Regardless of structure, flexibility is key; agile supply chains, like agile software development, cannot exist in a silo. Use minimal essential Learn more about cookies, Opens in new Build an adaptive and agile supply chain with rapid planning and integrated production. Agile supply chain processes such as product postponement and decoupling allow such flexibility, which is especially important in industries with short lead times, such as consumer electronics. We found statistically significant correlations between reported OTIF service levels and agility scores across quartiles. For this analysis, we examined more than 70 companies distributed across five industry groups. According to a recent survey, 97 percent of supply chain … Supply chain agility has emerged as a leading competitive feature for organizations operating in evolving business environments. collaboration with select social media and trusted analytics partners Responses were plotted on a scale of one to five and the overall agility scores organized into quartiles. Chemicals. Back to basics: Creating value through superior products Lastly, agile principles dictate that organizations and processes should be built with flexibility incorporated into them. Once this level of communication is established, collaboration may shortly follow. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. Many successful … By contrast, service and inventory performance were less strong at one home-products manufacturer, which like the consumer-products company above boasted a diverse product line but had lower agility scores for operations planning and risk management. Quickly identify supply and demand issues through insights … This flexibility facilitates end to end communication and allows for a more holistic view of the supply chain. Only a few companies, however, are adopting these approaches broadly enough to improve their supply-chain performance significantly. The company has several different Agile coaches who use … Continuous forecasting requires continuously updated information, which challenges organizations to hire multi-skilled personnel who can leverage operations against demand forecasting. Industries such as chemicals and pharmaceuticals had higher average inventory levels than consumer products and automotive did. Read more about Operations hereLearn more about cookies, Opens in new Supply operations often struggle to keep pace, as many aren’t sufficiently agile to capture fleeting upside opportunities or to mitigate fast-moving risks. 6 Tips for developing an agile supply chain. Raoul Dubeauclard is a senior expert in McKinsey’s Lyon office, Kerstin Kubik is a specialist in the Vienna office, and Venu Nagali is an expert in the New Jersey office. Please try again later. Synchronization implies that all parties in the supply chain … The digitization, focusing on fundamentals and change, augmented reality, artificial intelligence, and many other factors are transforming how the supply chain functions.Once, the lean supply chain was considered to be the most effective form of manufacturing and supply chain … Additionally, agile organizations must be flexible, and give power to capable employees to make the decisions necessary to react to an ever-changing market. cookies, McKinsey_Website_Accessibility@mckinsey.com, Speed and scale: Unlocking digital value in customer journeys, Technologies that could transform how industries use energy, Back to basics: Creating value through superior products. Operations executives use the term “on time and in full,” or OTIF. Ensure business continuity even in times of disruption by bringing better visibility and planning agility into your supply chain with Dynamics 365. While the agile methodology has been proven in the software industry in the last 20 years, the principles of this methodology have increasingly transcended into many different industries, including supply chain management. At aPriori, we follow a software development methodology called agile. Our flagship business publication has been defining and informing the senior-management agenda since 1964. Why would a company use agile supply? An agile supply chain focuses on responding to the market demand with smaller, customizable batches of items. Subscribed to {PRACTICE_NAME} email alerts. One business that gets agile supply chain right is clothing and accessory retailer Zara. In the name of competition, organizations may switch suppliers searching for the lowest priceand resource suppliers across the globe in the most economical cost venue. Agile supply … After a review of the company’s distribution network, these executives found they could mitigate customer stockouts by outsourcing a significant portion of their warehouse operations. To shed light on the enablers and enemies of agility, we examined the supply-chain performance of companies … Article The interviews assessed ten supply-chain capabilities, including portfolio and complexity, order and demand, forecasting, and risk.1 1. There are other anti-patterns as well: 1. Philips Likes Agile Techniques. Never miss an insight. Agile supply enables a company to: Rationalise inventory; Reduce costs; Build a predictable supply chain; Agile supply chains can adapt to meet unpredictable customer demand in a rapidly changing and volatile trading environment. Most transformations fail. By contrast, smart companies use agile supply chains to differentiate themselves from rivals. Inventory data became more reliable, collaboration improved, and on-time order fulfillment rose significantly. A hybrid supply chain strategy may be appropriate for a company attempting to become a "mass … However, it also means that market opportunities present themselves as moving targets. tab, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Learn about Customers are increasingly placing value on data – from knowing how products are being sourced from end to end, to more predictive and time-definite supply chains – thus creating an almost constant state of disruption and innovation in the current supply chain environment. Report Another company that is worth mentioning is Philips. Agile practices can help companies navigate an increasingly volatile and unforgiving global economic environment. Operations executives use the term “on time and in full,” or OTIF. These tools allow planners to … Getting in sync. That capability has not only sharply reduced the number of end products the company needs to stock but simplified SKU management as well. Its service levels have slipped, because chronic shortages of materials, resulting from inconsistent coordination with suppliers, often delay shipments. Factories now run at nearly full capacity, with lower logistics costs and far fewer expensive express shipments. We then compared those scores with two widely employed measures of supply-chain performance: service levels, as measured by the proportion of orders delivered on time and as promised,2 2. There are more moving parts, more people to talk to, and more alignment required to get products manufactured on-time and in budget. One example of a company that uses these techniques is Amazon, which adjusts prices and inventory levels in real time in response to competitors’ moves, among other things. On closer inspection, it found that a lack of transparency across its supply chain was the culprit. What is Agile Supply Chain? Define agile according to your reality: Being clear about what agile means for your supply chain … Time is money. We also looked at specific agile practices and how consistently top-quartile companies adopted them (Exhibit 2). The main benefits of an agile supply chain … tab. Most struggled to shape demand, a practice that relies on variable pricing—increasingly grounded in advanced analytics—to regulate the flow of products through supply networks and to optimize margins. Lastly, accurate and timely data is the key element of any agile supply chain. We'll email you when new articles are published on this topic. For this analysis, we examined more than 70 companies distributed across five industry groups. Inventory days average raw materials, work in progress, and finished goods across the supply chain. Benefits of Agile Supply Chain. We found statistically significant correlations between reported OTIF service levels and agility scores across quartiles.

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