Implementing Flexibility in Supply Chain

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Implementing Flexibility in Supply Chain

Contents                                                                                                     Page

        

Introduction        

Flexibility and Supply Chain Management        

Manufacturing Flexibility        

Supply chain flexibility        

Application of Supply Chain Flexibility        

References        

List of Figures

Figure 1- Ferdows and De Meyer (1990) Sand Cone model        

Figure 2- Vokurka and Fliendner (1998) modified sand cone model        

  1. Introduction

In today’s competitive environment, markets are becoming more international, dynamic and customer-driven. Customers are demanding more variety, better quality and service, including both reliability and faster delivery. Technological developments are occurring at a faster pace, resulting in new product innovations and improvements in manufacturing processes. The resulting competitive environment requires low cost, high quality product in increasing varieties. The changes have instigated changes in business and manufacturing strategies (Duclos et al. , 2003).

The three main strategic imperatives that emerged in this century are low cost, high quality, and improved responsiveness (both delivery time and flexibility of product delivery) (Aquilano et al., 1995 cited in Duclos et al. ,2003). Cost efficiency was the driving force behind Henry Ford’s mass paradigm with large production volumes providing low per unit cost. Through the efforts in Japan, quality became the next strategic imperative. The marketplace valued efficiency and low prices, but began to emphasise the quality of products and services in product purchasing decisions. As a result of increased global competition in the 1970s, responsiveness emerged as the third strategic imperative. Buyers became more sophisticated, demanding more customisation and shorter product life cycles. Manufacturers found they could no longer maintain the large volumes of production and cost efficiency of their production and cost efficiency of their production processes with these higher levels of change and uncertainty. As a result, firms concentrated on the reduction of cycle time and solving the tradeoffs between efficiency and flexibility (Duclos et al., 2003).

By the 1990s, firms recognised the necessity of looking beyond the borders of their own firm to their suppliers, supplier’s suppliers and customer to improve overall customer value. This movement, titled supply chain management changed companies’ focus from internal management of business processes to managing across enterprises.

In this work, the concepts of flexibility and agility in manufacturing and supply chain are introduced and then various dimensions of flexibility are demonstrated through a simple example. The discussion on flexibility and agility is the focus of a lot of researchers and this work by no means is considering all aspects of flexibility.

  1. Flexibility and Supply Chain Management

  1.  Manufacturing Flexibility

Reviewing literature indicates that the definition of supply chain management flexibility have two major focuses. Most of the literature is focused on flexibility in internal manufacturing ((Duclos et al., 2003) in other words the internal ability of as firm to be flexible. Vokurka and O’Leary-Kelly (2000) provide a comprehensive review of manufacturing flexibility and an insight into the current state of research into manufacturing flexibility. They identify 15 dimensions of flexibility including: machine, material handling, operations, automation, labour, process, routing, product, new design, delivery, volume, expansion, program, production and market flexibility.

 Koste and Malhorta (1999) proposed four elements of flexibility for measuring elements for measuring organisation’s flexibility including Range-Number (number of options in operations, tasks etc.), Range-heterogeneity (differences in options), Mobility or transition penalties such as time, cost and effort of transition and finally uniformity or similarity of performance outcome. D’Souza and Williams(2000) developed four dimensions of flexibility that is volume, variety, process and material handling flexibility. Koste and Malhotra (1999) developed a multi-level perspective of flexibility starting from strategic flexibility to shop floor and finally individual resource flexibility but still the focus remained with manufacturing flexibility. In these literatures while reviewing manufacturing flexibility, some elements of supply chain management such as marketing flexibility is also discussed.

  1. Supply chain flexibility

In the literature, for defining supply chain management flexibility, agility and flexibility is used interchangeably. Prater et al.(2001) argues that an agile firm designs its organisation, processes and products such that it can respond to changes in a useful time frame. Christopher (1992) (cited in Christopher and Towill, 2001) argues that a key feature of present day business is the idea that it is supply chains that compete, not companies and the success or failure of supply chains is ultimately determined in the market place by the end consumer. Getting the right product, at the right price, at the right time to consumer is not only the linchpin to competitive success but also the key to survival (Christopher and Towill, 2001).

Naylor et al. (1999) defines agility as using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile marketplace. Christopher and Towill, (2001) argued the differences of lean (Toyota Production Systems concept as argued by Ohno, 1988) and agile supply chain and showed how they might be combined for greater effect. In developing the idea of achieving agility McCullen and Towill (2001) focus on supply aspect of supply chain and demonstrate how lean supply can be achieved through agile manufacturing.  Therefore develops a link between supply chain and manufacturing flexibility as one dimension of multidimensional supply chain flexibility. They provide steps to providing effective damping of bullwhip effect called material flow principles which includes control system principle, time compression principle, information transparency principle and echelon elimination principle and then they discuss lean and agile paradigms and apply the concept to motor vehicle industry that have high volumes and relatively long product life-cycles.  They ultimately argue that an agile manufacturing can be achieved through an agile supply chain which in their case was achieved through lean supply.

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Sommer (2003) argues that the global competition has forced many organisations to search for increasingly smaller and more sophisticated sources of competitive advantage and they have redefined competitive advantage as a function of how well their organisational culture initiate and/or adapt to change, e.g. change in market conditions, competition, new product development etc. In order to realise such change, organisational processes and the technology that enables them must be continually re-evaluated and modified to reflect the needs of new integrated customer/supplier relationships. He argues that the need for flexibility has made the organisations to focus on their core competencies and ...

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