Pearson on Excellence: Agile Execution—The engine of dynamic operations

This is the final column in our series about dynamic operations, or global supply chains imbued with the ability to alter the function and focus of key processes (manufacturing, transportation, distribution, etc.) in response to changing events. In recent months we’ve profiled three of dynamic operations’ core capabilities:

• Insight to Action: sensing, capturing, and analyzing external and internal data and turning it into usable business intelligence.
• Adaptable Structure: creating products, processes, and systems that are easily modified in response to changing conditions.
• Flexible Innovation: making design and development processes less rigid by reducing changeover times, increasing interchangeability, and designing products that embrace multi-channel networks and technology.

The fourth capability—agile execution—is concerned with adjusting supply chain actions by rethinking supply chain functions, partnering more effectively, improving collaboration, and implementing new strategies and advanced technology. For example, agile execution emphasizes collaboration with internal and external partners to maximize information sharing, reduce order cycle times, and create processes that are streamlined yet adaptable. Postponement also has a place, since end products can be customized closer to the sale, thus helping to ensure that supply closely matches shifting demand.

An innovative network strategy is also associated with agile execution. The mantra here is “flexible resource allocation,” made possible by centralized operations, low-touch (highly automated) processes, cross-trained personnel, solid supplier contingency plans, and an elastic infrastructure that emphasizes outsourcing, vendor-managed inventories, and rent-rather-than-buy philosophies.

A flexible system architecture rounds out the list of top-tier agile execution features. Standardization and automation are the linchpins here. For example, processes and technologies need to be broadly standardized to effectively handle and disseminate ideas, designs, plans and products. Systems also must be able to operate seamlessly and adjust to changes without human intervention.

Agile execution’s core components—horizontal partnering (collaboration), innovative network strategy, and flexible system architecture—are profiled in the corresponding figure along with brief examples of how leading companies are putting them to use. To help set the stage for agile execution, businesses can also:

• Enhance their use of system alerts and triggers to make faster, better adjustments and manage priorities.
• Establish an open architecture network that fosters competitive knowledge sharing.
• Automate (low-touch) value-driven business processes and technologies with rules-based logic.
• Create “pop-up” or “pop-down” capabilities that can be deployed at the product or geographic levels.
• Enhance multi-directional information sharing with trading partners.
• Build a more flexible, cross-trained workforce to help affect quick shifts in function or location.
• Utilize assets that are multi-functional and can be repurposed quickly.

A great example of agile execution comes from a large consumer goods manufacturer. Consider, for example, that it is not uncommon for companies to dedicate a single plant to one or just a few products or product families. This is generally considered the most economical approach, despite the fact that it limits an organization’s ability to respond quickly to internal disruptions (forecast or planning errors) or external changes (customer, market, geopolitical, and competitor shifts).

At the other end of the spectrum are manufacturing networks that allow every plant to produce all of a company’s products. These can be highly expensive to enact and manage, although they may sometimes be cost-effective, profitable, and competitively advantageous because of their ability to keep pace with change.

The best scenario is usually somewhere in the middle: balancing economy and flexibility based on whatever criteria an organization deems most salient. This is what the above-mentioned manufacturer did. Responding to rapidly changing consumer preferences, it created not the highest level of agility, but rather the right amount of agility across its network of plants. The company thus is able to produce almost everything that full flexibility could achieve but without the giant cost increases associated with maximum elasticity. In effect, it spent a little more to get a lot more.

Why so important?
Why do we believe that dynamic operations and its four core capabilities warrant so much editorial attention? One reason is simply because it is a truly powerful and largely new concept: No company has thus far implemented every dynamic operations capability, nor is there a high likelihood that many will do so in the near future.

In the long run, however, dynamic operations seems certain to become a key characteristic of world-class supply chains. In other words, “designed-in adaptability” will become a base-level response to the permanent volatility that typifies today’s and tomorrow’s business environments.