I interviewed Ranjan Sinha who discussed Necessity of having a Flexible Supply Chain.
Hi Dustin, My name is Ranjan Sinha. I have 24 years of Experience in Logistics, Supply Chain management, Transportation Management & Project Management in many countries which includes India, Ukraine, France, Luxembourg and Middle East. My assignments includes CEO-Logistics/Supply Chain & Port Operations with the biggest steel conglomerate in the world. Currently associated as project director with a green field project for development for a Integrated Logistics city based in Middle East.
I will be speaking today about ‘Why do you need to have a Flexible Supply Chain System”
Why You Need to Have a Flexible Supply Chain System ?
Supply chain flexibility is becoming increasingly important, helping companies to most effectively manage their costs and resources, as well as most effectively meet consumer demand. A flexible supply chain is both agile and adaptable. It is demand driven (and can therefore respond to short-term changes in demand) and it can evolve and improve over time to meet ever-changing conditions.
There are two forms of supply chain flexibility: micro flexibility and macro flexibility. Micro flexibility essentially refers to how quickly a supply chain can detect and respond to any kind of short-term issues. A company with a supply chain that exhibits a high degree of micro flexibility can manage spontaneous or sudden problems or opportunities quickly and effectively, such as the late arrival of a delivery truck a customer request for special packaging or handling: how quickly and effectively can you manage these changes and needs?
By contrast, macro flexibility refers to broader, over-arching company strategies, programs, and policies. A company that has a macro flexible supply chain system can easily change existing supply chains or develop new supply chains to accommodate changing consumer demand.
In other words, agility and adaptability are important.
The bottom line is that both macro and micro forms of flexibility are absolutely essential.
Let’s take a look at the inherent benefits of a flexible supply chain system.
a) Combat increased market volatility
Historically supply chain factors such as production levels, raw-material purchases, transport capacity, etc, were determined through a careful examination of historical patterns of demand. Now, however, this simply isn’t feasible. Today’s markets are increasingly volatile and a flexible supply chain can help a company to pull through potentially damaging market changes, such surges in prices or drops in demand.
Ultimately, businesses that are flexible are able to protect themselves. Interestingly, many analysts have praised Honda’s remarkable flexible supply chains, arguing that it was this flexibility that helped the company to make it through the 2008 recession and surge in gas prices relatively unscathed.
b) Adjust to complex patterns of consumer demand.
Determining consumer demand isn’t as simple as it once was before because markets are more volatile it isn’t just as simple as looking at the historical patterns of consumer demand. In most emerging economies economic expansion is occurring at double-digit rates, prompting huge shifts in global demand patterns. Because of the scale of these shifts, it’s hard to predict what consumer demand will look like five or ten years down the line.
c) Boost company value.
In an economic recession or any kind of situation that causes a drop in demand a company may be tempted to scale back on everything. This can be quite a mistake, however, as if and when demand resurges it will difficult to accommodate it. Flexible supply chains means that a company can easily adjust production levels, raw-material purchases, and transport capacity in order to maximize profits.
When demand is high the company boost production, when it is low it can scale back. In a flexible supply chain making changes to the overall system are simply not as costly..
So how can managers achieve better supply chain flexibility?
Be Proactive, Not Reactive
Normally, companies tend to react to the uncertainty of the supply chain in four ways:
- Keeping safety stock to reduce the probability of inventory shortage.
- Setting capacity higher than average demand to avoid substantial shortages during peak periods.
- Maintaining multiple suppliers, which increases costs.
- Adding safety lead times to the actual cycle time .
But using these strategies may be counterproductive in the long term.
Instead, they will find greater flexibility in proactively redesigning products, processes, and their supply chain network and negotiating more effective relationships with trading partners.
- Using common components
- Redesigning both shop floor and administrative processes
- Reducing facilities or centralizing stocks to fewer facilities to reduce risks
- Partnering with other firms to achieve consortium purchasing
- Negotiating or renegotiation supply contracts to alleviate minimum order quantities or to obtain a commitment from suppliers to supply materials or services in the case of a significant increase in demand
- Reducing lead time by redesigning procurement processes, changing supplier selection criteria from cost focus to speed focus, or developing suppliers for better lead time management.
- Identifying alternative routing or shipment modes
- Fostering better collaboration with supply chain partners
My Experience with Flexible Supply Chain
Established supply chain “war rooms” to make fast decisions across functions. Populated by leaders from production, procurement, logistics, and sales—and furnished with the latest data on purchasing, production, orders, and deliveries—these teams meet weekly or even daily to devise near-term operational plans.
The team managed to cut inventory levels by 20 percent in just ten weeks, while maintaining high levels of customer service. What’s more, by speeding up decisions, the company increased the frequency but reduced the size of its orders from key suppliers. Greater cross-functional cooperation helped it not only to identify new opportunities for using out-of-spec materials (and thus inventory on hand) but also to make better-informed decisions about where and when to discount overstocked products.
A flexible supply chain organization requires not only a strategic leader, but also input from managers who represent the traditional supply chain functions of planning, sourcing, manufacturing, logistics, and also sales and marketing, among others.
Thank you Ranjan for sharing today.
About Ranjan Sinha
CEO with 23 years experience in