Procurement and Supply Chain Professionals

Thursday, 25 August 2011

5 levers of Supply Chain

A recent survey indicates that flexible organisations focus on i) supply assurance and proactively managing capacity, especially of critical resources; ii) relentlessly engaging in supply chain planning with upstream and downstream partners, in a continuous improvement loop; iii) further integrating their supply chain and aligning their performance metrics with those partners, so all participants speak the same language; iv) better involving product development into supply chain management and breaking down silos; and lastly, v) striving for flexibility in all functions of the company, making it a part of the company’s DNA and easier for supply chain practitioners to implement it.
We prefer to call it operational flexibility because it goes beyond the supply chain and involves the entire supply and demand chain, from product launch to end-of-life management. Operational flexibility is the ability to rapidly adapt to changes in supply or customer demand by ramping up or down internal and partner operations. A company is flexible when it is able to keep customer lead times stable, despite demand spikes and supply disruptions without resorting to constant “firefighting.” Lastly, it does not mean recovery after “black swans”, or extraordinary one-time events, such as the 2011 Japanese earthquake – those are beyond the scope of steady-state operational flexibility and are best addressed by a sound business continuity and crisis readiness strategy.
True operational flexibility is a strategic objective, because it directly impacts customers and involves top-level planning; so it fits naturally on the executive agenda. It also reflects the fact that volatility has become the norm. Economic, business, political and even geological factors have led to unprecedented uncertainty both at the supply and demand ends of the supply chain. Flexibility is not just a source of competitive advantage anymore, but fundamental to staying in business, significantly impacting both the top and bottom line.
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