HOW EMERGING TECHNOLOGIES ARE IMPROVING SUPPLY CHAIN LEAGILITY

Organisations and businesses are operating in a Volatile, Uncertain, Complex and Ambiguous (VUCA) environment due to customers changing need and market dynamics. To achieve and sustain a supply chain that is responsive to the changing needs of the customer, market dynamics and volatile business environment, there is a need for organisations to design and implement a supply chain that incorporates agility and lean operation across the value chain.

Leading supply chains are leveraging on cutting-edge technology such as cloud computing, Big Data Analytics, Internet of Things, blockchain technology etc to create a supply chain that enables real-time sharing of data and information between manufacturers, suppliers and buyers thereby improving supply chain "leagility" and competitive advantage. 

SUPPLY CHAIN LEAGILITY (Lean-Agile): A Hybrid Strategies

In supply chain design and execution, there will be cases when either a ‘pure’ lean or ‘agile’ approach might be suitable for a supply chain. Conversely, situations may arise where a blend of the lean and agile approach may be required to complement each other, such an approach is referred to as a hybrid strategy (Christopher and Towill, 2000).

The combination of lean and agile supply chain give rise to a hybrid supply chain known as “leagile”.

It is advisable for firms to explore hybrid supply chain approach with possibilities to switch between agile and lean depending on market and supply chain dynamics. 

CONCEPT OF LEAN SYSTEM

The concept of lean was first introduced and implemented by Toyota, they called it Toyota Production System (Womack & Jones, 1996). The two major aim of the lean system is to improve efficiency by eliminating or reducing error and waste; and optimization of inventory carrying cost through batch manufacturing and JIT (Just-In-Time) delivery.

The concept of a lean system is doing more with less. 

Organisations can implement lean supply chain through the following:

1. Specifying what creates value from the customer perspective.
2. Identify the activities that need to be done to achieve the above – Efficient Supply Chain Planning.
3. Carry out the required activities – best in class New Product Development process.
4. Only produce & deliver what is required – Through Just-In-Time.
5. Continuous improvement – review of processes to identify waste and eliminate them

Apple Supply Chain Planning is a typical example of lean manufacturing through its New Product Development Process (NPD). As depicted in the figure below, it integrates Research & Development, Marketing research activities and various roles under supply chain management. From the figure, Apple Inc. fast-tracks the new product introduction to the market by on-time procurement of licenses, maintaining an appropriate inventory level, and managing material purchase commitments. They make advance payments to some suppliers to secure and lock in pricing and materials for strategic raw materials. The inventory level is regularly reviewed to ensure that raw materials are delivered just when it is needed.

AGILE SUPPLY CHAIN

 In a rapidly changing and volatile environment, supply chains need to be agile to effectively respond to disruptive changes in demand and supply and remain competitive.

An agile supply chain is one that is able to swiftly respond to supply and demand issues of customers in a Volatile, Uncertain, Complex and Ambiguous (VUCA) market environment. It strives to deliver a swift response to consumer requirements at an acceptable cost. A vital feature of an agile supply chain is flexibility in terms of rapid adjustment, modularity, reconfigurability, versatility or standardization (Shaw et al., 2005).

An Agile Supply Chain is demand driven and customer focused.

Supply Chains that have embraced the transformative influence of agility and responsiveness are always ahead of its competition because they are enabled to swiftly anticipate and respond to unanticipated occasions, and turn disruption to benefit. 

Agility is required in an environment that is less predictable, volatile demand and high variety. Lean works best in an environment that predictable, with high volume and low variety (Shaw, et al, 2005). Most organisations operate in both environments eg Dell with products such as PC that sell more volume and therefore predictable-here a lean approach is recommended; whereas other products such as servers, storage, sell less volume with very volatile demand requiring an agile approach.

Dell agile and lean supply chain design enables it to implement make-to-order and assemble-to-order methodology. Make-to-order model is used by Dell to manufacture quality products and services at a competitive price within a short span of time based on customers’ requirements. The assemble-to-order practice is to postpone the assembly of their devices until there is market demand through a confirmed purchase order from a customer and customer configuration. With this approach, Dell is guaranteed that whatever device they produce will be sold almost immediately and not tied down as an inventory. They keep minimum inventory and follows the Just-In-Time (JIT) inventory model. Dells’ supply chain is designed to be market sensitive, capable of evaluating and responding to disruptive demand. 

How advanced and emerging technologies are utilised by supply chains to improve supply chain leagility.

Organisations are increasingly improving their supply chain leagility by exploring and adopting advanced and emerging technologies such as big data analytics, Internet of Things, Cloud Computing and blockchain.

 Big Data Analytics

Big data analytics have evolved and now adopted as a competitive advantage tool and techniques for organisations in recent years. Organisations are harnessing and leveraging on supply chain " big" data to improve and transform its Efficient Consumer Response (ECR)-the ability to hear the voice of the consumer and swiftly provide a direct response. Supply Chain functions can utilize Big Data Analytics to unearth insights on customer demand pattern and inventory to enhance supply chain agility and customers changing need to drive the development and delivery of differentiated products that align with customers need. Implementing big data can support running enquiries faster, predicting demands accurately to solve sourcing challenges and potentially reducing operational costs.

Actionable analytics powers smarter decisions and Next Best Action (predictive insights)

 Internet of Things (IoT)

Supply chains are utilizing emerging technologies such as RFID (Radio-Frequency Identification), sensors, GPS tag, chips and barcodes to track and provide real-time information about the location of an inventory and then communicating this data to an application which enhances the visibility of inventory’s route to all supply chain partners and speeds up decision and collaborative efforts. Furthermore, supply chains are leveraging robotics for order pick up and fulfilment through IoT resulting in accelerated consumer deliveries after purchase. This increases business expansion through customer growth and retention. IoT can be employed by supply chain and logistics providers to facilitate alternative product delivery through automated product delivery using drones such as UVA (unmanned aerial vehicles).  Supply chain processes, raw materials and components are becoming instrumented with IoT sensors such as Smart Packaging; Labels, Radio and GSM Tagging enabling real-time communication with each other and generating data that powers de-centralized optimization Intelligence, predictive analytics and Next Best Action. 

Cloud Computing

Supply chain clouds are shared supply chain platforms between clients, suppliers and customers, providing real-time collaborative SC solutions (planning, sourcing/ordering, contracting, distribution, payment). Cloud-based supply chain platforms are scalable to meet the changing needs of any size supply chain. Cloud computing allows various supply chain applications and platforms to work and exchange data with one another in real time with the ability to improve between swift communication and order fulfilment thereby improving the efficiency of the supply chain. Several organisations have adopted cloud computing in their supply chains; by developing cloud-based platforms that allow suppliers to share real-time data about their inventories, capacities, cost and quality metrics. They utilize the platform to share information about customer requirements, customer demand and product quality requirements. Cloud computing can significantly reduce Bullwhip effect enabling all stakeholders to gain insight into the actual demand volatility they have to manage. Adopting and applying cloud-based technology in supply chain management could result in palpable values and benefits such as cost savings, real-time visibility, improved forecasting and planning, streamlined processes, improved security, flexibility, as well as enhanced sustainable supply chain.

 Blockchain Technology

Supply chains can leverage on blockchain technology to monitor and obtain real-time details of a required asset or material, and track shipments to better predict where a shipment is; when it will arrive and in what condition. Blockchain can provide enhanced supply chain visibility, which can lead to improved just-in-time planning and accurate inventory management while reducing waste across the entire supply chain. In a supply chain, firms are somewhat interested in knowing when their order (goods) will be delivered, but sometimes it’s essential to know where the materials and goods have been before arriving at your facility. With blockchain, firms can improve the traceability of goods

Apple is considering the integration of blockchain technology in its mineral supply chain process to improve transparency and quell human rights abuse concerns.

CONCLUSION

 In this day and age, organisations and businesses are faced with uncertainty, turbulence and volatility both on the demand and supply side orchestrated by changing customer demands, product proliferation, decreasing product lifecycle and lower price demands. Hence, their supply chains are required to be flexible and quick to respond to the changing business environment and market dynamics. Organisations are now designing their supply chains to be agile and flexible to swiftly match and deliver customers demand and lean to minimize waste and optimize inventory. The removal or reduction of the uncertainties within a supply chain requires close collaboration with suppliers and all the participants within the supply chain network. Markets with a wide variety of innovative products, unpredictable demand and short cycle times require agile supply chain, conversely, markets with less unpredictable demand, limited variety of products probably require for lean supply chains.

It is advisable for firms to explore hybrid supply chain approach that allows it to switch between agile and lean depending on market dynamics and environment. Organisations should implement collaborative supply chain strategies with their suppliers and customers, and ensure they are involved early in the new products development stage while adopting the use of advanced and emerging technologies such as cloud computing, big data analytics, blockchain etc in the design, planning and control of the supply chain. They should ensure that the digital supply chain roadmaps align with the enterprise-wide digital goals. The possibilities of how advanced and emerging technologies could impact supply chain management is infinite.