Supply chain chaos and the need for agility
Debra Hofman and Lora Cecere at AMR Research have just put out an Outlook piece entitled “Supply chain chaos and the need for agility.” This is a really good piece that aligns very well with what we see in the market regarding Response Management.
It has been our belief that organizations must develop a core competency in Response Management - the ability to proactively drive operations performance by quickly and effectively responding to changes in demand, supply, capacity and product. Today’s market creates an urgent need for OEMs and contract manaufacturers alike to develop such skills - since customers continue to expect greater responsiveness and your operating performance (inventory, margins, etc.) are directly related to this ability. As AMR points out, its about the ability to respond to unexpected events - both positive and negative.
To do so requires a very different strategic solution than what organizations have typically invested in. Most organizations invest heavily in systems to ensure the business runs like clockwork. Yet, managing the business when things don’t run like clockwork is one of the least automated aspects of the business (most companies rely on spreadsheets to make day-to-day decisions in response to change. And, because this doesn’t work very well, they’ve had to “institutionalize” safety stock, excess capacity and other mechanisms to increase responsiveness-all at the expense of operating performance). To do so requires a fundamentally different approach.
In most organizations, planning is done by a small number (at least in proportion to the employee base) of highly trained individuals. Yet, responding to change is done on the front lines - by literally hundreds or thousands of buyers, customer service representatives, planners, managers, etc.
These front-line decision makers need the ability to respond quickly. They need immediate access to relevant and detailed information and collaborative “what-if” capabilities to rapidly evaluate various action alternatives with others across the extended supply chain. To ensure the right decisions are being made, decisions that align with corporate objectives, alternatives need to be scored in real-time.
The key to responding effectively to change, which is at the heart of having an agile supply chain, is the ability to empower front-line decision makers to quickly drive the appropriate action.
