The Flexibility Of Supply Chain Management Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

According to Duclos, Vokurka and Lummus (2003) a complete definition of supply chain flexibility components consist of the flexibility dimensions required by all the participants in the supply chain to successfully meet customer demand. Flexibility in the supply chain adds the requirement of flexibility within and between all partners in the chain, including departments within an organization, and the external partners, including suppliers, carriers, third-party companies and information providers. It includes the flexibility to gather information on market demands and exchange information between organizations. There are five components of supply chain flexibility have been identified from the literature on manufacturing flexibility, strategic flexibility and the limited writings on supply chain flexibility .

The operations flexibility includes the ability to configure assets and operations at each node of the supply chain to react to emerging customer trends. Market flexibility describes the ability to mass customize and build close relationships with customers. Logistics flexibility includes the ability to cost effectively receive and deliver product as sources of supply and customers change. Supply flexibility is the ability to reconfigure the supply chain, altering the supply of product in line with customer demand. Organizational flexibility is the ability to align labor force skills and organizational structure to the needs of supply chain to meet customer requirements (Duclos et al., 2003). Below are further explanations of the flexibility of supply chain management:

5.1 Operating system flexibility (both manufacturing and service)

Operating system flexibility is the ability to configure assets and operations to respond to emerging customer trends (product changes, volume, mix) at each node of the supply chain. Anderson and Lee (2000) also refer it as the ability to be "operationally agile." This includes the ability to configure assets and operations to reach to customer trends for both products, geographic areas, and the ability to redesign manufacturing system to react to new market requirements (Wu, 2001). Radjou (2000) stated that global manufacturers must be able to respond to "dynamic trade" which is defined as "the customized response." An integral component of supply chain flexibility would be the operations flexibility at each node of the chain. In order to meet the end customer's needs, each node needs to be able to deliver the product or service in a timely manner.

5.2 Market flexibility

Market flexibility is the ability to mass customize and build close relationships with customers, including designing and modifying new and existing product. This requires a concurrent engineering approach utilizing representatives from different nodes of the supply chain to develop a more effective product with a short development time. Fisher (1997) stated that the primary purpose of this is to respond quickly to unpredictable demand in order to minimize stockouts, forced markdowns, and obsolete inventory.

5.3 Logistics flexibility

Logistics flexibility is the ability to cost effectively receives and deliver product as sources of supply and customers change (customer location changes, globalization, postponement). Distinct value to distinct customers implies ensuring logistics flexibility within the supply chain to serve each distinct customer's needs. The logistics flexibility includes selecting logistics components that can accommodate wide swings in demand over short periods, handle a wide-range of products, have flexible reverse logistics and return policies, have the ability to pack product-in-transit to suit individual customers' requirements with product arriving from multiple shipping points, and have the ability to customize products close to the customers. Logistics flexibility is required to meet changing channels, especially electronic commerce expands and markets open in developing countries and sourcing, manufacturing and distribution is becoming more global (Bradley, 1997). Lummus and Vokurka (1999) argue that successful supply chain will develop customized logistics networks tailored to each customer segment.

5.4. Supply flexibility

Supply flexibility is the ability to reconfigure the supply chain, altering the supply of product in line with customer demand. Supply flexibility includes the ability to handle variable life cycle lengths, the ability to ramp up production quickly, the ability to adopt processes to specific products, the capability to downsize, the ability to attract a portfolio of partners that changes as customer needs change. As markets keep on changing, the competitive priorities of the supplier partners must include a parallel shift in focus at each level of the supply chain down to the remotest level of supply (Rich & Hines, 1997). The flexibility of supply includes flexibility in establishing the relationships with partners. Companies may choose to solicit short-term bids, enter into long-term contracts and strategic supplier relationships, form joint ventures, form consortiums, create problem-solving councils or vertically integrate. Flexibility in forming these relationships is the key to successfully meeting changing customer requirements. Companies must select the most appropriate relationships to match the specific set of situation (Cooper & Gardner, 1993).

5.5. Organizational flexibility

Organizational flexibility is the ability to align labor force skills to the needs of the supply chain to meet customer service and demand requirements. It targets the flexibility that a node can achieve through its workforce and the organizational structure, business practices, and culture within which that workforce operates. This component of supply chain flexibility is used to recognize the fact that reconfiguration and adjustment of operations will only be as successful as the flexibility of the workforce and organizational environment allows. Miles (1989) argues that a new organizational form and well-trained workforce, is needed to meet the challenges inherent in the global economy.

6.0 Three "A's" Supply Chain

In order to make SCM function smoothly, small business' supply chain must adopt the "three A's": Agility, Adaptability, and Alignment (Scarborough, Wilson & Zimmerer, 2008). Viswandham and Raghavan (1997) described this concept as the ability if a business process to effectively manage or react to changes with little penalty in time, cost, quality or performance. The "three A's" are described as follows:

6.1 Agile Supply Chain

An agile supply chain (ASC) is one that is fast, flexible, and responsive to changes in demand. Agile supply chains can deal with the unavoidable disruptions and fluctuations by establishing strong partnerships with suppliers, sufficient levels of safety stock, backup plan for catastrophic incidents, and an information system that gives everyone in the chain with timely information. According to Aitken, Christopher and Towil (2001) the key principle of ASC are rapid replenishment, organizational agility and quick response (as cited in Ismail & Sharifi, 2006). According to Christopher (2000) in order to be agile, there are numbers of characteristics that a supply chain must have. These include market sensitivity (through the capturing and transferring of point of sale data), designing virtual supply chain (based on information rather than inventory), process integration (collaboration between buyers and suppliers, joint product development, etc.) and networks (association of partners linked together as against stand alone organization). There are few ways which introduced by Lee (2004) that can be used which are continuously provide supply chain partners with information on changes in supply and demand so they can respond immediately. Besides, working together with suppliers and customers is to redesign processes, components, and producers in ways that give the organization a head start over competitors. Besides, producing the finished products only when accurate information on customer preferences is obtained and keep a small inventory of inexpensive, non-bulky product components can prevent manufacturing delays. For example, convenience-store chain Seven Eleven Japan (SEJ) builds supply chain agility by using real-time systems to detect changes in customer preferences and track sales and customer data at every store. Satellite connections link stores with distribution centers, suppliers, and logistics providers. SEJ reallocates inventory among stores and reconfigures store shelves three times daily to cater to different customer groups at different hours.

6.2 Adaptable Supply Chain

An adaptable supply chain is the approach that makes changes according to company's needs, change, and could accommodate a small business's growth. Adaptable supply chains are predictive where the changes in companies' buying and selling processes can be anticipated. It also helps the companies to adapt to changes in real time such as the structural shifts in markets (Scarborough et al., 2008). In order to meet these shifts, the supply chain's design such as supply network strategies, products, and technologies must be modified (Kopecka, Penners & Santema, n.d.). For example, the supply chains will evolve over time as economic progress, political shifts, demographic trends, and technological advances reshape markets. The objective is to adjust supply chain design to accommodate market changes. The method for adaptability supply chain is to track the changes in economics, especially in developing countries and to use intermediaries to find reliable vendors in unfamiliar parts of the world. Besides, it can also create flexibility by ensuring that different products use the same components and production processes. Last but not least, the adaptability of supply chain is also the ability to create different supply chains for different product lines and optimize their capabilities. For instance, with highly customized, low-volume products, use vendors close to your main markets while for standard, high-volume products, commission contract manufacturers in low-cost countries (Lee, 2004). For example, Seven Eleven Japan's (SEJ's) adaptability is legendary. Within six hours after the 1995 Kobe earthquake, SEJ overcame highway gridlock by mobilizing helicopters and motorcycles to deliver 64,000 rice balls to its stores in the beleaguered city.

6.3 Aligned Supply Chain

When all the companies work as a team for the benefit of the entire group, the supply chain is considered as properly aligned. Lee (2004) described alignment supply chain as to create incentive along the partners within the supply chain for better overall performance. The success of the companies needs both sharing information seamlessly and also synchronizing their efforts to maximize the efficiency throughout the entire chain (Scarborough et al., 2008). They align the interests of all participating firms in the supply chain with their own. As each player maximizes its own interests, it optimizes the chain's performance as well. There are some methods for aligned supply chain which are to provide all partners with equal access to forecasts, sales data, and plans. Clarify partners' roles and responsibilities to avoid conflict. Redefine partnership terms to share risks, costs, and rewards for improving supply chain performance. Align incentives so that players maximize overall chain performance while also maximizing their returns from the partnership. For example, Seven Eleven Japan (SEJ) fosters alignment by making partners' incentives and disincentives clear. For another example, when carriers fail to deliver on time, they pay a penalty. But SEJ also helps carriers save money by forgoing the typical time-consuming requirement that store managers verify all contents of each delivery truck. In conclusion, to achieve sustainable competitive advantage, your supply chain needs all three of these qualities which are agility, adaptability and alignment.