At Georgia State University’s Georgia Tech department, leading professor John Langley has put together a forum of supply chain managers who go by the name of Georgia Tech Supply Chain Executive Forum. In the autumn of 2010, John Langley, together with supply chain blogger and expert Dan Gilmore conducted a survey among the forum’s managers. The agenda for the survey was as follows:
- how can you define “supply chain flexibility”?
- how highly will supply chain flexibility be prioritised when it comes to both strategy and operations?
- which business needs call for more flexibility?
- what are the barriers to flexibility in the supply chain?
- is short-term or long-term flexibility most important?
- does your company measure flexibility?
What is flexibility in the supply chain?
A common thread running through the 40 or so responses was that flexibility in the supply chain is "the ability to react to fluctuations in demand or capacity while placing the minimum of strain on costs and service".
A typical answer sounded thus: "I don't know precisely how a definition should sound but I do know how flexibility in the supply chain behaves in everyday operations and I know that the supply chain must be able to react quickly to inefficiency and fluctuations that can spring up from any part of the network: suppliers, customers, partners and the internal organisation". Another typical response went as follows: "The ability to support significant and rapid changes in demand, supplies, the mix etc. without impacting on customer service levels. Ideally, flexibility should be built into all parts of the supply chain, for example, production, warehousing, transport etc."
At this point, the conclusion to the survey – in light of the importance that will be attached to it – must be that there is a surprising lack of clarity on exactly what flexibility in the supply chain means and what it entails.
How will flexibility be prioritised?
25% of the respondents replied that flexibility has "highest priority" in their supply chain strategy. 67% responded that the concept was "very important", 8% responded "somewhat important" and 0% responded that the concept was "not important".
Thus, there is no doubt that the supply chain managers who took part in the survey see flexibility as playing a crucial role in the success of their supply chains.
Which business needs call for more flexibility?
In the survey, the respondents were given seven drivers of flexibility and asked to score them between 1 and 5, thus giving an indication of the business needs in which there is a particular call for flexibility. The results show that the managers score all seven drivers highly but that the need for moving costs from fixed to variable, in relative terms, score lowest of the seven needs. “This is perhaps surprising in light of the strain under which the financial crisis has put liquidity” says Dan Gilmore, one of the instigators of the survey.
| To improve the ability to react to company strategies/strategic opportunities |
4.2 |
| To improve the ability to deal with interruptions to and deviations in day-to-day operations |
4.2 |
| To improve the ability to handle fluctuations in market trends and demand trends |
4.1 |
| To improve the ability to balance supply and demand on a global scale |
4.1 |
| To reduce costs |
3.9 |
| To reduce overall supply chain risks |
3.9 |
| To move more fixed costs to variable costs |
3.7 |
What are the barriers to flexibility in the supply chain?
Similarly, the respondents were asked to allocate a score of between 1 and 5 to a list of potential barriers to introducing or improving flexibility in the supply chain. "Perhaps the most surprising thing here is that "software and IT system Flexibility" ranks highest among the barriers," says Dan Gilmore.
The respondents were also assembled to discuss the results of the survey and here, one manager from a leading software provider supported the viewpoint that information technology often hampers flexibility. It is his experience that his, over the years, his IT company has supplied countless customer adaptations to standard systems in order to meet changes in the customer's business needs. The problem is that adaptations to systems often take months to implement because the standard system is no longer a standard system thanks to the numerous layers of adaptations and additions, and this complicates adaptation of the system. In recent years there has been a remarkable development of IT systems in the direction of greater flexibility and quicker adaptations. However, many companies still abound with older systems that supplement and overlap each other in a more or less manageable network.
| Flexibility in supply chain software / integration between systems |
4.2 |
| Organisational structure |
4.2 |
| Reduction of costs normally overshadows the desire to improve flexibility |
4.1 |
| It is difficult to quantify the value of increased flexibility |
4.1 |
| It is difficult to pinpoint the precise definition of flexibility |
3.9 |
| The lack of will to cooperate among collaborative partners |
3.9 |
| Lack of backing from the top echelons of management |
3.7 |
Short-term or long-term and can flexibility be measured?
The respondents believe that short-term and long-term flexibility carry equal weight. 70% responded that the two time perspectives carry equal weight, 22% responded that long-term flexibility is most important while 8% believe that the ability to react quickly to sudden interruptions is most important.
22% of the participants in the survey responded that they in fact do carry out direct measurement of flexibility in the supply chain while 22% gave a hesitant "Yes", and 56% responded that they do not measure flexibility directly. "The ensuing discussion of the subject makes me believe that the true figure for the number of companies that measure flexibility is lower than 22%", Dan Gilmore tells us.
Five recommendations for the supply chain
The conclusions from the Georgia Tech survey are, to some extent, underpinned by the conclusions from the survey "Lessons Learned from the Global Recession" conducted by PRTM Management Consultants in 2010. Director Gordon Colborn from PRTM states: "Relatively few companies have really succeeded in improving their abilities for flexibility in the supply chain and establishing the necessary processes needed to handle growth in both demand and volatility."
On the basis of the survey, PRTM have extracted five recommendations which they believe are essential for managing the supply chain of the future:
- Improve “customer access” and precision in supply chain planning
- Improve flexibility, both upwards and downwards in the supply chain
- Increase focus on supply chain costs
- Introduce end-to-end risk management in the supply chain
- Integrate and “empower” the supply chain organisation
The role played by WMS in flexibility
"It is interesting to see how the Georgia Tech survey singles out IT systems as the main barrier to flexibility and how both the Georgia Tech survey and the PRTM survey show that flexibility is becoming increasingly important to competitiveness," Mikael Holmqvist from Consafe Logistics explains, before adding: "It is also our experience that WMS can both function as a show-stopper and as a driving force for improved flexibility”.
He stresses that WMS must both:
- underpin transparency in the data flow and a fully integrated value chain, and
- be flexible in itself.
There has to be systematic updating and adaptation of the IT system so that it is constantly at eye level with reality. Consafe Logistics has a conscious strategy that entails constant development of WMS. It can always be slightly better and meet the needs of different companies to an even greater extent. Naturally, the need for IT support of the warehouse is ongoing as the world and the market change.
Therefore, Consafe Logistics has a team which currently comprises 9 experts whose full-time job it is to collate experiences from customers, consultants and other IT experts. Twice a year, the team institutes meticulously selected improvements to the Astro WMS system which are made available to all customers. Some of these improvements will be of particular relevance to specific types of customers or industries while others will be relevant to all customers. This ensures customers of a WMS that matches executive management and the customers’ need for flexibility at all times.