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Agile Supply Chains focus on improving three latencies.
When I wrote about Demand Sensing in my last post, emphasizing frequent refresh of the demand outlook, many people pointed out that it helps only if acted upon by the supply team. Absolutely on the dot, well appreciated.
Demand Sensing, with its frequent refreshes, helps us in catching the demand shifts much faster. It also helps in understanding the evolving demand patterns better, which in turn helps in better prediction of near term demand. The technical term for the lag between actual demand shift and our deciphering it is called Demand Latency. It is the first step in making the supply chain more agile.
Once we have better estimation of near term demand, we must use it to modify the supply plan. The lag between these two is technically called Planning Latency. It needs to be shortened continually. If we update the demand outlook every day, we must also update the supply plan at the same frequency.
Having updated the supply plan, we must act on it as fast as possible. This is called Execution Latency. What’s the point in updating the supply plan if we don’t execute it?
Agile Supply Chains minimize all the three latencies. It is quite common now-a-days to bring down the total latency to just one day.
We then move from periodic supply chain planning to a continuous one. No delays. Well synchronised. Uninterrupted flow. No firefighting. Smooth operations.