Managers like things to turn out elegant. A well-laid out factory that produces flawlessly. A warehouse with more than enough storage space and material-handling equipment. A complete fleet of trucks that delivers all the orders without delay. A smoothly running purchasing system in which supplies and materials are bought at the best price and arrive on time.
Nice to dream about but hardly the reality. All it takes is one disruption to mess everything up.
The COVID-19 pandemic of 2020 is the popular example. Many enterprises have closed thanks to sudden drops in demand and supply. What many executives thought would be a good year turned out the opposite.
But as much as the pandemic was the biggest whammy to business in recent memory, it is not the last and it certainly wasn’t the first. Disruptions happen all the time in different degrees and forms. There will always be uncertainties and resulting variabilities in supply and demand. Consumers will overstock or switch to other brands. Business customers will be fickle about buying new equipment. Vendors will speculate and change prices, terms, and the availabilities of items. Third-party providers will abruptly ask to renegotiate contracts.
Many consultants cite the need for supply chain flexibility and resilience in order to re-grow and survive. But that’s not the answer.
What we need are nimble supply chains. Nimble means having the prowess to adapt and respond quickly to changing circumstances without having to invest or spend too much in resources. It’s more than being synonymous to agile. It involves the ability and tendency to adapt rapidly to changing circumstances. Enterprises not only need to run fast but run fast and dodge unpredictable obstacles while aiming toward moving targets.
Hence, the challenge for supply chains: with all its differing functions and all the uncertainties, how does one become nimble from start to finish? Can it even be done?
The answer is yes but it would need changes in mindsets.
First, nimble is not a buzzword. Consultants and so-called experts have promoted buzzwords like agile, just-in-time (JIT), Six Sigma, ERP, Lean, and responsive. Many projects have ended up dead-on-arrival while consultants and so-called experts made money out of them. When we say we want to be nimble, it doesn’t mean uttering it in every meeting. (“we need to be nimble!”, why aren’t we nimble?”). We need to define it and make a strategy out of it.
Second, nimble does not mean a total change in how we operate. It’s more of finding and focusing what to improve and where. How fast can we switch to a different item? How do we shorten the set-up times between products? How do we adapt our order-to-delivery systems? How do we quickly source new materials?
Large consumer goods firms such as Unilever and P&G have bragged about their introduction of hand sanitizers and face masks in the wake of the COVID-19 pandemic but it took them several weeks to develop the items. Toyota has made it a routine to retool their assembly lines and make available a new vehicle model in a matter of hours, if not minutes.
Third, it is relevant to all functions in the supply chain. Nimble isn’t limited to manufacturing (where a lot of people think it does). And even if an enterprise thinks it can be nimble just on the production line, it is doubtful its supply chain will be if its logistics and purchasing functions aren’t geared up for it.
A large wholesaler excelled in the procurement and inventory management of merchandise but had room for improvement when it came to deliveries. The wholesaler hired a freight trucking company to deliver products to customers. The wholesaler insisted that the trucking company supply large 6-wheeler trucks to maximise loads and minimise freight costs. Trucks, however, often had to wait for hours till they were fully loaded and the wholesaler usually loaded the trucks with up to 10-15 customer orders each. Either way, deliveries were frequently delayed or trucks weren’t able to deliver all of the orders in a single day. Customers complained. The wholesaler finally relented to the trucker’s call to use smaller four (4) wheel vans which delivered to customers faster, sometimes within the same day orders were received. It turned out freight costs didn’t significantly increase as four (4) wheel vans could do several trips in a day.
Fourth, nimble applies in every industry. Whether it be consumer goods, industrial, or energy, going nimble can help enterprises of every sort.
For many years, a large cement company sold to a captured market. It had steady revenues and all it had to worry about was cost. Its factory was designed to mass produce cement bags by the hundreds in a day. One day, however, the government allowed foreign cement producers to enter the market. Suddenly, the cement company found itself at a pricing disadvantage. The cement company eventually closed down its factory. Imported cement was cheap and had better quality. The cement factory never bothered to improve its products or its operations. It thought it never had to.
Fifth, nimble isn’t limited to enterprises that sell tangible products; it works for service-oriented organisations too. Hospitals in Taiwan have long realised that fast turnaround of patients is crucial in keeping costs down and reducing wait times for sick people seeking treatment. Taiwan hospitals were well-prepared for the COVID-19 pandemic. They had an inventory management system that assured enough medicines, supplies and personal protective equipment (PPEs). They also set up a structure in which assigned medical teams, consisting of doctors, nurses, and staff, would be dedicated exclusively to the contagion. These teams would work separately from other medical practitioners dealing with patients with other ailments. The strategy worked and Taiwan was nimble enough to dodge the virus bullet.
Sixth, and finally, it needs an engineering approach. Leaders set directions, managers plan and implement, but engineers do the nitty-gritty design and development of structures and systems essential to the improvement of operations.
Enterprises don’t construct factories on their own. Enterprises hire engineers to do that. In the same way, they should engage supply chain engineers to build systems and structures that would enable an enterprise to become nimble.
Enterprises don’t have to start from scratch. And it would not need super large investments. Engineers can identify workplaces along the supply chains that would significantly contribute towards becoming nimble.
It can consist of re-designing production lines to quickly change over to different items, such as what Toyota did. Or it can involve having smaller trucks to deliver rapidly to customers, as what the wholesaler did. It can also just entail identifying areas to reduce costs and improve quality which the cement company failed to do.
Supply chains operate in a normally disruptive world. Enterprises need to be nimble; flexibility and resilience aren’t enough. Buzzwords are useless. For an enterprise to be nimble, it needs to define its strategy, focus on where to improve, and involve all functions. Enterprises have to believe that nimble applies to all industries, even service-oriented ones.
The best approach to nimble is via supply chain engineering. Supply chain engineers have the best qualifications to build the nimble enterprise.