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Do you compromise on flexibility to gain a reliable supply chain performance?
Many companies prefer to design their supply chain processes to improve the value chain reliability. Concepts like Production Leveling (Heijunka) and JIT work on this principle. However, the underlying assumption behind such a design is that we know the future demand.
Actual consumer demand, however, has a high degree of unpredictability which calls for a more flexible system. If the overall demand starts accelerating faster than our estimates, we must respond by increasing production beyond the set level.
On the other hand, supply chains designed for flexibility often suffer from poor reliability, which leads to a demand-supply mismatch and calls for higher inventory buffers.
How do we design a supply chain which is flexible as well as reliable? Reducing batch sizes and compressing lead times helps. However, the quantum leaps in flexibility and reliability need to be calibrated to ensure that improving one doesn’t cause a deterioration in the other one. The organization should be able to internalize and stabilize the first step before taking the next one.
There is no end to improving flexibility and reliability. Once we calibrate the steps, it becomes a part of POOGI (Process of Ongoing Improvement).