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Agile Supply Chain (“agility”) refers to the relationship between the finished product producing company and the customer market, i.e. the flexibility of the supply chain to respond to changes in customer demand. The competitiveness and profit of the agile supply chain is the chain’s ability to respond as quickly as possible to market challenges. The key to the success of the chain is understanding customer requirements and meeting them to the highest possible standard, as well as improving their ability to adapt to expected changes in market demand.
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Manufactured products are increasingly tailored to customer needs, i.e. they are becoming more and more unique, which requires an increasing number of individual products, with ever-shorter lead times and ever lower costs. The feature of this strategy is that it is used in the production of short-term innovative products (up to 1 year) and that the actors in the chain operate in the dynamic form of cooperation within the framework of virtual corporate networks. Flexibility, speed and high service standards are the determinants of the selection of suppliers. Customer Value /Customer Decision Considerations Product Price Product Lead Time Product Quality Product Customizability Product Quality Services.
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Agile Supply Chain Management
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Agile supply chain management was proposed in the United States in the late 1990s, with the development of computer and network technology, in the traditional industry to bring unlimited business opportunities, but also bring more challenges. The integration of multi-company under the comprehensive technical support of information technology, computer technology and advanced management mode, the integration of a variety of management ideas and advanced technology and the development of a new set of supply chain management model suitable for the changing corporate environment – agile supply chain management, agility is its core.
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Agility is at the heart of agile supply chains. Agility refers to the ability of an enterprise to control change, which requires the enterprise to complete the adjustment it needs in a high-speed manner and at low cost, while also means a high degree of pioneering and creative ability.
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The essence of agile supply chain is the integration of multi-enterprises under the comprehensive technical support of information technology, computer technology and advanced management mode, and it is a new supply chain management mode suitable for the changing enterprise environment developed by integrating various management ideas and advanced technology. Agile supply chains enable supply chains to cope with rapidly changing and unpredictable market demands and reap long-term economic benefits by integrating flexible virtual organizations or dynamic alliances, advanced production technologies, and highly qualified personnel.
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Agile supply chains are very distinctive compared to general supply chains. Firstly, agile supply chains are highly market-sensitive. This means that agile supply chains are not only well aware of market changes, but can respond to them as quickly as possible. At present, the vast majority of businesses, because they do not have access to real demand data, or even if they do not have the ability to respond quickly to real demand, can only predict demand based on historical data and formulas, and based on this forecast to develop supply chain plans, often out of touch with reality.
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However, the emergence of an effective customer response model (ECR, Efficient consumer response) provides a good example of this problem. Especially later, as information technology developed, it became easier to obtain Point of Sale and Point of Sale data, making the implementation of agile supply chains a real possibility.
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Secondly, agile supply chains are virtual supply chains linked to information. Traditional supply chain management deals and cooperation through paper orders and contracts, such as logistics systems, based on complex formulas to determine optimal inventory and order quantity. In contrast, in an agile supply chain, everything is done in a virtual environment. Electronic data exchange technology (EDI, Electronic data interchange) and the Internet make communication between supply chain partners very convenient and effective, they can share information and even respond to instant demand information.
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Thirdly, the result of information sharing in agile supply chains is process integration. Under the condition of information sharing, supply chain partners set up a common information system, participate in each other’s product development, and jointly manage the logistics system of both sides. When each member is focused on their core competencies, this form of cooperation forms a truly integrated supply chain.
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The fourth feature of agile supply chains is that all supply chain partners form a dynamic network. The agility of the supply chain comes from the seamless collaboration of the entire dynamic network. Unlike lean supply chains, many changes and demands are unpredictable. This requires partners to remain highly alert at all times, and can form a parallel network response of points and faces to changes at any moment.
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Agile Supply Chain Driving forces
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In the 21st century, the market environment of business management has undergone great changes, especially the continuous progress of information technology and the globalization of economy, which makes customer-centred enterprise management face more complex competitive environment and more powerful competitors. The competition between enterprises from simple product quality and performance to the competition between the supply chains in which the enterprises are located. At the same time, the common problem affecting the survival and development of enterprises is that the current competitive environment, customer demand and other factors change too fast, and the speed of self-adjustment and adaptation of enterprises can not keep up.
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As early as 1991, the Aucoka Institute of the University of The Caspian Sea produced a report entitled “Manufacturing Strategy for the 21st Century”, which proposed the concept of agile manufacturing based on virtual enterprises or dynamic alliances. The report argues that agile competition through agile manufacturing is the main form of international competition in the 21st century, and the emergence of Agile Supply Chain (ASC) also marks an important shift in supply chain management mode, namely, from efficient supply chain to responsive supply chain, manufacturing mode from lean production to agile manufacturing.
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The flexibility of traditional supply chains is enhanced to capture business opportunities through rapid transformation or restructuring, resulting in Agile Supply Chain. Combined with the background of the times, it can be found that the five elements ultimately contributed to the emergence of ASC:
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(1) The level of product development has been improved. This leads to significantly shorter time-to-market time to market, prompting companies to leverage external resources to pursue opportunities for collaborative design, development, and manufacturing. This is the 21st-century market environment and user consumption concept requires and is the key to win the competition. This can be seen in the change in US manufacturing strategy. The strategy of American manufacturing has developed from the “scale first” in the 1950s, after the “price competition first” and “quality competition first” in the 1970s and 1980s, to the “market speed first” in the 1990s, and the time factor was mentioned as the top priority.
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(2) Diversification and personalization of customer needs. With the improvement of people’s living standards, customers are no longer satisfied with the enterprise’s consistent products, they want to meet their personality and needs of a variety of products. This demand is putting pressure on companies as well as providing them with new competitive opportunities.
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(3) Supply chain flexibility is improved. In response to a “rapidly changing, unpredictable” market, supply chain management needs not only technical flexibility, but also managerial flexibility, as well as human and organizational flexibility. Manufacturing in the 21st century will capture unforeseen opportunities through rapid transformation or restructuring.
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(4) Distribution, parallelism and integration have become the characteristics of the global supply chain. Under the trend of economic globalization, the distribution is stronger and wider distribution of enterprises in geographical distribution, the degree of parallelization is higher, which means that many processes of enterprises can be implemented across regions and departments distributed in parallel, and the integration degree is higher, including not only the integration of information and technology, but also the integration of management, human and environmental.
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(5) The rapid development of information technology. The key to agile supply chain is to realize the integration and sharing of information between affiliated enterprises in the Internet network environment. In recent years, Internet-based information technology, such as VRML (Virtual Reality Modeling Language), XML (Extensible Markit Language), CORBA (Public Object Request Agent Structure), Distribution Computing Technology, and JAVA support cross-platform, object-oriented programming languages, have become the supporting technologies of agile supply chains.
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In addition, the popular application of Electronic Data Interchange (Electronic Data Interchange, EDI) technology, RFID and other new-generation automatic identification technology, electronic funds transfer (EFT) technology provides effective technical support for supply chain management, while providing a technical foundation for the implementation of agile supply chains.
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Agility
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Agility means using market knowledge and virtual enterprises to exploit profitable opportunities in a volatile market. Agility is a transaction-wide capability that includes the organizational structure of an enterprise, information systems, logistics supply processing, and mindsets.
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Agility is an important goal in supply chain construction and operation. Agile supply chain emphasizes the rapid restructuring of supply casting and agility according to the changes in the internal and external environment of the enterprise, and the agile adaptation to market needs.
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Agile supply chains emphasize rapid readjustment and adjustment based on the formation and disintegration of dynamic alliances (reorganization), support for rapid alliances of dynamic alliances, optimized operations and smooth disintegration, achieve business synergies between enterprises, organize alliances on a regular basis in accordance with agile and dynamic alliance requirements, adjust management and production plans, and integrate other supply chain systems and management information systems.
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The implementation of agile supply chain helps to promote inter-enterprise cooperation and the transformation of enterprise production mode, and helps to improve the comprehensive management level and economic benefits of enterprise groups.
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What is Lean Supply Chain?
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