Supply chain resilience: How agile is your supply chain?
By Wesley Niemann - Oct 4th 2018, 11:38
Thanks to globalisation, the typical manufacturing supply chain has become an incredibly complex network of entities spread across various continents. This complexity makes planning and managing the efficient and effective flow of goods, services, and information a great challenge for supply chain managers.
More complex supply chains are susceptible to a variety of risks that could disrupt the aforementioned flows and have severe adverse effects on all the entities involved in the supply chain. These risks necessitate the development of a more resilient supply chain which can respond to and recover from disruptive events and return operations to their original state or a new and improved state.
One of the major principles underpinning supply chain resilience is agility. Agile supply chains possess competencies such as event readiness that allow them to respond to disruptive risks more rapidly and cost-effectively. A study was conducted by supply chain management researchers at the University of Pretoria to explore the risks and specific agile practices used to achieve supply chain resilience in the South African food and beverage manufacturing sector.
South African food and beverage manufacturers are, like many other firms, dependent on their suppliers to provide the raw materials that will be used in the production process. As such, food and beverage manufacturers are exposed to a significant level of supply risk which may lead to production halts, and subsequent inadequate supply of products to the market. This, in turn, may lead to consumers resorting to substitute products and an overall decrease in revenues.
Operational risks have their impact on the inner workings of the firm, which ultimately affects the firm’s ability to manufacture products and services to meet market demand. The study found that a significant proportion of food and beverage manufacturers in South Africa faced operational risks as a result of failures to adhere to processes. Effectively responding to the needs of customers is a critical aspect of any supply chain which exposes firms to a series of demand risks as products are moved from the firm to its customers. A firm’s inability to respond to changes in demand could result in customers finding substitute products that better meet their needs. Inaccurate forecasting and volatility in demand have had adverse effects on food and beverage manufacturers’ ability to meet the needs of their customers.
Supply chain resilience in the food and beverage manufacturing industry is the result of reactive approaches and proactive approaches taken by these firms in the face of disruptive risks. More importantly, agile practices were found to be a major contributing factor to increase resilience in supply chains.
Supply chain agility allows the supply chain as a whole to more rapidly respond to customer needs and variations in demand. Agility is based on a series of capabilities or enablers such as flexibility, visibility, responsiveness and velocity. These capabilities are dependent on the ability of the firms in the supply chain to communicate more effectively to recognise discrepancies sooner, collaborate with one another to achieve tighter integrated amongst supply chain partners, and improve the overall network design of the supply chain. More importantly, managers need to be attuned to agile practices and should increase the awareness of agile practices among lower-level employees.
Improving agility throughout the supply chain
Food and beverage firms can improve their agility by implementing agile manufacturing practices including time-based competition, socio-technical systems design and demand chain management. Contributing further to the agility of the supply chain, lean manufacturing and just-in-time principles assist firms in reducing inventory levels and increasing the flexibility needed to respond to unexpected market changes.
One of the most important benefits that firms can realise in improving agility throughout the supply chain is the increase in customer satisfaction. Agility enables the firms to respond to customer needs more effectively. This, in turn, increases the revenues of the supply chain as a result of increased sales. Most importantly, increased agility results in a more resilient supply chain that can respond to and recover from disruptions in a cost-effective manner.
Thriving in a complex and fast-moving industry such as the food and beverage industry requires an agile, and ultimately more resilient supply chain that can respond to changes in the market more rapidly and recover from disruptions in a cost-effective manner. Managers should be focused on developing the capabilities needed to increase agility, such as improved collaboration, communication and integration which all contribute to greater visibility throughout the supply chain. Just-in-time practices and lean manufacturing should be investigated and implemented in conjunction with training and educating the lower-level employees who are responsible for operationalising these practices.
Finally, food and beverage manufacturers should be focused on developing more proactive approaches to disruptive risks. This will allow them to pre-empt these disruptions and respond to them more effectively
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