The Lean or Agile Supply Chain – Which Method Produces Better Results?
Having access to information at the drop of a hat can make or break a modern supply chain participant. From answering consumer inquiries to routing emergency shipments, and providing tracking solutions to multiple partners, the modern shipper, carrier, and other supply chain partner depend on automation and efficiency to stay competitive. This is where lean or agile supply chain solutions come into play.
Many companies, including manufacturers, LTL and FTL, suppliers, and those involved in the transportation of goods activate lean or agile supply chain management. While there are several similarities between the two, each has its own benefits.
To determine which method is best for your organization, it’s important to understand the differences, so you can create an effective plan of attack for improving your daily operations to stay competitive.
Explaining the Facts About the Lean Supply Chain
Focusing on high volume production at reduced cost, the Lean supply chain management concept has a primary goal of reducing the costs of goods or reducing waste that is not a valuable commodity to the consumer. This type of supply chain places an emphasis on predictability and reliability as opposed to adaptability and flexibility of the operation.
In manufacturing, the lean methodology permits a company to set schedules of production in advance, rather than scaling or adjusting their operations based on changes in the marketplace. By planning far in advance, the manufacturer is able to retain supplies in bulk-quantities; which are often sold at discounted rates. So – while the name lean is used, in fact, the company actually becomes aggressive with production.
This methodology is best utilized for companies that manufacture or sell products that are staple items that are not susceptible to market changes or spikes in sales due to consumer demand. Items like non-seasonal foods and toiletries are examples of this type of lean supply chain operation.
Understanding the Agile Supply Chain
On the contrary, the agile supply chain is 100% directed to roll with the changes in the market. It focuses on receptiveness to the consumer market and being flexible in the operation, production, and transportation of goods to comply with the changes. The agile supply chain is designed to deal with the unpredictability of today’s always evolving financial climate – and takes a ‘wait and see’ position.
Those who operate an agile supply chain operation consider demand as their top priority. They only spend money and resources as the consumer market dictates. They’re not proactive – rather reactive in nature. This isn’t necessarily a bad thing in manufacturing. In fact, by being frugal with manufacturing, a company can eliminate waste, reduce inventory control problems, and save money on the overall operation of the business.
While the lean supply chain is best for staple-items and industries, the agile supply chain is exceptional for seasonal or short-life cycle goods and services. As opposed to being trendsetters, agile-focused businesses are trend followers.
So, What’s Best for Your Business – Lean or Agile?
Determining which method is best for your business beings by asking some very important questions including:
- What type of goods does your business produce, ship, or sell: As we stated above, those who deal in staples that are less impacted by changes in the marketplace will find the lean method to their liking. Those dealing with products that are trendy, seasonal, or subject to the demand of consumers should consider the agile supply chain process.
- Who is your consumer, and do they exhibit certain purchase habits? Your customers will tell you through their actions which method is best for you. If they are consistent in their ordering and purchase of your commodities, the lean method should be activated. When your base is impulsive based on certain trends, seasons, or financial changes, agile is probably best.
- Does the economy impact your operations? To be completely honest, the economy impacts all consumer purchases. When the economy is strong, people have more money to spend on consumables – especially luxury items (meaning items that they don’t need). However, if you have an operation that is impacted greater than others based on the overall economic climate, then an agile supply chain methodology is best suited for your business.
Is There a Happy Medium?
Absolutely! Many of today’s modern supply chain partners are finding creative ways of activating a hybrid lean-agile project management process. A Lean-Agile process takes components of each and applies it to their operational philosophy. A great resource for learning how to streamline your supply chain efforts, without compromising consumer demand or product quality is by consulting with a profession 3PL like LTX.
Experienced third-party logistics experts like LTX Solutions work with transportation, retailers, distributors, manufacturers, and other partners within the supply chain to establish best practices based on their individual products, consumer base, and more. If you’re interested in learning more about lean or agile supply chain solutions, give us a call.