Published on Monday, 14 January 2013
Every year seems to have "buzzwords". Starting out a new year, I am predicting the buzzword for 2013 in the Supply Chain world will be "AGILE". The only serious challenger is "LEAN".
Hey wait a minuit. Aren't they synonyms? DICTIONARY.MS
says this about them: AGILE:
Speed of response and flexibility in meeting changing supply chain requirements. LEAN:
Eliminating Non-Value Adding (NVA) activities in the supply chain.
Now, how did these two words get into the Supply Chain vocabulary so quickly ? LEAN started out to describe flexible manufacturing while AGILE was associated with project management (usually in association with SCRUM teams
One of the difficulties we have with promoting Supply Chain Management is explaining the terminology that has developed in the "silos" of Procurement, Logistics, Warehousing, Customer Relationship Management, et al.
Some descriptive synonyms include responsive, swift and nimble
. A good antonym is gauche
. The speed and responsiveness of AGILE is a big differentiation from LEAN. AGILE becomes more important in Supply Chain Management because product life cycles are shortening and demand patterns are constantly changing. Some charecteristics of AGILE include: (1) Delivers based on real demand. This means the SCM organization must use demand planning, NOT forecast planning; (2) Collaboration across company boundaries. All data MUST be shared within the virtual supply chain; (3) It must operate in an environment of an extended supply chain where processes between all partners are integrated; (4) All the partners must realize they are competing against other supply chains, not with each other as in traditional supply chains.
A thesaurus under LEAN shows thin, slim or trim in the sense as used in the supply chain. Antonyms that apply include rich, insufficient, unprofitable. A usual use in a supply chain sense is to make a process LEAN by getting rid of Non-Value Adding (NVA) activities. NVAs include both something the customer is willing to pay for and something that adds time. Remember; time translates to money. In summary: "going lean" benefits come from efficiency improvements. A "kissing cousin" of LEAN is JIT (Just-In-Time). This idea was brought out by Toyota and concentrates on eliminating waste. Over the years, our friend, Dr. Deming, has been instrumental in both these ideas.
AGILE plus LEAN
Just because LEAN appears to "part" of AGILE, by itself it will not help the supply chain meet customer demands more rapidly. This implies we can consider LEAN to be a subset of AGILE.
Now, how do we get LEAN and AGILE to work together? Well, the experts have even introduced a new term: LEAGILE
. LEAGILE is built around a "Decoupling Point
" which responds to a volitile demand from the market while still holding scheduling constant from the manufacturing companies in the extended supply chain.
Let's use General Electric's historic Appliance Park in Louisville, Kentucky — a plant that was on the verge of shutting down just four years ago. They are "re-shoreing" electric water heaters and when you look at the total system costs (including the supply chain), they will be cheaper than "made in China". They depend on the LEAN idea of "pull " demand. The whole company is using it's expertise as a world-class manufacturer to introduce advanced manufacturing software solutions that drive lower costs, faster production and tighter control on quality. All developed with AGILE technology.
We have attempted to boil down a lot of material and give you a "bird's eye" view of LEAN and AGILE in Supply Chain Management.
The best overview/reference we have found is "Lean or Agile Supply Chains: Jargon or Action
?" by Dr. Edward Sweeney of the Dublin Institute of Technology.
LEAN focuses on efficiency; AGILE focuses on effectiveness; LEAGILE focuses on both efficiency and effectiveness.
Characteristic of LEAN is trim; characteristic of AGILE is responsive; characteristics of LEGILE are trim & responsive.
Goal of LEAN is to reduce waste; goal of AGILE is to increase speed; goal of LEAGILE is to deliver value.
The measure of LEAN is cost; the measure of AGILE is service; the measure of LEAGILE is both cost and service.
Yes, LEAN and AGILE fit perfectly with the common definitions of Supply Chain Management objectives : (1) Deliver satisfactory customer service to the targeted markets ; and (2) Optimise costs and objectives.