Agile Information Systems for Mastering Supply Chain Uncertainty

Read this chapter. The main objective of this reading is to identify the different strategies and characteristics of supply chains. Pay attention to Figure 1 and the explanation for each. What types of companies do you think use Agile supply chains which deal with evolving and highly innovative products?


Mastering both demand and supply uncertainty is a key challenge for many companies. Markets are increasingly turbulent and also the vulnerability of production and logistics processes is growing. The management of uncertainty has been addressed as an essential task of supply chain management.

For coping with the addressed uncertainties, Supply Chain Management (SCM) literature initially has focused on creating so-called lean supply chains that efficiently push products to the market. Lean supply chains build upon reduction of demand uncertainty, especially by product standardisation. Customers must choose from a fixed range of standard products that are made to forecast in high volumes. Business processes in lean supply chains can be highly automated by Enterprise Resource Planning (ERP) systems.

In the late 1990s, the then dominant approach of leanness was criticised more and more. It was argued that in volatile markets it is impossible to remove uncertainty. Companies therefore should accept differentiation and unpredictability, and focus on better uncertainty management. Agility was proposed as an alternative approach that aims for rapid response to unpredictable demand in a timely and cost-effective manner. It is founded on a mass customisation approach that combines the seemingly contradictory notions of flexible customisation with efficient standardisation. Efficient standardisation is realised by fabricating parts of the product in volume as standard components; distinctiveness is realised through customer-specific assembly of modules.

Until then, SCM focused on strategies for coping with demand uncertainty. Lee was one of the first who stressed the impact of supply uncertainty on supply chain design. Supply chains characterised by high supply uncertainty require the flexibility to deal with unexpected changes in the business processes. Disturbances of logistics, production or supply of materials should rapidly be observed and lead to process changes including re-planning and re-scheduling, purchasing new material, hiring alternative service providers, or negotiating new customer requirements.

Supply chains that are characterised by a high uncertainty of both demand and supply require a combination of responsiveness to changing demand and the flexibility to deal with unexpected changes in the business processes. Following Lee, we use the term agility to characterise these types of supply chains. In agile supply chains, demand requirements and supply capabilities, i.e. products and processes including resources, should be continuously attuned. Therefore, both front-office and back-office systems need to be flexible and smoothly integrated.

The main objectives of this chapter are to define the requirements to information systems in agile supply chains and to develop strategies for implementation of agile information systems. For the identification of requirements, the concept of mass customisation is applied to information systems.

The chapter first introduces a typology of supply chain strategies and the role of information systems in these strategies. Next, it focuses on information systems in the quadrant of agile supply chains. It is argued that these supply chains information systems should support an ICT (information and communications technology) mass customisation approach and the basic requirements for such an approach are defined. In the next section the role of ERP systems, configurators and Service Oriented Architecture (SOA) to enable ICT mass customisation is described. The chapter concludes with the introduction of three basic strategies for the implementation of agile information systems. The strategies involve different divisions of product configuration, process configuration and management of the order fulfilment among ERP systems, dedicated configurator software and SOA platforms.

Source: C.N. Verdouw, A.J.M. Beulens, T. Verwaart, and J. Wolfert,
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