What Does It Mean to Have an Agile Supply Chain?

As supply chain issues have fallen into the spotlight, strategies and insider terms have become buzzwords. Agility is one such concept whose meaning can get lost in all the conversation around it, but it’s a critical consideration for business today. So what does it actually mean to have an agile supply chain?

What Is an Agile Supply Chain?

Put simply, an agile supply chain is one that favors flexibility and resiliency over other factors. While other, more conventional strategies may emphasize cutting out as much waste as possible or minimizing costs, supply chain agility sees adaptability as more important. That doesn’t mean cost efficiency and similar factors aren’t important in an agile network, but they don’t take precedence.

Agile supply chains can see incoming changes and react quickly, mitigating their impact. While this often means higher costs in some areas, it also means even extreme situations are minimally disruptive.

Supply chain agility isn’t necessarily a new concept, but it’s become increasingly popular in the wake of COVID-related disruptions. There were 4,200 supply chain disruptions in the first nine months of 2020 alone, with more than half leading to a “war room” situation. As businesses grappled with delays and shortages, the idea of a more responsive supply chain became more appealing.

Agile vs. Lean

It’s easier to understand agile supply chains when comparing them to another popular strategy: lean. Lean principles, which have become dominant over the past 25 years, aim to reduce waste and costs as much as possible. That often includes slimming operations to transport just enough goods in just enough time.

Agile approaches often move away from extreme waste-cutting to provide a cushion in case of emergencies. While lean sees large inventories as a waste, agility typically requires safety stocks. Similarly, whereas lean supply chains may rely on single sourcing, agile ones favor distribution and choice.

Agile strategies may feature less standardization than lean supply chains, too. While they likely involve some standard practices, they don’t lean into them as heavily, helping them adapt if circumstances change.

Common Features and Strategies

While every supply chain is unique, agile networks often have a few features and strategies in common. The most crucial of these is an emphasis on visibility. Agility requires an understanding of current and incoming situations, so these supply chains need thorough real-time visibility.

Achieving that transparency often means using technologies like the internet of things (IoT) and machine learning. It also means working more closely with partners, and this collaboration is another hallmark of agile supply chain management.

Agile businesses may work with more partners than lean ones, too, or at least more facilities. Distributed sourcing is a common agile strategy, and since 180 products come from a single country in some industries, this can be a big change. Similarly, reshoring and near-shoring sources are also popular agile strategies, as they enable faster responses.

How to Create an Agile Supply Chain

Agile supply chain management has many benefits, most notably the ability to adapt to otherwise disruptive changes. Still, agile approaches aren’t ideal for every product or company. 

Generally speaking, low-volume but high-volatility items benefit from agile strategies, while higher-volume, low-volatility ones are better suited to lean approaches. The first step to creating an agile supply chain is determining where to apply it, following this principle. Once businesses recognize which networks or products need more agility, they can make other necessary changes.

The most important of those other changes is maximizing visibility. Only 6% of companies today have full visibility into their supply chains, but adaptation requires awareness. Businesses can implement IoT tracking technologies and warehouse management systems and encourage mutual data-sharing with partners to reverse this trend.

Developing close relationships with supply chain partners is also crucial. Regular meetings and extensive communication are crucial to keep everyone on the same page. Using the same software across all parties and facilities to consolidate information will help, too.

Organizational changes are necessary, too. Some supply chains may need to reshore or near-shore. All should consider moving away from single dependencies and increasing their emergency inventories.

Facilities will likely have to adjust their workflows to enable more flexibility, too. That often involves moving away from highly specialized equipment and processes to more versatile, adaptable alternatives.

Agility Is Crucial for Supply Chains Today

Many supply chains today are fragile, but agile strategies can help them move past that. If more companies embraced these practices in their higher-volatility products, events like the COVID-19 pandemic wouldn’t be as disruptive. Businesses can enjoy fewer losses and more uptime as a result.