non-value added activities such as reduce the time to set up machinery as done by Toyota Production Systems. However, this strategy lags in design, timing and distribution which is important in case of customer demand.

The agile strategy

This strategy is based on the concept of maximum flexibility and ability to respond to possible sudden changes that may occur in the business. Businesses such as companies, suppliers, designers, manufacturers and distribution centres mainly use the agile strategy. Businesses using agile supply chain strategy have a high scope of improving compliance and flexibility along with quick response and reaction to changing markets (Qrunfleh & Tarafdar, 2013). In addition, this strategy is applicable to businesses that have a short life-cycle. These businesses have the ability to spot trends quickly. This helps to translate the trends into ready products in a short time. These businesses showcase the following characteristics;

  • Market sensitive.
  • Relies on shared information.
  • Flexibility to change.
  • A high degree of process interconnectivity.
  • Fast delivery.
  • Data accuracy.
  • Use of IT tools.
  • Cost Minimization.
  • Customer satisfaction.
  • Lead time reduction.

Differentiating characteristics between the lean and agile strategy

CharacteristicsLeanAgile
Superior objective Meet the foreseeable demand in the most efficient and therefore the cheapest way Respond quickly to changes in demand in order to reduce the shortage of supply, price reductions and obsolescence of goods
Market success factors Quality total delivery time availability Quality cost total delivery time
The most important element of competitive advantage Cost Availability
Strategy in the orders’ area To shorten the cycle of the fulfillment of the orders and if it is possible, without increasing costs Boldly invest in methods to reduce the cycle of the fulfillment of the orders
Suppliers’ selection strategy The superior criteria for selection should be: the price and quality The superior criteria for selection should be: speed, flexibility and quality
Stocks keeping strategy To shorten the cycle of the inventory rotation and to minimize the stock levelsTo allocate the important buffer stock of semi- and final products
Strategy in the area of product designing To design products regarding the cost reduction and increasing of production productivity To use the modular designing to postpone the phase of the diversification of the product
Production strategy To keep high level of production capacity utilization To keep the surplus of buffer production capacity

References

  • APICS Supply Chain Council. (2016). Supply Chain Strategy Report. Avaiable online: http://www.apicshttp://www.apics.org/docs/default-source/toc-pdfs/strategy-report-short.pdf.org/docs/default-source/toc-pdfs/strategy-report-short.pdf.
  • Heckmann, I., Comes, T. and Nickel, S., 2015. A critical review on supply chain risk–Definition, measure and modeling. Omega, 52, pp.119-132.
  • Hugos, M. H. (2018). Essentials of supply chain management. John Wiley & Sons.
  • Qrunfleh, S., & Tarafdar, M. (2013). Lean and agile supply chain strategies and supply chain responsiveness: the role of strategic supplier partnership and postponement. Supply Chain Management: An International Journal18(6), 571-582.
  • Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a structured literature review. International Journal of Physical Distribution & Logistics Management, 45(1/2), pp.16-42.

Avishek Majumder

Research Analyst at Project Guru
Avishek is a Master in Biotechnology and has previously worked with Lifecell International Private Limited. Apart from data analysis and biological research, he loves photography and reading. He loves to play football and basketball in his spare time with an avid interest in adventure and nature. He was also a member of the Scouts in his school and has attended Military training.
Avishek Majumder

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