Analysing supply chain agility - when science meets practice Prof. Dr. Michael Henke Head of Chair for Purchasing and Supply Research Director Financial Supply Supply Chain Institute EBS Business School 20 October 2010
Introduction to the EBS Universität für Wirtschaft und Recht i.gr. EBS Universität für Wirtschaft und Recht i.gr. Supply Chain School Campus Frankfurt Airport Governance School Future Law School Campus Wiesbaden EBS Business School Campus Schloss Reichartshausen Presence 1
Market volatilities demand for research on how agility creates value Interruptions in supply chains destroy value by Hendricks and Singhal (top-ranked scientists) Hendricks & Singhal discovered that with the announcement of interruptions in supply chains, share prices of corresponding listed companies decreased by 10.8 % on average. BUT: Our research study focuses on how value can be created through agile supply chains 2
Agility: Capability to identify changes, proact and react in supply chains Being on the alert Identify changes in markets and company (e.g. new technologies) Supply Chain Excellence has become the important factor in global competing markets 3
Agility: Capability to identify changes, proact and react in supply chains Being proactive Align entire supply chain to future needs in the longer term (e.g. new market entry) Supply Chain Excellence has become the important factor in global competing markets 4
Agility: Capability to identify changes, proact and react in supply chains Being proactive Align entire supply chain to future needs in the longer term (e.g. new market entry) Being reactive React with specific supply chain functions for shorter term needs (e.g. adjust delivery quantities) Supply Chain Excellence has become the important factor in global competing markets 5
Agility: Capability to identify changes, proact and react in supply chains Being proactive Manufacturing Lead Time Agility in science by Swafford Development Cycle Time Frequency of new product introduction Level of product customization Being reactive Responsiveness to changing market need Speed to adjust delivery capability Speed to improve delivery capability Speed to improve customer service Supply Chain Excellence has become the important factor in global competing markets 6
Modeling agility and its impact on performance Agility - Framework Performance - Framework Potential drivers of agility in the supply chain Supplier Internal Resource Technology Uncertainty Strategic Responsibility Supply Chain Agility Cost & Performance Performance (*) Competitiveness will be considered as performance effect (*) Short-term & Long-term Performance 7
Potential drivers of agility Supplier 5 Responsibility 4 3 2 1 0 Internal Resource Strategic Example illustration Technology Uncertainty 8
Potential drivers of agility - Example Supplier Supplier Responsibility 5 4 Internal Resource Supplier valuation Supplier selection 3 Supplier integration 2 1 0 Strategic Technology Example illustration Uncertainty 9
Potential drivers of agility - Example Responsibility Supplier 5 4 1 Internal Resource 3 Hypothesis Early integration of suppliers in new product development 2 (example) increases agility. Supplier Supplier valuation Supplier selection Supplier integration 0 Strategic Example illustration Technology Uncertainty 10
Potential drivers of agility - Example Responsibility Supplier 5 4 1 Internal Resource 3 Hypothesis Early integration of suppliers in new product development 2 (example) increases agility. Supplier Supplier valuation Supplier selection Supplier integration Measurement scale 0 Our key suppliers are involved in the early stage of product Strategic Technology development. We ask our key suppliers for their input on the design of component parts. We make use Uncertainty of key supplier expertise in the development of our products. 11
Does agility drive business performance? Supplier Agile Supply Chains Cost & Performance Revenue growth Profit margin Responsibility 5 4 3 Internal Resource Cost of goods sold Inventory cost 2 1 0 Short-term & Long-term Performance On-time delivery Strategic Uncertainty Example illustration Technology Product customization Innovativeness Technology leadership Customer loyalty 12
Questions to be answered in the agility study What is the status quo in Germany? Which industries do a good job? What are the most important requirements to become agile? What actions work best? What are the best practice companies? What can we learn from best practice companies? 13
Design of the agility study The first part of the study is a survey given to the member companies of BVL and BME Questionnaire Starting November 2010 Leads us to the best practice companies in terms of agility Adressees are CEOs and the Heads of Purchasing, Logistics and Supply Chain All participants will receive the results of the survey The second part of the study are case studies with participants of the best practice companies Case studies Starting spring 2011 Gaining deeper inside into value drivers and impacts of agility All participants will receive the results of the case studies 14
Be agile and take part in the study! Starting November 2010 http://www.ebs.edu/smi 15