4 ways to make your supply chain more dynamic, resilient
Executives around the world today are challenged by a seemingly continual onslaught of change that must be managed, whether it's driven by fluctuations in foreign currency, a natural disaster or political instability. While such change makes business outcomes less predictable, it also can create unexpected opportunities.
Consequently, many companies question the resilience of their supply chain. They also fear that their supply chains lack the flexibility that is needed to withstand this ongoing volatility and uncertainty. Are they agile enough to scale up and down to accommodate shifting customer demand? Many fear the answer is "no."
Many supply chains were built on inflexible foundations in an era of greater stability. The focus was on efficiency vs. flexibility. They generally deliver reliable, efficient results, but they typically don't have the ability to rapidly change in response to today's global marketplace. To compete successfully, companies need "dynamic operations" that respond rapidly to change, thereby giving them the potential to capitalize on market shifts and other changing business conditions.
But how do companies create "dynamic operations"?
Four capabilities underpin this practice, giving companies the speed, responsiveness and possibility to gain a competitive advantage when they face volatility in their markets.
1. Turning data into action
Companies with dynamic operations systematically capture information in their supply chains and markets to develop insights and make decisive management decisions. A key to this is whether the company regularly can monitor and analyze market trigger points and operating data in almost real-time -- and then quickly determine the right course of action to execute on it.
For instance, clothing retailer Zara, famous for its two- to five-week design-to-store shelf production cycle, monitors trends and captures and synthesizes data to help guide last-minute production decisions. A generic drug manufacturer may also monitor stock-outs from its competitors on a weekly basis to adapt its safety stock policies and position itself to replenish products to grab additional sales and win new customers.
2. Adaptive structure
Success of such organizations, in part, hinges on having an adaptable operating structure that makes it possible to capitalize on opportunities as they arise and respond to supply chain risks without disruption. An automotive manufacturer in Asia, for example, said it would serve the U.S. market with compact car production from an existing European plant, with a limited investment thanks to an adaptable structure. This allowed it to respond to currency and energy costs linked to production in its home market.
3. Flexibility in innovation
Flexibility in innovation also plays a key role in helping companies create dynamic operations that can contribute to their growth objectives and the achievement of greater operational efficiency. In fact, a recent study found that companies with a formal system for driving innovation in their organizations are 75 percent more likely to see their innovation strategy delivering a competitive advantage (21 percent vs. 12 percent), and 35 percent are more likely to say they are typically first to market with new products or services (50 percent vs. 38 percent).
4. Agile execution
Last, companies benefit from agile execution, the ability to very quickly adapt operations to respond to market changes whether they result from new market opportunities, a natural disaster or other business variables, thereby enhancing the company's performance. For instance, an industrial glass manufacturer using high capacity, high temperature ovens designed those ovens to operate with natural gas or petrol, giving it the ability to switch to either commodity to take advantage of these commodities' price fluctuations.
While these core concepts are relatively easy to grasp, properly designing and implementing them can pose challenges. Still, companies that embrace the principles of dynamic operations typically find they can use this capability to create a competitive advantage. They can be quicker to improve profitability and realize cost savings in an increasingly volatile world.
By strengthening market insights, quickly capturing data that can be incorporated into business and operating decisions, as well as creating an adaptable infrastructure, companies have the opportunity to enable flexible innovation and agile execution. Such operations can contribute to a company's competitiveness and profitability, all while attempting to prepare the company for unexpected events that characterize today's business environment.
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