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"Only supply chains that are agile, adaptable, and aligned provide companies with sustainable competitive advantage."—Hau L. Lee, "The Triple-A Supply Chain," Harvard Business Review, 2004
Supply chain agility: what does it mean? Let's cover the basics first. Dictionary.com defines the word agility first in terms of physicality by calling it, "the power of moving quickly and easily; nimbleness." It then defines agility as an attribute of one's mind in terms of "the ability to think and draw conclusions quickly; intellectual acuity."
But there's a third definition that we'll discuss today. We're talking about supply chain agility. Like physical or mental agility, companies with supply chain agility exhibit a certain quickness, ease, and intelligence. According to Lee's famous Harvard Business Review article from 2004, having an agile supply chain is one of the three core tenets that sustain a company's competitive advantage.
In this article, we'll investigate supply chain agility. First of all, what does that term really mean? Further, what are the core benefits and theoretical tradeoffs of supply chain agility? Next, we'll look at ways to achieve supply chain agility in the real world. And finally, we'll look at whether Lee's "Triple-A" hypothesis from 2004 still provides sustainable competitive advantage in the face of today's supply chain challenges.
After all, the world has changed drastically since the freewheelin' days of the early aughts. But on the other hand, there's the old saying, "The more things change, the more things stay the same."
"Great supply chains are agile. They react speedily to sudden changes in demand or supply."—Hau L. Lee, 2004
Supply chain agility is the smooth, quick, and nimble response to a shock or disruption to supply or demand.
Another way of putting it, according to Redwood Logistics, is, "The agile supply chain focuses on flexibility and receptiveness. It responds quickly to changes in demand, customer preference, and industry. It’s made to handle unpredictability in the market."
In other words, supply chain agility is like Achilles on the battlefield. It easily reacts to whatever is thrown at it.
Speaking of 2004, when I think of agility in general, for some reason I picture Achilles (played by Brad Pitt) in the 2004 movie Troy. According to Greek myth, Achilles faces off against a giant in a duel that decides the entire battle between the two armies. Spoiler alert: Achilles defeats the giant, and it's because of his incredible agility.
The giant is a massive, towering hulk of a figure. Meanwhile, Achilles is smaller, but he's more athletic and agile. Indeed, with complete confidence, Achilles runs straight at the giant. He easily dodges a couple of spears. And then, with perfect timing, Achilles leaps and twists in midair. He looks like a basketball player taking flight.
But instead of a ball, Achilles' sword goes straight into the target...and with deadly accuracy. The giant staggers and falls. Let us all be so efficient. And also—let us never forget we may have an Achilles' heel!
An agile supply chain allows a company to produce less inventory. And less inventory means less capital is gathering dust stored on shelves in warehouses. An agile supply chain is identifiable based on the following attributes, and it depends on how you answer the following questions:
Depending on your industry, maybe everything. Quickness and agility are vital attributes of the contemporary supply chain. This is because customer needs, wants, and trends can change relatively quickly.
For example, let's think about footwear trends. When consumers have capital to spend, tastes and the desire for options create a lightning rate of turnover for shoe manufacturers to contend with.
Footwear supply chains require agility to service the vast number of sub-niches. For starters, one customer might wear a size six and a half, and another customer might wear a size 10. Next, how many different categories of footwear are there? Within each category of shoe, you'll find numerous options, sub-niches, and color combinations. All these options need the support of an agile supply chain. As you can imagine, an agile supply chain still involves forecasting. But the forecasting remains more fluid and open to real-time data.
Missing out on the next big thing is bad for business. Being out of stock is bad for business. Getting blindsided by the next once-in-a-lifetime event is bad for business. In short, supply chain agility helps you avoid the things that are bad for business. How does it all work?
"Never let a crisis go to waste."—Winston Churchill
There's clearly an opportunity for the logistics industry to learn valuable lessons from the COVID-19 pandemic. The greater logistics industry is full of niches, yet it all works together. That means it's possible to improve agility up and down the supply chain. Here are strategies for how to make a supply chain more agile to avoid disruption.
This is a big one. Technology drives supply chain agility. Indeed, the two previous strategies would be easier to deploy with superior data analytics. Tech provides a measurable impact on agility in these areas:
Lack of supply chain agility can result in unhappy customers, decreased market share, reduced profits, lower stock price, and overall underperformance of business. In other words, when your customer is unhappy, they tend to not stay your customer. If you can't keep up on the basketball court, you're washed up. If you can't keep up on the battlefield? Well, you get the idea!
The key concept is that the Henry Ford days are long gone. Yes, Ford invented the assembly line and revolutionized manufacturing. But he also said, "You can have any color car you want, as long as it's black." His assembly line wasn't agile. But over time, customer demand for options drove—and continues to drive—innovation.
So, let's craft our future by learning from our past. And let's all raise a glass to Achilles (patron saint of supply chain agility). Be quick, be efficient—and slay giants!
This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.
