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Does Agility in Supply Chain have a limit?
Companies on their Agility journey in Supply Chain often ask me the ultimate question… If we keep improving agility, will we finally hit the limit?
Let’s try to answer this question. An important outcome of agility improvement is meeting customers’ requirements consistently and with lower inventory. This way of looking gives us two axes of continuous improvement.
The first one is delivery lead time. Can we deliver faster? We have seen it play out in consumer industries with e-commerce players going for same day delivery, followed by 2-hour delivery. Quick Commerce upped the ante by delivering in 10 minutes. The limit to this dimension is instant delivery!
The second axis is reduction in system inventory to maintain this service level. Can we improve responsiveness to minimize the requirement of inventory buffers? Lower inventory does indeed offer fresher products to consumers. The theoretical limit on this dimension is also zero.
Does it mean that instant delivery with zero system inventory is the ultimate in agility? Have you seen it in reality? Power companies have already done it decades ago! Instant delivery when switch on the light. Keeping inventory is so costly that they opt for zero.
How does such a system operate? The key lies in extreme production flexibility. Production output must synchronise with actual manifested demand every moment!
Not so easy, isn’t it?