To understand the need for agile supply chain networks, it is necessary to recognize the chaotic nature of today’s consumer-driven markets, says Barr. Consumer preferences are driving an explosion in SKUs because of the many types of colors, shapes and sizes on offer, he says, and new models are replacing the old at a record pace. “Supply chains that were designed over the past 30 to 50 years and that have a lot of physical assets in place are not nimble or flexible enough to respond to current markets,” says Barr. “To survive, companies are going to have to build more agile networks.”
There are three key areas that need to be addressed, says Barr. The first is physical design of the network. Cycle time, which is actually reaction time, has gone from weeks to days or hours, he says. “Companies need a physical design that is nimble and flexible enough to provide the shorter reaction time required by today’s consumers,” he says.
The second issue is process design. “Most companies still are using process designs in which hundreds or thousands of people are making separate, one-off decisions that impact product availability,” Barr says.
The third area is how companies organize production and distribution. “Many companies are still using very distributed models that really have no central control,” he says. Much as an air traffic control tower manages flight patterns and synchronizes takeoffs and landings, companies need an organizing model to control all the massive change and chaos in their supply chains, he says.
Most companies are realizing they cannot solve these issues on their own, says Barr. “They need to involve and establish online connections with materials suppliers and perhaps packaging suppliers. They need to have visibility to what their suppliers have and suppliers need to see what they have in inventory, so they can work together to solve problems. Fortunately, today’s cloud-based solutions are allowing most companies to easily connect outside their four walls very in ways that simply weren’t possible five years ago,” he says.
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