Developing Agile Supply Chain

Strategies for a Turbulent World

Emeritus Professor Martin Christopher
Cranfield School of...
Agenda

• The new competitive environment
• Complexity and volatility have changed the
rules of the game
• From ‘forecast-...
New competitive realities
• Input costs are rising but …
• New sources of low cost competition mean that the
pressure on p...
Commodity Price Index

4
Volatility Index

5
Anticipated Sources of Volatility
18%

Demand Volatility

Volatility of Market
Prices of our Outputs

22%
15%
16%
29%

Vol...
The rise of demand-driven supply chains

• Because markets have become more

turbulent they have become harder to
predict....
The impact of complexity

• Much of the cost in today’s supply chains is
there because of the continuing increase in
their...
Complexity impedes agility

• One of the biggest barriers to improving
agility in the supply chain is complexity.

• Compl...
Seven steps to agility

• Substitute information for inventory
• Work smarter, not harder (eliminate or reduce nonvalue ad...
Conventional supply chain design

• Based on conditions of relative stability
• Designed to optimise production flows
• Of...
What is structural flexibility?

In conditions of increased supply and demand
uncertainty the ability to rapidly adopt or ...
Structural vs Dynamic Flexibility
Dynamic flexibility is a
reflection of the agility of
the supply chain,
particularly its...
Moving from dynamic to structural flexibility

Structural
Flexibility
Low

High

High

Efficient
Supply
Chain

Adaptable
S...
Variable lead-times or flexible capacity

Fixed Capacity
Flexible
Capacity
Variable
Lead
Time

Lead-time

Fixed Lead-time
...
Gaining structural flexibility
• Investigate ‘local-for-local’ alternative to global
sourcing and centralised manufacturin...
Thank you
For further information…
Dr Martin Christopher
Emeritus Professor of Marketing and Logistics
Cranfield School of...
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Martin Christopher - Developing agile supply chain strategies for a turbulent world

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Almost 100 supply chain managers and experts attended Implement Consulting Group's Master Class Thursday 31 October 2013 with one of the worlds most acknowledged experts on the subject, professor Martin Christopher from Cranfield School of Management.

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Martin Christopher - Developing agile supply chain strategies for a turbulent world

  1. 1. Developing Agile Supply Chain Strategies for a Turbulent World Emeritus Professor Martin Christopher Cranfield School of Management Cranfield University Cranfield Bedford MK43 0AL United Kingdom Picture source: http://1ms.net/turbulentwaters-108045.html Tel : 44 (0)1234 751122 Fax : 44 (0)1234 721225 E-mail : m.g.christopher@cranfield.ac.uk www.martin-christopher.info
  2. 2. Agenda • The new competitive environment • Complexity and volatility have changed the rules of the game • From ‘forecast-driven’ to ‘demand-driven’ • A route map to agility • The search for structural flexibility 2
  3. 3. New competitive realities • Input costs are rising but … • New sources of low cost competition mean that the pressure on price will continue and … • Continued concentration of markets means that bigger, more powerful customers will demand more from their suppliers whilst … • Conventional marketing strategies have less effect in a time-sensitive, on-demand world Picture source: http://www.etftrends.com/2009/09/finra-raises-margin-requirements-leveraged-inverse-etfs/ 3
  4. 4. Commodity Price Index 4
  5. 5. Volatility Index 5
  6. 6. Anticipated Sources of Volatility 18% Demand Volatility Volatility of Market Prices of our Outputs 22% 15% 16% 29% Volatility of Prices of our Inputs: Raw Materials, Resources (including Energy) Exchange Rate Volatility 30% 12% 15% Current Year Next 2 Years_ Source: The Hackett Group 2012, Key Issues Study 6
  7. 7. The rise of demand-driven supply chains • Because markets have become more turbulent they have become harder to predict. • As a result there is a growing requirement to move from being forecast-driven to being demand and event-driven. • This implies a higher level of responsiveness and agility across the supply chain. Picture source: http://www.thebcg.com 7
  8. 8. The impact of complexity • Much of the cost in today’s supply chains is there because of the continuing increase in their complexity. • Complexity is also a major barrier to agility and responsiveness. Picture source: http://massively.joystiq.com/2008/12/01/the-negative-impact-of-complexity-on-mmos-and-virtual-worlds/ 8
  9. 9. Complexity impedes agility • One of the biggest barriers to improving agility in the supply chain is complexity. • Complexity is also one of the major drivers of cost in the end-to-end supply chain. • Supply chain managers must become ‘complexity Masters’ if the goal is to enhance agility at less cost. Picture source: http://newfoundnation.wordpress.com/2010/06/10/facing-obstacles-is-necessary-in-community-development/ 9
  10. 10. Seven steps to agility • Substitute information for inventory • Work smarter, not harder (eliminate or reduce nonvalue adding activities) • Partner with suppliers to reduce in-bound lead-times • Seek to reduce complexity (not necessarily variety) • Postpone final configuration/assembly of products • Manage processes not just functions • Utilise appropriate performance metrics, e.g. end-toend pipeline time Picture source: http://janedundee.com/big-changes-small-steps-2/ 10
  11. 11. Conventional supply chain design • Based on conditions of relative stability • Designed to optimise production flows • Often based on ‘lean’ thinking • Network optimisation based on cost rather than responsiveness Picture source: http://www.ticsales.com.au/what_we_do.asp 11
  12. 12. What is structural flexibility? In conditions of increased supply and demand uncertainty the ability to rapidly adopt or reconfigure the supply chain becomes critical. Structural flexibility implies a willingness to invest in solutions that maximise responsiveness rather than minimise cost. Picture source: http://www.inhabitat.com/wp-content/uploads/twirlingtower1.jpg 12
  13. 13. Structural vs Dynamic Flexibility Dynamic flexibility is a reflection of the agility of the supply chain, particularly its ability to respond rapidly to variations in volume and mix. Structural flexibility is the ability of the supply chain to adapt to fundamental change, e.g. if the ‘centre of gravity’ of the supply chain changes, can the system change? Picture source: http://cameronbland.wordpress.com/2012/04/13/cinema-vs-dvd/ 13
  14. 14. Moving from dynamic to structural flexibility Structural Flexibility Low High High Efficient Supply Chain Adaptable Supply Chain Dynamic Flexibility Traditional Supply Chain Low 14
  15. 15. Variable lead-times or flexible capacity Fixed Capacity Flexible Capacity Variable Lead Time Lead-time Fixed Lead-time Capacity Capacity Lead-time Source: Aronsson, 2000 15
  16. 16. Gaining structural flexibility • Investigate ‘local-for-local’ alternative to global sourcing and centralised manufacturing • Focus on the ‘economies of scope’ rather than the ‘economies of scale’ • Create ‘bandwidth’ through asset sharing, e.g. capacity and inventory • Adopt a ‘real options’ approach to supply chain decision making Picture source: http://www.inhabitat.com/wp-content/uploads/twirlingtower1.jpg 16
  17. 17. Thank you For further information… Dr Martin Christopher Emeritus Professor of Marketing and Logistics Cranfield School of Management Cranfield Bedford MK43 0AC United Kingdom E-mail: m.g.christopher@cranfield.ac.uk Web: www.martin-christopher.info 17

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