The changing shape of supply chains – the need for an agile supply chain

Supply chains are like the backbone of a company, ensuring that everything from raw materials to the final product flows smoothly. Many companies have adopted agile supply chains to streamline operations, move goods efficiently, and meet delivery deadlines. The disruptions from pandemics and wars have highlighted the importance of supply chain agility allowing a business to quickly adapt to unexpected changes in the market. While not every challenge will be as extreme as a global lockdown, having an agile supply chain is crucial for responding to fluctuations in supply and demand.

‘Black swan’ events rarely happen, or do they?

The disruptions caused by Covid highlighted the crucial need for enhanced supply chain risk management, a concept that was often overlooked before the pandemic. Many large corporations and multinational companies were aware of the potential financial losses that unforeseen events could bring, ranging from millions to billions in various currencies. However, these events were often unpredictable and classified as “black swan events” due to their rarity. As a result, companies struggled to quantify the return on investment (ROI) for implementing risk management strategies, leading to a lack of investment in such technologies. It is common for organisations to prioritise improving supply chain risk management only after experiencing a significant disaster. For instance, the automotive industry embraced risk management practices following the nuclear crisis in Fukushima, Japan. Covid served as a wake-up call, akin to a ‘Fukushima-type’ event, impacting industries across the board.

As businesses adopted risk management solutions, they found that while some were effective at pinpointing risks one tier up the supply chain in real-time, they struggled to detect risks occurring multiple tiers up – commonly known as the “n-tier problem,” the very issue that Covid supply disruptions magnified. Take the automotive sector, for instance, which suffered substantial losses due to the semiconductor chip shortage. Suppliers faced challenges in obtaining the necessary chips, leading to a domino effect where Original Equipment Manufacturers (OEMs) couldn’t access the essential subassemblies and car components they required.

What are n-tier suppliers?

Suppliers beyond your tier 1 (contracted) suppliers are part of the network of companies that supply your tier 1 supplier with the goods or services they need to deliver their own products or services to you. Due to the multiple levels of sub-tier organisations, there may be limited information available about them, leading to potentially high-risk exposure.

Customer driven need for an agile supply chain

Companies need to adapt their supply chain agility not only to address unexpected changes but also to meet customer demands. Customer loyalty is no longer guaranteed, and the influence of customers on supply chain logistics is continuously evolving. With consumer-generated content taking over from traditional marketing campaigns, companies now have less control over demand fluctuations. In today’s fast-paced world, a single viral video can draw the attention of millions overnight, requiring organisations to quickly respond to customer needs and capitalise on brief profit opportunities. To stay ahead in this dynamic, consumer-focused environment, your supply chain must be flexible, predictive, and responsive to ever-changing demand and product mixes. In essence, your supply chain needs to be agile to thrive in this rapidly evolving landscape.

What is an agile supply chain?

Supply chain agility helps you respond swiftly and avoid hasty decisions when faced with changes in consumer demand or unexpected market challenges like geopolitical crises, labour shortages, or natural disasters. An agile supply chain allows you to effortlessly handle sudden spikes in demand and adapt to shifts in raw material availability. With agile supply chain management, you can stay ahead of future demand while efficiently managing your current inventory levels to prevent shortages or overstocking. This approach is especially valuable when demand is high but supply is limited, helping you minimise costs and production delays. Embrace the power of an agile supply chain to enhance your operations and stay ahead of the competition.

How ERP can support supply chain agility

An Enterprise Resource Planning (ERP) system offers the scalability and flexibility necessary for achieving supply chain agility. It enables organisations to easily adapt their operations to meet evolving business requirements, ensuring efficient resource allocation and inventory management. By fostering seamless collaboration, including the sharing of information with supply chain partners like suppliers, manufacturers, distributors, and customers, organisations can effectively oversee their supply chains.

Recognising the significance of an ERP system in supply chain management and its essential features is vital for selecting the right software for your business. Through the utilisation of supply chain ERP systems, you can improve communication and collaboration among team members, optimise stock levels, streamline inventory management, and drive down costs.

Ultimately, this leads to a more productive, resilient and agile supply chain operation, resulting in reduced expenses, faster cycle times, and heightened customer satisfaction.

Check out our guide ‘Solving supply chain woes‘ to discover the role of ERP in an agile supply chain.

We offer a range of guides that provide more insight into Sage X3. If you would like to build a more agile supply chain, then please download our ‘solving supply chain woes’ guide to find out how an ERP system can help, or take a look at our other guides such as:

Intelligent Inventory

How to keep your business agile in a changing world

If you would like to discuss your project with us, please contact our team or book a tailored Sage X3 demo

2024-05-08T16:44:57+00:00May 8, 2024|Blog|
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