In Parts 1 and 2 of this series, we began looking at the five basic CHAAF components required for supply chain resilience success, and defined Celerity, Hardiness, and Adaptability. Here we will conclude with Agility and Flexibility.

    Agility
    Organizations 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 organization's performance. Andrew Grove, former CEO of Intel stated, “So give me a turbulent world as opposed to a quiet world, and I’ll take the turbulent one.” A single risk event can easily disrupt at least one of the supply chain streams. In most cases, the impact of disruption can be observed along the supply chain. Any hiccup will cause delays and even disruption. Recent incidents such as Hurricane Sandy in the U.S. show how such disruptions can severely affect even the most stable supply chain.

    As defined by AMR Research, SCEM (Supply Chain Event Management) is a software application that supports control processes for managing events within and between companies. It allows you to monitor your supply chain processes, providing visibility within the process and alerting appropriate parties to potential critical situations. As part of SCEM, the Supply Chain Control Towers concept has come into being. A Control Tower operates as single, unified command center for visibility, decision-making, and action which is based on real-time data for both inbound and outbound logistics flows. As you would expect, dashboards or cockpits monitor supply chain developments and events in real-time. The Control Tower requires data integration with all parties within the supply chain - suppliers, carriers, logistics providers, internal constituents, and trading partners - and collaboration to break barriers created by organizational or functional silos.

    The haziness of reality, the potential for misreads and the mixed meanings of supply chain conditions in the New Normal requires agile execution. Ambiguity must be overcome by agility, the ability of supply chain professionals to communicate across people and organizations instantly and to move quickly in applying solutions - all of which may interrupt supply of product to the customer and/or ultimate consumer.

    Flexibility
    According to Industry Week, one thing is certain: Real flexibility demands strong, collaborative relationships with key suppliers and supply chain partners in order to jointly address capability gaps and help mitigate supply chain risks. To quote Albert Einstein, “The measure of intelligence is the ability to change.”

    Supply chains and business operations are the backbone for the development and growth of organizations and nations. Today’s uncertain, turbulent environments expose supply chains and business operations to risks and disruptions that can significantly damage organizations and economies. Research conducted by the Business Continuity Institute (BCI) and supported by the Chartered Institute of Supply, Zurich Insurance, and DHL found that 85% of respondents had suffered at least one significant supply chain disruption in the last 12 months.

    For example, flash memory is a global commodity, much like oil. Its pricing fluctuates with supply and demand. As PPB Newslink reported in March 2011, more than 40% of the world’s USB flash drive supply is produced in Japan. In fact, one major supplier, Toshiba, supplied 30% of the world’s memory chips alone. Due to the history-making earthquake and tsunami in Japan, memory prices jumped by 50 to 60% overnight - literally. Fear caused the price increase because of the unknown impact on supply.

    Calum Lewis, Operations Director at Lego in 2013 proposed that the flexibility of a supply chain will be the factor used to differentiate the good from the bad. He said: “What will differentiate one supply chain from another is its ability to flex people, processes and systems.” How effectively an organization implements flexibility is reflected in their focus: On being reactive or proactive. Because we’re part of a global supply chain, we all felt the effects when the earthquake and tsunami hit Japan. How we experienced these effects would be dependent on our flexibility. Are you reactive or proactive? Based on the effects when the earthquake and tsunami hit Japan, would you defensively adjust to the uncertainty of flash memory by changing suppliers? Or would you proactively control it by contacting your customers about the situation so they can go ahead and order products in order to get current pricing as well as create a buffer product inventory?

    Organizations are rethinking their supply chains to craft a strategy that can deftly accommodate broad swings in demand and supply. In fact, 64% of respondents to PwC’s recent 2013 Global Supply Chain Survey said they plan to implement greater flexibility to better respond to shifts in volume. That makes flexibility a top supply chain priority.

    Flexible supply chains incorporate event readiness, are capable of providing an efficient response, and often are capable of recovering to their original state or even better postpone the disruptive event. The World Economic Forum’s 2013 “Building Resilience in Supply Chains” report stated, “Despite fears that injecting resilience into the supply chain will create cost and reduce possible rewards, most experts surveyed believe that efficiency and resilience [flexibility] can coexist without major negative impact and ideally, should be complementary.”

    Summary
    Two characteristics that distinguish companies on the Gartner Supply Chain Top 25 are an emphasis on supply chain strategy and a mind-set that strives for continuous improvement. Aligning supply chain strategy with business strategy is the shift organizations need to transform a traditional, reactive supply chain into an agile, hardy, organization that adapts and flexes within a celeritous environment.

    If you haven’t got some CHAAF, then what are you waiting for? How are you going to make your supply chain more resilient to the increasing likelihood of potential disruptions?


    This article is part of the monthly series authored by the Institute for Supply Management’s Logistics & Transportation Group Board Members, who are current practitioners, consultants, trainers, and educators. In future columns, they will continue sharing their views on a number of Supply Chain and Professional Development topics.

    Thomas L. Tanel, CTL, C.P.M., CISCM, is the President and CEO of CATTAN Services Group, Inc., specializing in Logistics and Supply Chain issues. He is also the Chair of ISM’s Logistics & Transportation Group and can be reached at tanel@cattan.com or (979) 212-8200. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.

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