The Secret to Supply Chain Success: Agility

The lesson for supply chains is to focus on creating an entrepreneurial culture that promotes three core principles

By Michael Gravier, Associate Professor of Marketing and Supply Chain Management

March 31, 2016

One of the main issues facing supply chain managers is that low- cost, efficient supply chains are very attractive when things are going well, however, they make it very hard to predict major disruptions. And, because these supply chains are so reliant upon this method, they are often caught flatfooted by predictable trends. This “set and forget” mentality can get a company in a lot of trouble.

Companies with an entrepreneurial culture who put an emphasis and value on having their supply managers and teams come up with creative solutions to these problems position themselves to reap success when the unexpected happens. These companies motivate their teams to develop new strategies as a result of the disruption. Honda, Apple, Zara (the Spanish clothing retailer) and Amazon are some examples of companies who have been successful with agile supply chains.

There are three things that agile supply chains have in common:

1. Alertness and Accessibility – They quickly detect changes, opportunities and threats by quickly accessing pertinent data.
2. Decisiveness – After reviewing the data they make a decision as to how they are going to pivot their supply chain as a result of the data
3. Flexibility – They modify operations to the extent needed to implement the new strategy.

The lesson for supply chains is to focus on creating an entrepreneurial culture that promotes the three core principles noted above. Focusing on this will help you be nimble enough to pivot your supply chain strategy when a disruption comes along.

The proof is in the success, Honda’s agility allowed it to survive a surge in gas prices in 2008 and the big drop in demand due to the recession by having factories that were able to produce various models rather than the more model-specific nature of the competition’s plans.