Is it better for a supply chain to be lean or agile? The answer may vary wildly depending on who is asked and what their business prioritizes. While both approaches have pros and cons, some business models are better suited to one than the other. And choosing the right approach is essential if companies want to sharpen their competitive edge and stay on top.
Here are just a few reasons to consider each approach—and some tips for striking a healthy balance between the two.
The agile supply chain: Fast, flexible, but challenging
The agile approach to supply chain management leverages speed and visibility to outperform other companies. Agile supply chains use real-time data to maximize responsiveness and flexibility in the face of changing markets or conditions.
This means that companies maintain the ability to change their processes or operations with relative ease and adapt to evolving demands on the fly—rather than relying on long-term forecasting. As a result, the agile supply chain tends to be better suited to volatile and fast-paced markets.
Supply chains that prioritize agility tend to keep less inventory than other companies. While this can reduce warehousing costs and waste, it can also create plenty of challenges for supply chain managers. For one, resource planning can be very difficult. It can also be hard to negotiate the best rates with carriers when the type, volume, and frequency of freight being shipped can change rapidly.
The lean supply chain: Cost-effective but not free from risk
A lean approach to supply chain management focuses on cost-effectiveness and waste reduction above all else. By implementing low-cost strategies and minimizing unnecessary steps across the supply chain, this approach can be extremely successful in boosting bottom-line savings.
Whereas agile supply chain management prioritizes the ability to pivot in an instant, the lean approach is heavily reliant on accurate forecasting. When sudden market shifts and changes in consumer demand are not accounted for, the lean supply chain may struggle to accommodate them. This can put a strain on customer relationships, potentially hurting a company’s reputation.
Achieving the best of both worlds
Every supply chain is different. And while companies may put more of an emphasis on one approach over the other, ultimately, as with most things in life, a healthy balance is the best way to go.
Recovering costs is something every company needs to do. After all, it’s the best way to preserve the bottom line. But at a time when uncertainty is the new norm, being able to adapt at a moment’s notice is more critical now than ever before.
So, how can companies strike a balance and embrace the benefits of both approaches? Simple: by using their company’s data to drive their strategy at every step.
The right approach is a data-driven approach
Modern transportation management systems and business intelligence solutions and make it easy for companies to be nimble, proactive, and informed about their approach to supply chain management. Using these tools, supply chain managers can rapidly gather, synthesize, and analyze their data to glean actionable insights—and drive the most strategic and impactful approach.
Strike the perfect balance. Contact CTSI-Global today to get started.