Leagile supply chain transformation & strategies
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Leagility in procurement and supply chain management emphasizes agility as a critical dynamic capability needed to thrive in today's volatile market, driven by demanding customer needs and technological advancements. The document outlines a four-step transformation model towards an agile supply chain, highlighting the importance of change management, delivery agility, and organizational agility to enhance responsiveness and efficiency. It discusses the leagile model, which combines lean and agile strategies to optimize supply chain performance in varying demand scenarios.
Leagile supply chain transformation & strategies
- 1. Leagility Procurement & Supply Chain Author: Reza Hagel Telecom Chief Procurement Officer Digital Business Transformation Advisor An Introduction to
- 2. Table of Content Introduction Supply Chain Visibility Four steps transformation to agile supply chain - Introduction, Scaling Agility - Change Management - Delivery Agility - Organizational Agility - Business Agility Lean, Agile or Hybrid model- Leagile - Background - 7 wastes by Taiichi Ohno - A Demand driven approach - The decoupling point between lean and agile - Postponement & JIP - Lean versus Agile supply chain strategies - Leagile supply chain strategies Sources
- 3. Introduction Today’s business environment is more volatile than ever, organisations have to conduct business within ever increasing uncertainty of the market place, we have experienced how the coronavirus has affected the entire supply chain. Nevertheless, customers have become more demanding as they seek lower prices, better quality and quicker delivery. These external factors have pressured organisations to shorten product life cycles, adapt new technologies and increase product variety. Supply chain agility is critical for the survivability of an enterprise within these dynamic and volatile markets. As such agility is an important dynamic capability within the current business environment and is perceived as one of the most noteworthy issues in contemporary supply chain management. The theoretical basis for supply chain agility is however underdeveloped, as agility is a complex concept consisting of many elements and there is only limited literature available adding to the fact that it is characterised by ambiguity.
- 4. SUPPY CHAIN VISIBILITY • Using a cloud platform, all sized organizations can today manage the life cycle of collaborative supply chain plans and the associated data. • In general these platforms covers 3 main features: a real-time Data Collection Framework that collects data from partners sites (IoT and legacy systems) and store data into the cloud; configurable optimization service that propose optimization algorithms for designing a plan; and Monitoring Plan Execution through model comparison for detecting deviations and propagation of the deviations; agile adaptation for different deviations; a dashboard for visualize and assess the supply chain situation. Managing and controling visibility of information regarding flows of products and services in different levels and directions is vital towards the creation of an agile supply chain. Visibility as an important contributor to improved responsiveness in order to avoid mistakes in decision making, the bullwhip effect, excessive inventories and jeopardizing the profit margin. In these contexts, supply chain visibility is the capability of sharing on-time and accurate data on customer demand, amount and location of inventory, cost of transportation, and other logistics dimensions throughout an entire supply chain. It must help enterprises to identify and act upon the risks and opportunities of their supply chains considering they are confident in the fair usage of the gathered data.
- 5. Four steps Transformation Model to Agile Supply Chain
- 6. SCM Transformation SCALING AGILITY Agile (or agility) is more than just a mentality—an alternate state of mind. Transitioning from ‘doing agile’ to ‘being agile’ requires something other than just an assortment of practices; it requires an organization to embrace agility as the way of operation and to thrive. It requires a new way of living and working for those organizations. Many procurement and supply chain organizations have been working mostly separated from the business lines but those days are gone were the function could deliver results working in isolation gathering requirements to manage tenders and sign contracts. The world has decided to move much faster but moving in smaller incremental steps. This may be a quantum leap for many supply chain organizations and the challenges faced to make it happen may be mountain high. Organizations need to develop key expertise, strategies and methodologies to make the organization’s transformation to agile smooth, seamless and pain-free.
- 7. CHANGE MANAGEMENT SCM Transformation Change Management is the first step in your supply chain agile transformation journey. Starting by setting up the business objectives and sort out change authority groups necessary to meet those objectives. Each change program should be built to fit particular business lines needs from field-tried change designs adjusted with change models and agile practices. Some changes may be global that impact the entire value chain and supplier network. Some changes may be more localized such as, Category Management or Contract Management. Regardless of scale of change, managing the change in a rigorous way exhibits the discipline necessary to successfully complete any agile transformation project.
- 8. Delivery Agility changes your skilled people into high-performing, autonomous teams who can deliver cost savings through efficiency and productivity improvements in a well-coordinated manner. Once change management captures the entire transformation steps and flows, supply chain delivery agility bridges the gap between agile hypothesis and practice. A supply chain delivery framework that brings life to a nonstop change plan has to be develop with the aim to: • Alignment of teams around a shared vision of success • Rapid delivery with higher quality and reduced cost • Improved transparency and predictability • Better corporate and business lines strategy fit in an iterative manner DELIVERY AGILITY SCM Transformation
- 9. ORGANIZATIONAL AGILITY Once change management blueprint is implemented using delivery agility frameworks, organizational agility brings key leaders of the organization to advance three fundamental work spaces — physical, virtual, and mental of every part of the Supply Chain organization. Organizational Agility aims to advance a community-oriented culture leveraging upon organizational advancement, group achievement, program coordination and continuous improvement. Streamlined procedures and destroying waste across every department of the organization to “examine and adjust” as the organization navigates through changing realities around it. Leaders should strive to bring organizational agility to their teams with an aim to transcend the organization into a “learning machine” that continuously learns from the world around it, adapts and adjusts its internals and externals to react with every weapon in its arsenal to win the business objectives of the organization SCM Transformation
- 10. SUPPLY CHAIN MANAGEMENT BUSINESS AGILITY SCM Transformation • Business Agility aims to bridge any gap between the value chain and the organization business lines, namely by integrating with the finance department and alignment with sales and marketing. • While supply chain agility is only possible through the collaboration of R&D and Product development, business agility brings agile administration across the corporation departments to be aware and leverage whenever possible. Fostering a culture where rapid delivery engines in IT and product development aids in rapid-fire marketing, faster sales processes and revenue realization. Fundamentally, business agility brings innovation and newer products and services to market faster. Organizations need business agility experts who brings the non-technical transformation complimenting organizational agility — completing the loop and cycle of agile transformation in the most holistic manner.
- 11. Lean, Agile or a hybrid model: Leagile
- 12. The debate continues over the decision to develop a lean supply chain, an agile supply chain, or a hybrid model: leagile. • Background Lean supply chain thinking was developed by Toyota to develop their production capabilities through constant innovation in resource reduction and utilisation. The ultimate goal of lean thinking is to eliminate waste. To this end it is necessary to identify and eradicate the 3 M’s: Muda, Mura and Muri. Muda is work that absorbs resources but adds no value. Mura is the waste of unevenness or inconsistency leading to an erratic flow. Muri is to cause overburden, stretching resources beyond their limits.
- 13. Taiichi Ohno identified 7 wastes that absorb resources but adds no value 1. Transport: The unnecessary movement of materials and products 2. Inventory: Excess stock held without reason 3. Motion: The unnecessary movement of resources to conduct an activity 4. Waiting: Interrupting the constant flow of material or information 5. Overproduction: Making more than is required 6. Over-processing: Conducting operations beyond the needs of the customer 7. Defects: Poor quality leading to rejects and rework Taiichi Ohno is considered to be the father of the Toyota Production System, which inspired Lean Manufacturing in the U.S
- 14. A DEMAND PATTERN APPROACH ❑ A lean supply chain would benefit an environment where there are high volumes and predictable demand. ❑ An agile supply chain would benefit an environment where there is a wider range or variety of items in smaller volumes. ❑ But what if the organisation has a high variety and volumes are also high? This is where leagile fits in. A combination of reduction and response to enable the organisation to benefit from both scenarios.
- 15. LEAGILITY – the decoupling point between lean & agile • The term leagility separates the lean and agile concept at a strategic point which is known as the decoupling point. The decoupling point is the position to where the customer’s order penetrates the supply chain. Upstream from this point lean strategy can be utilised to gain cost-efficient advantages of predictable demand. • Downstream of the decoupling point agility can be applied in order to deal with the uncertainty of the market. The ability to build these leagile supply chain networks has been lagging and has not developed as anticipated.
- 16. The philosophy behind this would be to have inventory Just In Progress (JIP) using postponement opportunities to cut down on waste and still be able to respond to changes in demand. LEAGIBLE - POSTPONEMENT
- 17. The table 1. illustrates the comparison of attributes between lean and agile supply chain strategy by classifying products into two generic types, fashion and commodities. These two product types respond to distinctly different marketplace pressures and hence require a different supply chain approach to address their specific characteristics Lean versus Agile Supply Chain Strategy
- 18. Leagile Supply Chain Strategies Even as these three strategies are complementary rather than mutually exclusive, it is likely that each may work better in certain conditions. Table 2 shows that there are sets of appropriate conditions for the application of the three-hybrid, i.e., leagile supply chain strategies.
- 19. Sources • A conceptual framework towards leagility by Arno Meyer, Wesley Niemann, Karlheinz Peckover • Focus Consulting – Supply Chain Change Management and Transformation Best Practices • Developing Lean and Agile Health Care Supply Chains by Aronsson H, Abrahamsson M and Spens K • Responsive Supply Chain: A Competitive Strategy in a Networked Economy by Gunasekaran A, Lai K H and Cheng T C E • The Impact of Logistics Performance on Organizational Performance in a Supply Chain Context” by Green K Jr., Whitten W D and Inman R A • Six Sigma Deployment in Supply Chain Management: Enhancing Competitiveness by Madhani P M • Supply chain strategy selection by Madhani P M