Agile Supply Chains

Stephen DeAngelis

February 1, 2011

There are a number of descriptive modifiers being tossed about regarding supply chains — among them are: demand driven; efficient; intelligent; resilient; responsive; trusted; and agile. In this post, I would like to concentrate on the last one: agile. Blogger Amit Tambi writes, “The age-old mantra of running supply chains efficiently and measuring it on only two parameters – cost and service – is no longer sufficient [“Agile Thinking fires Agile Supply Chains,” Supply Chain Management, 27 December 2010]. He continues:

“To gain a competitive edge in manufacturing/service operations, supply chains need to not only be able to rapidly respond to the customer’s demand … but also demonstrate flexibility and nimbleness in minimizing supply disruptions. And how does one achieve this? By forging supplier partnerships (via integrated processes and information sharing); by [becoming] demand driven instead of forecast driven; by actively hunting for postponement opportunities in the supply chain; by building a streamlined logistics/distribution network and lastly by building [an] inventory of critical components (much to the chagrin of die-hard JIT proponents). However, I believe that for all these measures to be effective in an organization, the organization needs to have a culture of fast decision making.”

The late VADM Art Cebrowski, USN (ret), was a strategic thinker who called this ability to make fast decisions “speed of command.” He believed that both militaries and corporations should foster the ability to make decisions so quickly that they essentially precluded adversaries or competitors from being able to counter them. Tambi concludes:

“If your organization’s culture and set-up does not promote an environment of quick decision-making, all [other agile] measures will fail to yield the desired results. For instance, delays in budget approvals for sub-contractor hiring or for visa/travel bookings; or delays in ‘releasing’ resources from under one ‘umbrella’ to another vastly hampers the firm’s agility. Agile organizations are not just those that have agile processes; these processes need to be fueled by an ‘Agile thinking’.”

Bill DuBois, a business consultant with Kinaxis, agrees with Tambi that businesses must be agile [“Supply chain visibility is vital, but the larger business goal is agility,” The 21st Century Supply Chain, 14 December 2010]. He writes:

“I recently ran across some research that really has me thinking. The IBM Institute for Business Value surveyed 664 supply chain management executives in 29 countries around the world, and the results are pretty much what you would expect. That is, those executives cited global economic turmoil and uncertainty as the driving factors behind their three most significant supply chain challenges. Those top three challenges are:

Volatility—driven by global complexities and fluctuation in customer demand
Visibility—specifically the need for accurate, time-sensitive information
Value—continued corporate pressure for supply chain management and operations to create enterprise value

“Those are indeed, significant obstacles. Fortunately, considerable progress can be made addressing them through the use of a supply chain management solution, and, more specifically, S&OP tools. There’s been quite a bit of discussion about demand volatility here on this blog and in the Supply Chain Expert Community. For instance, Lora Cecere from the Altimeter Group addressed the subject in a webinar titled, ‘What S&OP capabilities matter most?’ Trevor Miles has had some good posts on volatility too. What Lora, Trevor and others have noted, is that in recent years, demand has not only fluctuated more significantly than in the past, but the frequency of change has also increased. The result is that forecasting by looking only at historic demand patterns is no longer sufficient. What’s needed instead, is the application of a robust what-if? capability to do range forecasting. That way, rather than a single number forecast, users can also test upside and downside scenarios to evaluate potential risks and mitigate against them.”

I agree with DuBois that “robust what-if” exercises can help train decision-makers to become more agile thinkers. For more on this topic, read my post entitled Examining the “What Ifs” in Life. DuBois continues:

“It isn’t surprising that visibility—or, more accurately, lack of visibility—was cited as the second most prominent supply chain challenge by respondents in IBM’s survey. As today’s supply chains become more complex, visibility becomes more important. This is particularly true in industries such as high-tech electronics and consumer goods, where brand owners and contract manufacturers face high demand volatility and rapid product evolution. They also have increasingly complex operations where many critical activities take place outside the traditional four walls of the enterprise, and there are many geographically-dispersed sites and/or partners using disparate data systems.”

At Enterra Solutions we are certainly finding that consumer packaged goods manufacturers are looking for better ways to make their supply chains more visible. We developed the Enterra Supply Chain Assurance Platform™ (ESCAPE™) in order to help address these serious and growing challenges. DuBois continues:

“I’ll argue, however, that the real challenge isn’t to simply gain visibility. It is a pre-requisite to the end-goal, not the goal itself. Sure, visibility is vital but the larger business goal is to improve agility. Many will promote ‘visibility’ solutions and will tie that to statements like ‘sense and respond.’ The problem is few, if any, are actually providing tools to enable the response process. They provide a limited level of visibility and leave users to determine how to benefit from it. Visibility without the tools to drive action gives only minor advantages to the organization. One needs to be able to alter and analyze information, not just see it.”

I couldn’t agree more. That is one reason that we developed ESCAPE cooperatively with Conair Corporation. We wanted to ensure that the solution we provided Conair not only provided the company with visibility but with a good return on investment. The ROI is not only measured in money saved but in increased customer satisfaction that results from actionable supply chain visibility. It is of little to no value to alert someone to a problem if there is no way for them to deal with it. DuBois concludes:

“I’ll also add that collaboration plays a critical role. Having access to ‘actionable’ supply chain information can set the stage for more meaningful and effective interactions between stakeholders based on informed decisions whereby the impact of decisions are understood and action plans are clearly defined. To truly improve supply chain performance—and ultimately address that unrelenting pressure to add enterprise value—a company must first gain supply chain visibility, but then they must be able to collectively leverage that data to make rapid decisions and act accordingly. That is true value.”

In other words, agility = knowledge + action. At Enterra, we believe that the sooner a client can be alerted to potential problems the more choices it has about how to handle them. Greg Johnsen, executive vice president of marketing, and co-founder of GT Nexus, believes that technology plays a vital role in making businesses more agile [“Business Agility – in the Cloud,” Supply Chain Digest, 16 December 2010]. He writes:

“Business agility is no longer a nice-to-have, it’s a requisite capability. If companies are to compete and win, they must have a strategy for broad and pervasive business agility. That is: they must have the ability to ‘re-wire’ and ‘re-deploy’ any time their global plans – whether small or large, local or global – change. In the world of supply chain this boils down to a company’s ability to quickly add or subtract trading partners and logistics service providers without losing the nervous systems that support process automation and control across inter-business transactions. … An agile company sees the edge of the cliff and turns in time. They get to market first. The best most competitive companies will be highly agile companies. If there is a battle cry for the next two decades, this is it. Agility, agility, agility.”

With agility being so important to the supply chain, Johnsen rhetorically asks: “Is there a fast track to business agility? How do companies acquire this critical capability?” His answer:

“It takes next generation control tower technology for supply chain. Control towers automate and monitor hundreds of inter-business operational processes in trade and logistics – from purchase-to-pay to origin operations and shipment planning, to destination operations and customer order fulfillment. The technology is radically different from traditional business software systems in that it combines Web-based software applications designed for business-to-business collaboration with technology to launch and manage private, permissions-based ‘virtual’ trading communities across an in-place electronically integrated partner data grid.”

At Enterra Solutions, we believe that the best method to share sensitive data in a “permission-based ‘virtual’ trading community” is using Attributes-Based Access Control (ABAC). As I have written before:

“The goal of an Attribute-Based Access Control framework is to provide a community the ability to manage secure information and resource exchange while instilling confidence among information owners that only authorized users can access appropriate data and information. Role-based access control (RBAC) functions accomplish this today for stand-alone systems and enterprises but do not scale for enterprise and multi-party communities that need to share real-time data at a granular level (e.g., individual document) and/or under specific conditions. ABAC frameworks deal with both granularity and scalability challenges and are able to address dynamic situations. Because information owners retain control over access to their information, authority is inherently distributed and managed. ABAC, however, provides a means for information granting authority to determine and specify who gets access and when. As a result, while control policies are centralized, decentralized resource owners retain fine-grained control of their own information. As one academic paper concludes, ‘Attribute-based access control, making access decisions based on the attributes of requestors, resources, and the environment, provides the flexibility and scalability that are essential to large-scale distributed systems such as the Grid’ [‘Attribute Based Access Control for Grid Computing,’ by Bo Lang, Ian Foster, Frank Siebenlist, Rachana Ananthakrishnan, and Tim Freeman, Argonne National Laboratory]. These distributed systems are growing in complexity and deal with security controls for sensitive information, as I discussed earlier, as well as proprietary information (think secure supply chains) and privacy issues (think new federal health care and smart grid programs). As things now stand, the technology for secure information sharing will likely be in place before the culture that it will ultimately support is fully embraced. If I’m correct, the technology will actually help speed up the process of culturalization and provide the means to address difficult security requirements at a reasonable cost.” [Sharing Sensitive Information]

Johnsen understands that large systems require large backbones. He concludes:

“The control tower is Cloud-based – it’s accessed over the Internet, as a service – and it becomes the central hub or informational ‘nervous system’ that the company and its trading partner network relies on to collaborate and execute key business functions. This technology did not exist in 1990. It’s based entirely around the Internet. But today, supply chain control towers are fast-becoming the only way that companies can achieve break-through operational efficiencies and business agility across their trading communities. Neutral, robust, secure, hosted in the Cloud, they are the ‘single version of truth’ system that enables, for the first time ever, massively scalable information sharing across a diverse and distributed trade community. Control towers don’t replace the enterprise software systems that companies have been investing in for the past three decades, they connect to these systems. They turbo charge them; they extend them. When your control tower is up, you and your whole supply chain are on the same page. You’re speaking the same language. And, because your own ‘private’ network operates above a broader community of partners and service providers who are already wired and ready to plug into your network, you gain more than just fast and consistent process automation. You improve overall agility. To use a social network analogy, the control tower is more like Facebook than it is like software for supply chain. Yes, you collaborate with partners using business software applications, but the underlying platform is a business network – a community of wired and ready partners who can be added or subtracted quickly to support a shift in plans. … Agility. It’s a compass heading. You need to aim there. You can start by plugging into a Cloud-based control tower. That’s where you get your whole community on the same page.”

I’m sure that I’ll be writing more about agile supply chains, the networks that support them, and the trust that needs to be garnered by stakeholders in those chains. I like Johnsen’s metaphor of the agile supply chain acting as a compass that shows the direction that supply chains need to be headed. Supply chain analysts are in near-unanimous agreement that supply chains of the future are going to be more demand driven and that will require greater supply chain agility.