How agile is your supply chain?
Zara has earned high marks for its agile supply chain. Despite its success, manufacturers heavily invested in Lean believe that the retailer’s approach could never work for them. What are the misconceptions about agility and how can they be overcome?
While recently talking to a senior supply chain executive from a U.S.-based CPG manufacturer, the conversation turned to Zara’s customer responsive, agile supply chain—a strategy that is based on the use of local suppliers, large amounts of spare distribution center capacity and strategically placed time-based buffers. The manufacturer’s response was one of shock: “Fifty percent spare capacity is just a huge big waste, and therefore a cost that we cannot even come close to justifying.” This reaction—and misconception— is typical of most if not all manufacturers. It is especially true for those that are the most heavily invested in Lean manufacturing and have spent years driving waste and cost out of manufacturing operations and supply chains. Yet local sup¬ply and spare capacity are precisely what allows Zara to identify and respond to new trends by designing, manufacturing and delivering new fashions to its stores in a fraction of the time of traditional retailers.
Why do these misconceptions of agility exist and how can they be overcome? How can CPG manufacturers and retailers develop an agile capability that will significantly improve their supply chain performance? To answer these questions, let’s begin by looking briefly at what exactly supply chain agility means.
What is supply chain agility?
In essence, agility is the ability of a supply chain to autono¬mously respond to demand—and its variations—with buffers that are minimized, albeit of the right size, and in the form that best serves both the company and its customers. Finally, those buffers are part of the supply chain design.
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While recently talking to a senior supply chain executive from a U.S.-based CPG manufacturer, the conversation turned to Zara’s customer responsive, agile supply chain—a strategy that is based on the use of local suppliers, large amounts of spare distribution center capacity and strategically placed time-based buffers. The manufacturer’s response was one of shock: “Fifty percent spare capacity is just a huge big waste, and therefore a cost that we cannot even come close to justifying.” This reaction—and misconception— is typical of most if not all manufacturers. It is especially true for those that are the most heavily invested in Lean manufacturing and have spent years driving waste and cost out of manufacturing operations and supply chains. Yet local supply and spare capacity are precisely what allows Zara to identify and respond to new trends by designing, manufacturing and delivering new fashions to its stores in a fraction of the time of traditional retailers.
Why do these misconceptions of agility exist and how can they be overcome? How can CPG manufacturers and retailers develop an agile capability that will significantly improve their supply chain performance? To answer these questions, let’s begin by looking briefly at what exactly supply chain agility means.
What is supply chain agility?
In essence, agility is the ability of a supply chain to autonomously respond to demand—and its variations—with buffers that are minimized, albeit of the right size, and in the form that best serves both the company and its customers. Finally, those buffers are part of the supply chain design.
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