In today’s dynamic and hyper-competitive environment, characterised by market unpredictability and constant change, being agile is all about customer responsiveness and mastering market turbulence.
Truly agile companies learn to become resilient and reliable, and at the same time, stay nimble and adaptive. Agility enables an organisation to react quickly and more effectively to the volatility and uncertainty of the market, thereby establishing a superior competitive position.
Additionally, organisations with agile processes are more market-sensitive, better capable of aligning supply with demand, and able to achieve shorter cycle times. Actions taken by organisations to mitigate impacts on supply chains from the pandemic can also lead them to become resilient to future problems.
However, it is vital to have a strong backbone and design structures, processes, and governance with a relatively fixed set of core elements. However, the key lies in how quickly they adapt to new opportunities and challenges.
There is a direct correlation to a company being agile and moving faster while it continues to meet customer demand efficiently. The organisation’s agility is related to a set of issues that require rapid action across the end-to-end supply chain.
All of this involves multiple stakeholders of the supply chain, including their Tier I and II suppliers, the manufacturing plant, the warehouses, their customers, and their customer’s customer.
Besides being agile and building resiliency for the future, having the capability to have end-to-end visibility is a game-changer for supply chains, which would effectively reduce risks and minimise costs.
Visibility of the supply chain enables access and information sharing across the supply chain partners. It also allows companies to identify disruptions across both the downstream and upstream supply chains, and synchronise demand and supply both at the required delivery time and at the point of sale.
A 2020 survey by EY indicated that with improved visibility, some supply chains can deliver 20 to 25 percent cost savings and reductions in inventory while improving their overall customer service levels.
Additionally, companies with end-to-end visibility can also perform what-if analyses and simulations to optimise usage of materials (both raw material and work in process) and hence productivity.
Today, agile organisations are starting to pivot and shift from response to recovery. There are three actions that organisations can take in response to the pandemic:
- Have a good handle on “actual” customer demand
- Efficiently manage cash and working capital
- Estimate value chain inventory levels.
How to handle “actual” customer demand
Organisations need to adopt demand sensing — the policy to use the point of sale (POS) data from retail stores to understand the actual demand from end-customers. Tracking and collating POS data and market buzz are two established demand sensing methods.
Efficiently manage cash and working capital
To survive in this dynamic world, businesses must ensure the rate of payments (cash outflow) do not exceed their rate of receipts (cash inflow).
According to a recent study, companies that do monthly cash flow planning have an 80 percent survival rate, more than double the 36 percent survival rate for those planning only once a year.
Careful planning enables a company to build up its cash reserve, serving as a life vest, when organisations are saddled with poor vendor performance, inaccuracies with forecasts, weather disruptions, or other unexpected issues.
Estimate value chain inventory levels
Estimating the amount of inventory available across an organisation’s value chain is a critical exercise. This includes the estimation of —
- Finished goods typically held in warehouses
- Spare-parts inventory that could be used for the production of new products
- Poor quality products – The company has to determine how many would have to reworked, reused, recycled, refurbished, or remanufactured, and how it would affect their end-inventory
- Product supply, which is at the hands of the customers, dealers, or wholesalers, and could be used for cross-delivery across the supply chain.
The COVID-19 pandemic has taught companies a very important lesson — a need to assess the vulnerability of their supply chain. Take an example of a third-party logistics (3PL) provider who can manage some of the difficult aspects of the supply chain such as last-mile delivery.
This 3PL specialises in cold chain logistics, which involves distributing food and grocery that can perish if not properly transported or stored.
Since the onset of the pandemic, their retail distribution, freight brokerage, and cold storage businesses have seen massive demand growth. With their fleets, warehouses, consolidators and forwarders, the 3PL becomes a very important and cost-effective partner for a company.
The 3PL industry is predicting that when the economy finally opens, they expect a majority of food demand to shift from eat-in restaurants to food delivery, and home cooking.
Being agile helps the 3PL company to create value by shifting with demand channels due to multiple factors:
- Dedicated managers, who proactively manage demand spikes by working overtime and long hours in a day, if required
- An agile supply chain by redeploying and retraining people, and efficiently managing resources to meet demand spikes
- An ecosystem that is integrated — an advanced process-driven approach to connect and integrate the revenue-producing processes between a company and its key ecosystem stakeholders.
The current pandemic has triggered the critical need for supply chain agility and responsiveness and the major rapid shift to ecommerce. Ecosystem integration helps to bring together all the systems and business processes so they can, in turn, respond rapidly to any natural disasters, pandemics, or geopolitical events.
In these fast-changing times, supply chain agility is the key to sustained business continuity and success. The choice is clear — you either become agile or become irrelevant.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
