Definition

Ability of an organization to detect changes (which can be opportunities or threats or a combination of both) in its business environment and hence providing focused and rapid responses to its customers and stakeholders by reconfiguring its resources, processes and strategies. Ability of a firm to redesign their existing processes rapidly and create new processes in a timely fashion in order to be able to take advantage to thrive on the unpredictable and highly dynamic market conditions

In the supply chain, while balance happens through alignment in horizontal processes Revenue Management, Sales and Operations Planning and Supplier Development agility only happens through design. For most, this is a new concept. It has not been a design element of most corporate strategies. As a result, in the face of supply and demand volatility, the company is less resilient. In the research for my upcoming book three things are quickly becoming obvious.

Inconsistent definition. There is no consistent industry definition for agility. While companies frequently use the term, and quickly acknowledge the need, the term needs to be defined by each organization. It cannot be assumed. Without it, the organization will thrash-about finding it difficult to design the supply chain and drive alignment on agility. In Figure 1, we share how 117 supply chain executives recently defined agility. For a market-driven supply chain definition, the best definition of agility is the design of the supply chain to have the same cost, quality and customer service given the level of demand and supply volatility.

Over my nine years as an analyst, I am seeing maturity. The industry is maturing in their understanding of agility. In this survey, 97% realize that it is about more than speed and supply chain cycle-time reduction. There is nothing to be gained by doing the wrong things faster.

It is growing in importance. Companies see agility as an important goal. In Figure 2, 89% rank it as important and only 27% state that they are equal to their goal. Only 1/3 of companies have the prerequisite agility they feel they need to run the race. There is a large gap between current importance and performance. Supply chains are substantially less agile than five years ago. For all, there is a deteriorating level of performance. They are more brittle and less resilient. Many of the programs driven by the first generation pioneers tight integration of the supply chain, lean process improvement programs, eProcurement and electronic biddingmade the supply chain stronger; but for many, there was an unconscious trade-off of agility.

Base: Total Sample (117) Q12. How important is it for your companys supply chain to be agile in 2012? Please base your answer on however your company defines agility. Q13. How would you currently rate your companys supply chain in terms of being agile? Change only happens through design. Buiding agility happens through conscious choice. Organizational agility improves when organizations focus on three things: the definition of a clear supply chain strategy, the building of strong decision support analytics (ability to model scenarios to understand volatility impacts), and the implementation of strong horizontal processes to sense and translate demand and supply market-to-market. It has to be a conscious choice. Just as an athlete makes a choice to do strength training followed by flexibility exercises, the supply chain needs to recognize the need and build the right design to ensure agility. For so many, it will not happen. They will try to power through supply chain 2020 solely through strength or wrongly believe that it is all about reducing cycles.

Supply chain agility The agile supply chains are the alliances of legally separated, but associated by their activity companies (suppliers, designers, producers, logistics), that are interrelated by forward material supply and backward information flows. Agile supply chain distinguishes by flexibility, adaptability and quick as well as effective response to the changing markets. Seeking for competitive advantage they have to consolidate with suppliers and customers for business operations rationalization and work together to achieve higher than stand-alone flexibility level. This is the way the supply chain agility is being developed. Supply chain agility supporters consider it the XXI century paradigm of supply chain. They construe it as an attractive strategy for companies seeking to become a leader in national or international level, while acting quickly in the constantly growing competition market, emerged as the result of changing user requirements (Yusuf & Gunasekaran, 2006). Great impetus to the theory of supply chain agility development has a research work of Christopher (2000), who suggested that not the companies, but their supply chains are the ones that compete among. According to him, an era of network competence was opened, and the winners will be those companies, who are able to better structure, coordinate and manage relationships with partners in the network, in order to support a better, proximate and agile communication with the end-user. Christopher (2000) was one of the first scientists, who distinguished 4 characteristics that an agile supply chain must possess. According to him, an agile supply chain is market sensitive (Christopher, 2000). This means that the supply chain is able to understand and respond to real demand. Many organizations used to follow the forecasts, assessing the sales and supply volumes of previous years and turning this information into stock, rather than the real needs, while using the advanced technology actual customer requirements are identified from data derived from fixed sales points almost as soon as it is loaded. The last decade was breaking in respect of development of technological solutions for market listening and direct response to market demands. Application of information technologies for data exchange between buyers and suppliers forms a virtual supply chain. Virtual supply chains are based on information rather than inventory (Christopher, 2000). The information interchange between supply chain partners can be fully leveraged only through the process integration (Christopher, 2000). Process integration refers to cooperation between buyers and suppliers, joint production, joint systems and information sharing (Christopher, 2000). Companies are increasingly concentrated on core activities, while other services are outsourced. Process integration as a form of cooperation in the supply chain is

constantly increasing. Supply chain comparison to associated partners alliance reveals yet another characteristic of agility a network structure. Van Hoek et al. (2001) sustain the characteristics revealed by Christopher, but call them supply chain agility dimensions. Ismail and Sharifi (2006) have a little bit different attitude. They define supply chain agility as the ability of the supply chain as a whole and its members to rapidly align the network and its operations to the dynamic and turbulent requirements of the demand network. Baramichai et al. (2007) state that agile supply chain is an integration of business partners to enable new competencies in order to respond to rapidly changing, continually fragmenting markets. According to him, the key enablers of the agile supply chain are the dynamics of structures and relationship configuration, the end-to-end visibility of information, and the event-driven and event-based management; an agile supply chain is a key enabler for an enterprises agility. Swafford et al. (2006) supply chain agility defines as the ability of the supply chain to rapidly respond to changing market environment. Hammant & Braithwaite (2007) assert that supply chain agility can be defined as an operational strategy that focuses on the increase of speed and flexibility in the supply chain. Agile supply chain success guid is speed and flexibility that forwards obtaining results in all the processes. As we can see, there is no general attitude to supply chain agility concept as well. But the importance of agility as a significant competitive factor in volatile market is acknowledged. Among the conditions reguired to achieve supply chain agility are management responsibilities, organizational structure and supply chain network, information sharing within companies and between them (Bal et al., 1999). Effective usage of information systems was identified as the main supply chain agility enabler (Garcia-Dastugue & Lambert, 2003). The key enablers for agile supply chain shaping according Baramichai et al. (2007) are its dynamics of structures and relationship configurations, the end-to-end visibility of information, and the event-driven and event-based management. Harrison and Van Hoek (2008) propose such components of agility: The agile supply chain is customer responsive, i.e. it responds to the market according customers demand and not companys forecasts. The agile supply chain should be viewed as a network of partners, who have a common goal to collaborate together in order to respond to customers needs. In agile supply chain the network is been viewed as a system of business process, as stand alone processes may create penalties in terms of time, cost and quality for the whole network.

 In agile supply chain use of information technology to share data between buyers and suppliers creates a virtual supply chain, which is informationbased rather than inventory-based. Christopher and Towill (2001) argues that the agile supply chain has many distinctive features; the main of them are 4: response the ability to identify changes and respond to them quickly, proactively as well as recover after; according to Yusuf et al. (2004) it is the most important ability of the agile supply chain; competence the ability to effectively and efficiently implement the goals of the firm; flexibility the ability to implement various processes and adapt different conditions while striving for objectives; speed the ability to achieve results as quickly as possible. Most of supply chain agility concept supporters claim that they are able to reach the distribution cost reduction by 50% and mainly it is related to the decline in stocks held when the supply systems and processes are based on Just-In-Time (JIT) principle (Hammant & Braithwaite, 2007). Each company needs an individual system to achieve agility, because any market is a set of multiple variables (Wadhwa, 2007). Meanwhile Zsifkovits and Engelhardt-Nowitzki (2007) suggests that the variables that define supply chain agility are not exceptional for a particular sector or product. Agarwal et al. (2007) presents 15 variables defining the supply chain agility: market sensitivness, delivery speed, data accuracy, new product introduction, centralized and collaborative planning, process integration, use of IT tools, lead time reduction, service level improvement, cost minimization, customer satisfaction, quality improvement, minimizing uncertainty, trust development, minimizing resistance to change. Researchers propose some different strategies for agility increasing: Virtual manufacturing a strategy that enables companies core competences integration to achieve more efficient operation of the company in agile environment (Gunasekaran, 1998). Agile product design a strategy that allows companies to adapt to the changed consumers requirements by changing the modular structure solutions in technical conditions (Yang & Li, 2002). Knowledge management a strategy that if chosen by agile manufacturers will be strongly based on a knowledge management, particularly on innovative solutions implementation in design and production processes. Mass customization a strategy which focuses on the possibility to offer customers personally tailored products and services thanks to technological innovations. In 2008 Li et al. conducted the survey on interdisciplinary literature reviewed articles on agility topic for the period from 1990 to 2001. Only 16 works, that

could be regarded as representative supply chain agility studies and that provided a supply chain agility definitions, were selected of 583 papers found. Only 4 of these studies included feasible agility measurement metrics. Lehigh University Iaccoca Institute report in 1991, already discusses some competitive basis, characteristics, elements and enabling subsystems of agility (Li et al., 2008), but as seen from above even until now there is no scientific consensus reached on their terms, nature or number.

Achieving agility requires four capabilities: SpeedThis recognizes the pace at which your company can sense and respond. EaseThis measures how nimble your company is when things dont go as expected, as well as how easy it is for your company to sense change and respond. PredictabilityReliability can be even moreimportant than absolute speed. The company that can respond quickly and easily in three days every time is a more desirable trading partner than one that sometimes responds in one day, but other times takes six. QualityA supply chain that senses and responds quickly, easily, and predictably, but with poor quality

orders or products, doesnt qualify as agile. Four steps to agility Competence in these skills prepares companies to achieve AMR Researchs four-step process for being agile: clear definition, leadership, alignment, and supporting cycles. Step 1Build a definition There is no industry-standard definition for agility. For top performers, agility is well defined for each organization. For laggards, the term is used in strategy documents, but isnt defined. Agility is most frequently defined as manufacturing cycle time, according to our recent study. However, the most important definitionthat is, the one driving the greatest improvement in customer service, asset utilization, and inventory write-offsis the ability to have the same cost, quality, and customer service given at every level of demand variability. Traditional supply chain processes focus on efficiency. The outcome is an improvement in return on assets (ROA), but not necessarily in agility or responsiveness. According to our survey, return on assets improved only by 1% after four years invested in supply chain excellence. Step 2Leadership the missing link The need for agility is felt across the organization, but it cant be solved by any one function. Instead, it requires a cross-functional approach. For this reason, the effort has to be led by someone with authority over every function involved. Agility initiatives are most successful when driven by the chief operating officer, our research shows. Step 3Alignment Cracking the nut requires a focus in three areas: culture, right-sizing complexity, and rethinking financial reward systems. Culture is the biggest barrier to achieving agility. Companies that have successfully closed their customer

service gaps while maintaining high asset utilization have taken five actions: Reduced product complexityTo accomplish this, theres an active focus on product and customer complexity. Invested in available-to-promise (ATP) capabilities To improve visibility, ATP processes are extended to manufacturing capabilities. Reduced demand forecast errorOver 60% of companies are experiencing an increase in demand variability, with new product launch forecast being the largest contributor to this error. A focus in this area can yield big dividends. Improved order effectivenessSuccessful companies have a significantly higher percentage of orders that move through their order management systems without manual intervention. Designed for supplyThe focus is on common formulations, platforms, and reuse strategies for source, make, and deliver. Step 4Supporting cycles Reactive supply chains are unable to play catch-up. On average, the time to sense demand is three times the time to process an order. Companies that focus on reacting to demand are always on their back feet. And, despite the investment in order-to-cash processes, this remains an area of opportunity for most organizations. Agility increases when the time to sense demand is aligned with the time to respond to an order. Companies can close this gap by improving demand sensing. Conclusions The importance of agility in enterprise business continues to grow, because the product life cycle becomes shorter and the global economy as well as competitive pressure leads to the uncertainty. In such environment, companies need to have resources and production capacity set in strategic points of the supply chain to facilitate the quick, profitable and qualitative flow of products to market. To be

competitive in volatile market company has to manage agile supply chain. A rapid evolution during the period of 1990-2010 of the agility concept in supply chain shows its undisputed significance. However, most of studies, conducted by various authors lack fundamental theoretic framework, empiric evidence and rigorous analysis.