Agile Supply Chains and Lean Thinking - Coursework Example

Logistics Systems Name: Course: Tutor: Institution: City and State: Date: Logistics Systems Part I Agile Supply Chains Agile supply chain is one of the practices that businesses normally use when trying to get a competitive edge over other organizations. The practice of agile supply chains relates directly to agility. Christopher (2005) states that agility is a concept that applies to all aspects of a business including the organizational structures, logistics and information systems. The main principle in this concept is flexibility. Flexibility becomes an advantage for businesses that operate in worlds that are highly volatile and unpredictable. Eyong (2009) explains that the advent of new technologies and products has increased the capabilities of organizations and created new markets for them. However, these innovations also mean that businesses have to be capable of changing their operations within limited periods. This is because the new products and technologies are still evolving, making the market more dynamic than it has ever been in the past. Agile supply chains therefore seek to use agility and flexibility as a way of coping with this volatility (Eyong 2009). If businesses are able to change their operations at short notice, then they will be more capable of dealing with the constantly evolving market that typifies the modern world. Within the context of supply chains, agility essentially relates to a firm’s ability to react quickly to changes in demand. This ability to change is perhaps the defining characteristic of agile supply chain practices. Agile supply chains also tend to utilize process integration as a way of ensuring that they are aware of market changes. In process integration, there is collaboration between suppliers and buyers in a manner that enables the former to provide quality services and products for the latter. Lastly, agile supply chains rely on fluid cooperation between partners operating within a single industry. Christopher (2009) argues that with this concept, the businesses that are able to structure and coordinate their relationships with partners in the most efficient way stand to gain the most. The use of agile supply chains to respond to rapidly changing markets and sectors is evident in Samsung’s strategies within the global smartphone industry. The last ten years have witnessed the rapid evolution of the global telecommunications industry in many ways. The spread of the internet has seen a rise in the demand for devices that can access the net easily, leading to the development of smartphones. Samsung Corporation is one of the leading players in the global smartphone industry and is currently facing stiff competition from Nokia, Apple and Google, each of which has their own devices in the market (Brin 2013). The volatile and dynamic nature of the smartphone sector makes it difficult for players to sustain their dominance. A prolonged existence in the sector requires a firm to be capable of dealing with fluctuating demand for various devices in terms of the number of units required as well as their specifications. Samsung’s agile supply chain relies on forecasting and collaborative planning as a way of dealing with the dynamic market in which it operates (Brin 2013). The company also has a large research and development department that leads the world in mobile phone technology. This department helps the company develop hardware that is more advanced than that which the competition uses, thus enabling the firm to meet customer demands for phones that are faster, lighter and better at processing various tasks. Lean Thinking Lean thinking is another supply chain practice that companies are embracing. Lean thinking, also referred to as lean production, has its roots in the Toyota Production System (Sanchez-Rodriguez 2006). In the practice, an organization applies a specific set of principles to improve the process of production, improve the quality of products and carry out operations in shorter durations all by eliminating wastage in the relevant processes (Sanchez-Rodriguez 2006). Several features normally typify lean thinking and its application within supply chain management and logistics. Firstly, specific values are necessary within lean thinking, meaning that the company has to understand what the customers want. The practice also promotes the mapping of value streams, with the company understanding all of the processes that go towards the production of items and the technicalities behind them. The fluidity of production is also a key issue within lean thinking and production (Sanchez-Rodriguez 2006). The concept emphasizes the need for the production process to proceed without any interruptions. In lean thinking, the customer is a central figure in the process of production as he or she also initiates it. This means that the demands of the consumers are key factors in lean thinking. Lastly, the process of lean production aims to attain perfection and manufacture products without producing any waste (Carrasqueira & Machado 2008; Cutting-Decelle 2007). One issue that is apparent in lean thinking is that the concept is similar to agile supply chains in many ways. One similarity comes in their application, like agile supply chains, lean thinking is a concept that needs to involve all segments of a firm. Lean thinking has to involve every level of an organization for the concept to have the desired effect in the supply chain of a firm. This is particularly important because lean thinking normally involves radical changes in the supply chain practices that a firm has been using for a long time. For the changes to become effective, they have to have support from all departments within the firm, specifically senior management. Lean thinking and agile supply chains are similar in the way that they value the customer. For both practices, the customers determine the production of a company. In agile supply chains, the production on a company is structured in a way that it can change rapidly to adapt to market transformations. Lean thinking adopts a different principle but still places the customers in a central role, as their demands drive the production of a company. Since its introduction into Toyota’s production process, lean thinking has become increasingly popular around the world. The introduction of lean thinking has changed significantly in recent years, bolstered by advances in technology as well as the emergence of other useful supply chain practices (Blanchard 2010). Two key trends are evident in modern supply chains, both of which involve lean thinking. Firstly, many firms have embraced modern communications technology, particularly the internet, and used it to switch to pull systems that focus on customer requests. Secondly, many companies are combining aspects of lean thinking with features from agile supply chains to increase their manufacturing efficiency. Unpredictable demand means that companies are having a harder time figuring out what products the consumers want. This has led to varying fortunes for many firms. In positive scenarios, a company launches a new product that experiences a warm reception in the market and generates substantial revenue. In other situations, a new product fails to attract enough clients leading to a loss of revenue. The combination of lean thinking with agile supply chains increases the chances of avoiding situations where their products fail to sell. This works by combining the agility from agile supply chains with the pull system from lean thinking. Combining the two means that firms predict the market and use their forecasts to determine new products and then base their production on immediate customer demands. The implementation of pull systems is particularly evident in the fast food industry, where various pizza chains and fast food restaurants have embraced the concept. Domino’s Pizza is an excellent example of a company that uses pull systems, combining this lean thinking with its successful delivery services. Instead of producing products and waiting for customers to purchase them, the company receives orders from consumers and then produces the exact item that the client wants. Normally, the customers specify the various ingredients that they want their pizzas to have, meaning that Domino’s are easily able to meet the demands of their consumers (Boyer & Verma 2010). This has several implications for the company. Firstly, there is minimum wastage of resources. The firm sells almost every pizza that it makes meaning that time, equipment and labor spent on production benefits the firm. The use of pull systems also means that Domino’s Pizza deals with zero inventories, eliminating the possibility of the company’s stock going to waste due to low sales. While the food industry best exemplifies the concept of lean thinking through its implementation of pull systems, other sectors have also attempted to introduce the concept into their production in various ways (Boyer & Verma 2010). Firms in the motor vehicle industry now use mass customization, a concept that combines qualities of both agile supply chains and lean thinking. In mass customization, a company produces vehicles in single units, to allow customers to customize each one of them the way that they prefer. Normally, customers design their own vehicles from a set of options that the company provides, allowing them to purchase the exact kind of car that they need. Examples of companies using mass customization are Ford Motors and BMW, with the latter claiming that each of its new vehicles is unique, due to customization by the client (Myerson 2014). Strategic Supplier Partnerships Businesses normally engage in strategic supplier partnerships to help manage their supply chains. Strategic supplier partnerships refers to an arrangement between multiple players in an industry where they share pertinent information that can help them both improve their statuses, while sharing the risks and rewards that result from their partnership (Agus 2011). A strategic supplier partnership can only work in cases where all players are open in their communication and willing to exchange vital information freely, while maintaining a mutual trust for each other (Agus 2011). Strategic supplier partnerships normally focus on a number of core areas that are of value to all partners. This usually results in cooperation in activities such as research, manufacturing, product development and distribution. Agus (2008) explains that such partnerships normally bring mutual benefits to all of the parties involved by reducing costs of acquisition, disposal of services and goods as well as possession. Some of the benefits also affect the parties’ supply chain practices, usually in positive ways. The positive effects of strategic supplier partnerships include an increase in the agility of production, faster cycles for developing new products, a decrease in the costs of input and a rise in the quality of the commodities that the firms produce (Agus 2008). Like the risks and effort involved in strategic partnerships, these rewards are normally mutual, with all of the firms involved receiving them. In some cases, strategic supplier partnerships normally emerge between partners who want to strengthen their position in a tough market. In such partnerships, none of the players may have all of the resources that they need to exert their dominance. The formation of a supply chain partnership therefore allows them to collectively enjoy the competitive advantages that individual firms had and enjoyed by themselves. While strategic partnerships tend to exist in many sectors, they can also involve parties that engage in different industries. Some of the most common supplier partnerships often involve companies involved in the manufacture of goods with those that are in the retail industry. An example of a strategic suppler partnership is the cooperation between Levi Strauss and Wal-Mart. Levi Strauss is an American apparel firm that became famous for manufacturing denim clothing articles that soon came to symbolize the culture of the United States. Wal-Mart is the largest retail firm in the world, with numerous stores spread across the United States. By forming a supplier partnership with each other, Wal-Mart and Levi both stand to gain various benefits (Girard 2004). Levi’s declining business over the past few decades has forced the company to seek new sales strategies. By collaborating with Wal-Mart, Levi hopes to get access to a substantial portion of the hundreds of millions of Americans that go through the retailer’s stores each year. Wal-Mart also stands to gain from this partnership, as the availability of Levi products in their stores will help the chain attract clients that are more affluent (Girard 2004). The retailer hopes that large brands such as Levi’s, which has a strong reputation, will help it achieve this goal. Part II Article Analysis In Relationships between Quality of Information Sharing and Supply Chain Food Quality in the Australian Beef Processing Industry, Ding, Jie, Parton and Matanda (2013) sought to investigate the supply chain practices that players in the Australian beef processing industry use. The study by Ding et al. focuses on the Australian beef processing industry. The red meat industry involves more than twenty-six million cattle and almost seventy million sheep. The sector employs approximately one hundred and seventy thousand workers in all levels concerning red meat. This makes Australia the second largest exporter of beef in the world and the largest of sheep meat. Through these exports and sales in the Australian market, the red meat industry in Australia generates revenue of approximately thirteen billion dollars, with most of it originating from the United States, Japan and South Korea. Ding et al. (2013) argue that the industry has become volatile over the past few years, as various factors affect the production and distribution of the products. One problem facing the industry is a lack of stability in the price of beef. Other key issues are affecting the production of red meat products as the cost of electricity rises and animal availability affect the manufacturing process. With their study, Ding et al. (2013) intended to fill a gap in the research that various scholars had carried out concerning the sector. This study sought to look at the current supply chain practices and determine whether they can help alleviate some of the problems currently facing the beef processing industry in Australia. Ding et al. (2013) conducted their study with two hypotheses in which they measured supply chain practices against five variables. The variables included customer focus, lean systems, information quality, strategic alliances and information sharing. In the first hypothesis, the researchers argued that there was no causal relationship between supply chain performance-food quality and the stated variables. The second hypothesis in the study stated that there existed a causal relationship between at least one of the aforementioned variables and supply chain performance-food quality. To test these hypotheses, the researchers used the quality of the food produced by the industry as an indicator of whether specific supply chain practices were beneficial. The researchers conducted the study with the use of questionnaires that asked queries concerning the supply chain practices within various players in the industry as well as their performance indicators, such as the product quality, agility of the systems and efficiency. The research team sent six hundred questionnaires to various companies that they identified across the country and achieved a response rate of twenty-three percent. The results established that information quality, trust and commitment and strategic alliances had noticeable positive effects on the food quality (Ding et al. 2013). Information quality proved to be the variable most effective when trying to improve the quality of food. While information sharing was also a positive variable, it was not as effective if the data that the companies were exchanging lacked credibility. The study that Ding et al. (2013) carried out in the Australian beef industry revealed several key issues concerning supply chain management. Their study found that the three most important variables for the improvement of supply chain practices were strategic alliances, information quality and trust and commitment. Interestingly, all three variables that the researchers found are aspects of strategic supply partnerships. In strategic supply partnerships, companies normally come up with arrangements where they work together by sharing pertinent information concerning their respective sectors so that they can improve their performances (Misra, Khan & Singh 2010). While sharing the information allows the companies to enjoy the benefits that they did not have before the arrangement, the partnerships also makes them vulnerable to each other’s weaknesses. Strategic supply partnerships entail each of the aspects that the study discovered when investigating supply chain management in the Australian beef industry. Firstly, the strategic alliances that Ding et al. (2013) outlined are an essential aspect of the partnerships. Secondly, the alliance essentially involves the sharing of information that is pertinent to the industry. In their study, Ding et al. (2013) identified that the sharing of information was a key issue but that it was far more important for the companies to provide each other with quality data that benefit each firm. Lastly, the trust and commitment that the researchers outlined is a perhaps the most important aspect of strategic supplier partnerships, as it ensures that the competitors are able to work together, without allowing any suspicions that they have concerning each other to interfere with their business. Interestingly, the emergence of strategic supplier partnerships within Australia’s beef processing industry has enabled the players in the sector to introduce agile supply chain practices into their operations. The key aspect of strategic supplier partnerships is to create an arrangement where companies can share the competitive and industry based advantages that they each have. For instance, a partnership between a producer and retailer will allow the former to use the latter’s stores to increase sales. Contrastingly, an arrangement between two producers in the same industry enables each of them to enjoy the competitive advantage that the other has (Gibbs & Humphries 2009). In the strategic alliances that the study identified, the arrangements that the firms had were unique in that they mostly involved the sharing of information. The strategic alliances involved players from different industries but the study, by indicating information quality as the most important variable, implied that the sharing of data was the focus of this partnership. This data appears to play a key role for the companies involved in Australia’s beef industry. Firstly, it enables them to forecast future sales and modify their production accordingly. This ensures that they are able to move their stock more efficiently. The data that the firms shared with each other also appeared to be a key influencing factor in the decisions that the companies made. Accordingly, the data enabled the companies to determine their production on the decisions that clients were making, as well as the perceived demand. It also helped them increase their flexibility, as they were able to switch their production to match changes in the market, using the incoming data as a predictor of these transformations. By using the data in this manner, the companies in Australia’s beef processing industry appear to have created a unique hybrid system that blends both strategic supplier partnerships with the practices from agile supply chains, allowing them to reap the benefits of both. Even though the study had conclusive findings concerning supply chain management within Australia’s beef processing industry, it is likely that the results are only relevant in that sector and country alone. The sharing of data in the Australian beef processing industry presents a unique situation, in that several companies that are in direct competition with each other are willing to trust each other and share valuable information for their mutual benefit. However, such a system is not applicable in several other sectors, where the companies would prefer to keep such valuable information to themselves. For example, players in the technology industry value the information that they have, particularly when it relates to strategies that they plan to use to reach new markets. Another issue that the study fails to identify is that the country in which the research was conducted is an important variable. Australia’s status as a major exporter of beef and sheep meats means that the players in the red meats industry have access to a large international market. Contrastingly, companies in other countries have smaller markets and therefore compete with each other more than they do with foreign firms. This makes such strategic alliances an unlikely situation. Lastly, the study also had a significant flaw in the way that it used food quality as the only relevant performance indicator. While the quality of the food products is an important variable for the food industry, various other indicators can determine the effectiveness of a supply chain. One important factor that the study could have included was revenue. With each of the firms involved in the study reporting the quality of their products, the researchers should have tried to determine how much revenue they were generating at that level of quality. In addition to revenue, the economic viability of the systems would have also been an effective indicator in the study. This economic viability would have looked at the revenue generated and the costs of production and tried to determine whether the supply chain practices were helping the firm create a reasonable amount of profit. References Agus, A 2011, ‘The structural influence of supply chain management on product quality and business performance’, International Journal of Trade, Economics and Finance, vol. 2, no. 4, pp. 269-275. Agus, A & Hassan, Z 2008, ‘The strategic supplier partnership in a supply chain management with quality and business performance’, International Journal of Business and Management Science, vol. 1, no. 2, pp. 129-145. Blanchard, D 2010, Supply chain management best practices, John Wiley & Sons, Hoboken. Brin, DW 2013, Companies make supply chains more agile with better visibility, 14 October 2014, . Boyer, KK & Verma, R 2010, Operations and supply chain management for the 21st century, South-Western, Mason. Carrasqueira, M & Machado, VC 2008, ‘Strategic logistics: Re-designing companies in accordance with lean principles’, International Journal of Management Science and Engineering Management, vol. 3, no. 4, p.. 294-302. Christopher, M 2004, ‘The agile supply chain: Competing in volatile markets’, Industrial Marketing Management, vol. 29, pp. 37-44. Cutting-Decelle, AF, Young, BI, Das, BP, Case, K, Rahimifard, S, Anumba, CJ & Bouchlaghem, DM 2007, ‘A review of approaches to supply chain communications: From manufacturing to construction’, IT Con, vol.12, pp. 73-102. Ding, MJ, Jie F, Parton, KA, Matanda, MJ 2013, ‘Relationships between quality of information sharing and supply chain food quality in the Australian beef processing industry’, The International Journal of Logistics Management, vol. 25, no. 1, pp. 85-108. Eyong, ME 2009, ‘Creating a competitive supply chain: evaluating the impact of lean and agile supply chain’ MSc. Thesis, Malardalen University College, Vasteras. Gibbs, R & Humphries, A 2009, Strategic alliances & marketing partnerships: gaining competitive advantage through collaboration and partnering, Kogan Page, London. Girard, K 2004, Supply chain partnerships: How Levi’s got its jeans into Wal-Mart, CIO, viewed 14 October 2014, . Misra, V, Khan, MI & Singh, UK 2010, Supply chain management systems: Architecture, design and vision, Journal of Strategic Innovation and Sustainability, vol. 6, no. 4, pp. 102-108. Myerson, P 2014, Mass customization…A lean and agile supply chain required, Industry Week, viewed 14 October 2014, . Sanchez-Rodriguez, V 2006, ‘Supply chain management, transport and the environment – A review’, Green Logistics Consortium Working Paper. Read More