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Recently, there has been a lot of mention of supply chains in combination with problems in general and problems about disruption of supply chains for food, pharmaceuticals and so on. It is ironic that in this crisis that we had to cancel the conference (due to this crisis situation) where one of the speeches was about this kind of supply chain risk management and need for flexibility.

The speech was supposed to be about dynamic supply chains, so I use this opportunity to try to explain the idea of ​​dynamic supply chains in an abbreviated version and show which of these supply chains that we will mention best suits this current situation.

Besides the above mentioned explosion of complexity in supply chain network design, complexity  was evident also in global trends that emerged in the eve of this great crisis. Trends such as shortening product life cycle and technology, strong competitive pressure for new products and models, high level of diversity and product profiling, increasing business risk and change from forecast-based management into demand-based management. In order to manage modern Supply Chains with lot of uncertanaity companies need to go in several directions:

  • Flexibility
  • Simplification
  • Multi local operations

Flexibility

So what is needed is resilience of SCM to future uncertainty and there are few ways how to do this. Our Supply Chains need to be flexible for various products, sources, logistics partners etc. what we need are hybrid supply chains. In practice we had various formations of Supply Chains (every formation was adjusted for special need, niche or market). What we need is hybrid Supply Chains or different formations for different markets or different formations for demand side and for supply side. We had lean-lean Supply Chains where there was important that costs were drived out of system; and we had agile-agile Supply Chains where there was important to have high service level. Now we need Lean–agile and agile-lean Supply Chains where customers are demanding a rapid response, with services and products delivered, fast and at low cost. So every company need to adjust and find its combination and to find place between the extreems.

Simplification 

Evidently, suppliers went to the extreme of complexity and fell into the over-customization trap, where every customer was treated as unique. This type of segmentation led to further complexity and an even higher cost-to-serve. Supply Chains need structural changes that will speed up the flow through SCM. Some of the paths to follow are:

  • Focus and less unprofitable products – above mentioned Apple is champion in this. Back in 2015, the iPhone was a sold with only 18 percent of smartphones, but it generated over 90% of profits of the industry, hence the focus rules.
  • Elimination of low or non-frequency products, services, suppliers and customers that do not bring value.

Multi local operations 

We saw in recent crisis how globalization disrupted Supply Chains and showed that global distribution of sorces will have to be changed in favor of more balanced global economic efficiency and respond to local demand. That will mean switching from a centralisation model to more regional approach.