Agile supply chain Agile supply chain is about Structure change MODULE 11

virtual integration
Module 10
MODULE 11

Market sensitivity KPI for agile supply chains Types of supply chain
MODULE 11 MODULE 11 configuration stable and dynamic

8 forms of waste in lean characteristics of an agile Factors Influencing Location

manufacturing module 8 supply chain- MODULE 10 Decisions MODULE 7

Factors influence location Cost to serve Nine Lean process mapping tools
decisions in the aviation
MODULE 8 MODULE 9
industry
Value Stream Mapping
Module 7
• Time Based Process
Mapping
• Process activities mapping
• Supply chain response matrix
• Logistics pipeline map
• Production variety funnel
• Quality filter mapping
• Demand amplification
mapping
• Value adding time profile

AGILE SUPPLY CHAIN CONCEPT

Agile supply chain is a concept that originated in the field of supply chain management
and is based on the principles of agility commonly associated with agile methodologies
in software development. The goal of an agile supply chain is to enhance flexibility,
responsiveness, and adaptability in the face of dynamic and unpredictable market
conditions.
AGILE
Agile supply chain management prioritizes adaptability. It’s for organizations that want
to quickly adapt to changing situations. This method makes it easier to adjust sourcing,
logistics, and sales in response to factors including economic swings, technology
changes, and customer demand.
Typically, an agile supply system waits to see what the market demand is before
finishing production. Short-term forecasts help companies stay responsive, but a key
aspect of agile supply chains is that they respond to demand as it happens. This
approach is useful when producing fast-changing and customizable items like fashion
wear.

An agile supply chain typically results in short order lead times. It’s also quick to
respond to customers. And when something unexpected happens, such as a regular
supplier not being able to fill an order, the system enables flexibility. You can also
respond more quickly to new market opportunities with an agile supply chain.

Agile supply chain is about virtual integration

Agility implies that the supply chain is able to respond to the changes in the local market
requirements and much of these can perhaps be the opportunities. To do this, agile supply chain must
be able to leverage skills, assets and other resources across the divisional units in the local region in
which they operate. This means they need to establish the shared goals and communicate them across
the supply chain and work toward them jointly in harmony. The bound between organizations created by
the shared goals does not necessarily vertical where the ownership consolidates. In fact, typically, it
creates the virtual integration – the vertical integration without being so.

Structure Change

As mentioned earlier, agile supply chain differs from the lean one from its structure to say the
least. The structure change required for developing an agile supply chain applies to two aspects. One is
the supply chain architecture; another is the organizational internal structure. It has to be said here that
we assume business and supply chain strategies have been and will be developed appropriately to
support the structure decision making.

MARKET SENSITIVITY

Agile supply chain relies on market sensitivity

Market sensitivity means that the supply chain’s internal measures, whatever it may be, are
sourced directly from and linked closely with the external market that the supply chain is operated in. All
too often, we see performance measures and business assessment are based on the data, information
from with the internal operation and mostly generated within the supply chain. This will most probably
misguide the management and drive the supply chain away from its ultimate objective of serving the
market.

Key Performance Indicators

Agile supply chain will also need a set of its own unique key performance indicators (KPI). The
commonly used KPI in predominantly lean supply chain operating environment will not fit and often
misguide the management. On top of the most frequently used KPI for agile supply chains are:

• Design to market time

• Customer satisfaction and delight

• Production throughput

• Delivery lead-time

• Product availability in the market

• Capacity synchronization and optimization

• Cost-to-serve

• Frequency of product up-grading

• Service innovation and flexibility

Fundamentally the KPI for agile supply chain is the market responsiveness in terms of speed product
range and service quality. But the detailed KPI for a specific organization, however, must be aligned with
its top-level business strategies and related with the industry sector and product categories.

TYPES OF SUPPLY CHAIN CONFIGURATION

the supply chain configuration can be divided broadly into two types of networks: stable network
and dynamic network. The stable network is a normal form of supply chain configuration where
the suppliers and buyers are formed in tiers along the supply chain. The suppliers’ involvement
in the supply chain is more or less fixed. The operational guidelines are formalized with the
OEM. The technical role and competence positioning in the supply chain is also predefined. The
style of operation of this type of network is mainly mechanical in nature that is displayed in its
physical functions.

The 8 forms of waste in lean manufacturing comprise:

1.Defects:
Defects have detrimental effects on time, financial resources, overall resources, and customer
satisfaction. Examples of defects in a manufacturing setting include inadequate documentation or
standards, significant discrepancies in inventory, subpar design with associated design
documentation changes, and an overall deficiency in quality control throughout the workflow.

To mitigate defect waste, implementing formalized document control, well-documented quality

methods across all production stages, and audited checklists to ensure adherence to the Bill of
Materials (BOM) are effective strategies. Additionally, the application of standardized work at each
production cell or point in the production line can contribute to reducing this type of waste. Specific
causes of defects encompass poor quality control at the production level, insufficient machine
repair, inadequate documentation, absence of process standards, inadequate understanding of
customers' needs, and inaccurate inventory levels.

2.Excess Processing:

Excess processing is indicative of a poorly designed process and may result from management or
administrative issues like insufficient communication, data duplication, overlapping areas of
authority, and human error. It can also stem from equipment design, inadequate job station tooling,
or facility layout.

Lean waste elimination tools, such as process mapping, can define an optimized workflow to
eliminate over-processing. Process mapping, a key method in lean production, extends beyond the
performance of production tasks to encompass reporting, sign-off procedures, and document
control.

3. Overproduction:

Overproduction occurs when components are manufactured before they are needed for the
subsequent downstream process. This results in negative consequences such as a disruptive
"caterpillar" effect in the production flow, the generation of excess Work in Process (WIP),
additional labor requirements for moving WIP multiple times, and the potential concealment of
defects that could have been detected earlier if processes were balanced.

Lean manufacturing systems employ various tools to address overproduction. Takt time is utilized
to balance production rates between cells or departments, while measured and process-mapped
jobs reduce setup time, allowing efficient small batch flow. In certain industries, "pull" systems like
Kanban are implemented to control or eliminate WIP.

Common causes of overproduction include an unreliable process, unstable production schedules,

inaccurate forecast and demand information, unclear customer needs, poor automation, and
prolonged or delayed setup times

4. Waiting:

Waiting encompasses delays involving people, materials, equipment (due to prior runs not being
finished), or idle equipment (resulting from mechanical downtime or excess changeover time).
Waiting incurs costs in terms of direct labor dollars and additional overhead costs, leading to
overtime, expediting costs, and potential additional waste in the form of defects.

Waiting, often the opposite of overproduction, can be mitigated or eliminated using similar
remedies. It is frequently a consequence of poor process design and can be addressed through
proper measurement of takt time and the creation of standard work.

Common causes of waiting include unplanned downtime or idle equipment, prolonged or delayed
setup times, poor process communication, lack of process control, production based on forecasts,
and idle equipment.

5. Inventory:

Inventory is considered a form of waste due to associated holding costs, including raw materials,
Work in Process (WIP), and finished goods. Over-purchasing or poor forecasting can lead to
inventory waste and may indicate a broken or poorly designed process link between manufacturing
and purchasing/scheduling.

Lean Manufacturing extends beyond the factory, requiring process optimization and communication
between support functions. Purchasing, scheduling, and forecasting can be standardized with
defined minimums and maximums, and order points mapped to the process flow and takt time.
Purchasing raw materials only when needed, reducing WIP, and narrowing the definition of "safety
stock" contribute to reducing this type of waste.

Common causes of inventory waste include overproduction of goods, delays in production or 'waste
of waiting,' inventory defects, and excessive transportation.
6. Transportation:

Poor plant design can lead to waste in transportation, triggering other wastes like waiting or motion
and impacting overhead costs such as higher fuel and energy costs. It may also result from poorly
designed or outdated processes.

Value stream mapping and changes in factory layout can reduce transportation waste, involving
comprehensive documentation of all aspects of the production flow. This includes changes to
minimize or eliminate transportation waste.

Common types of transportation waste include poor layouts with large distances between
operations, long material handling systems, large batch sizes, multiple storage facilities, and poorly
designed production systems.

7. Motion:

Motion incurs costs in terms of raw materials, people, and equipment. It includes excess physical
motion like reaching, lifting, and bending. Unnecessary motion results in non-value-added time and
increased costs.

Process mapping, following core Lean Manufacturing methodology, includes facility layout and
optimized workplace design, analyzing the distance of motion within the space and the location of
parts, supplies, and tools. An effective process map captures proper space utilization with well-
designed and documented standard work.

Common examples of motion waste include poor workstation layout, inadequate production
planning, suboptimal process design, shared equipment and machines, siloed operations, and a lack
of production standards.

8. Non-Utilized Talent:

The eighth waste, non-utilized talent, is unique as it is not specific to manufacturing processes. It
occurs when management fails to ensure that all potential employee talent is effectively utilized.
This waste may result in assigning employees tasks for which they are not properly trained,
contributing to poor communication.
Eliminating this waste involves engaging employees, incorporating their ideas, providing training
and growth opportunities, and involving them in the creation of process improvements. This
improves overall operational effectiveness and can positively impact all other forms of waste.

Examples of non-utilized talent include poor communication, failure to involve people in workplace
design and development, lack of or inappropriate policies, incomplete measures, poor management,
and a lack of team training.

CHARACTERISTICS OF AN AGILE SUPPLY CHAIN

A few universal characteristics of agile supply chains include:

Accurate Information - The mantra of agile supply chain management is “You can’t control what
you can’t see.” Supply chain agility requires you to collect and act on the most relevant ant timely
information. In turn, this may require a few adjustments to your organization’s strategy. Empower
your team to collect and quickly share accurate information. Shorten your response times. Broaden
your available options. Improve the quality of information you have available to make quick,
effective decisions.
Comprehensive Control - Agile supply chains strive to understand the entire supply chain. This
includes the key enablers and inputs needed to produce the best possible customer experience.
Agile organizations invest in new technologies and data-driven processes that allow them to
exercise precise control over the business.

Rapid Decision-making - While no one can possibly predict all disruptions, having processes and
technology in place that enable quick decision-making is key to building an agile supply chain,
meaning it can respond quickly to the unexpected and seize new opportunities despite the
uncertainty inherent in the space.

Factors Influencing Location Decisions

Location decisions in supply chain design and planning are influenced by a myriad of
factors, each of which must be carefully evaluated to ensure optimal outcomes. These
factors can be broadly categorized into three main areas: cost, customer service, and
operational considerations.
Cost considerations encompass a range of factors, including labor costs, land and
construction costs, taxes and regulations, utility expenses, and transportation costs. These
factors vary significantly across different locations and can have a substantial impact on the
overall cost structure of a supply chain network.
Customer service considerations revolve around proximity to end markets, demand
patterns, and the ability to provide timely and responsive service to customers. The
location of facilities and distribution centers can directly impact lead times, transportation
costs, and the ability to meet customer expectations, making it a critical factor in location
decision-making.
Operational considerations encompass a wide array of factors, including access to
transportation infrastructure, supplier and partner locations, proximity to resources and
inputs, and the availability of skilled labor. These factors directly influence the operational
efficiency and agility of a supply chain network and must be carefully assessed when
making location decisions.

factors influence location decisions in the aviation industry,

including proximity to suppliers and customers, transportation infrastructure, labor availability,
regulatory considerations, and market demand

Cost to serve
is the measurement of cost factors that go into the servicing of a customer, or the production of a
product. When paired with revenue, cost to serve analysis enables you to accurately calculate
profitability by customer, product types, production lines, facilities, processes. Cost to serve analysis
enables you to accurately identify unprofitable areas of your operation, and mitigate situations where
more volume creates larger losses.

Lean Process Mapping Tools

In today’s business management world, lean method is still the most popular one across the
world. Over more than 70% of organizations have, to various extents, exercised lean. One of the
reasons why lean is so widely applied and continues to be the most favorable method is that it has a
set of practical tools that can be readily applied in almost all business circumstances. The tools
created originally by the Toyota production systems are called ‘lean process mapping tools’. The
purposes of those tools are to visualize the material flows in the production lines and in the supply
chains; to see where the waste is. They help to pull together the lean thinking principles and
facilitate the discussion and communication, and help to identify the bottleneck and priorities the
remedial actions.

•Value Stream Mapping

• Time Based Process Mapping
• Process activities mapping
• Supply chain response matrix
• Logistics pipeline map
• Production variety funnel
• Quality filter mapping

Value Stream Mapping

The value stream mapping tool as shown in figure 16 is designed to map out the value adding and
wastage from the supplier to customer, including logistics, purchasing, order fulfillment, production
processes.

Time Based Process Mapping

Time-based process mapping tool is a simply

‘walk through’ tool to identify and map out the
activity time (supposed to be value adding) and
waste time (non- value adding) in every steps
that the material has gone through, as shown in
Figure 17.

Process Activity Mapping

Supply chain response matrix is used to evaluate

the inventory and lead times incurred by a supply
chain in maintaining a given level of customer
service. It is used to identify large sects of time
and inventory and allows managers to assess the
need to hold the inventory.
Supply Chain Response Matrix

Supply chain response matrix is used to

evaluate the inventory and lead times incurred
by a supply chain in maintaining a given level of
customer service. It is used to
Identify as large sects of time and inventory and
allows managers to assess the need to hold the
inventory.

Logistics Pipeline Map

Logistics pipeline map is a

compliment to the supply chain
response matrix. It shows the
accumulation of process time on
the horizontal axis and of inventory levels on the vertical axis. It shows exactly where the inventory
and time accumulate within each operation.

Production Variety Funnel

Production variety funnel is a visual mapping

technique that plots the number of product variety at
each stage of the manufacturing process. This
technique is used to identify the point at which a
generic product becomes either increasingly or
totally customer specific.
 Quality Filter Mapping.

Quality filter mapping is a tool designed to identify

quality problems in the order fulfillment process or
the wider supply chain. The map shows where three
different types of quality defects occur in the value
stream specific.

Demand Amplification Mapping

Demand amplification mapping is a graph of

quantity against time, showing the batch sizes of a
product at various stages of the production
process. This may be plotted with a company or
along the supply chain. It also can be used to show inventory holdings at various stages long the
supply chain.

Value Adding Time Profile

Value adding time profile plots the accumulation of
both value adding and non-value adding costs
against the time. It is an excellent tool for looking at time compression or mapping out where
money is being wasted.
MODULE 7
Location Decisions
In today's globalized and interconnected world, the importance of location decisions
in supply chain design and planning cannot be overstated. The strategic placement of
facilities, distribution centers, and transportation networks plays a critical role in the
overall efficiency and effectiveness of supply chain operations. This module will delve into
the multifaceted significance of location decisions in supply chain management, examining
the various factors that must be considered, the impact of location on overall supply chain
performance, and the strategies and tools available to make informed location decisions.

Location Decisions in Supply Chain Design and Planning within the Aviation Industry

Introduction to Supply Chain Management in the Aviation Industry

The aviation industry encompasses a wide range of activities, including aircraft

manufacturing, maintenance, repair, and overhaul (MRO) operations, airline operations, and the
transportation of passengers and cargo. The seamless coordination of these activities is essential for
the industry to function effectively and meet the demands of its customers. Supply chain
management plays a pivotal role in ensuring the integration and coordination of these activities,
with a focus on optimizing the flow of materials, information, and resources throughout the aviation
supply chain.

Understanding Location Decisions in Supply Chain Design and Planning

Location decisions in supply chain design and planning involve the strategic selection of
sites for various facilities, such as production plants, warehouses, distribution centers, and
transportation hubs. In the context of the aviation industry, these decisions are particularly critical
due to the nature of the industry's operations, which involve the movement of aircraft, parts, and
personnel across different geographical regions. The selection of optimal locations for key facilities
is essential for achieving operational efficiency, minimizing costs, and enhancing overall supply
chain performance.
 A well-planned and strategically located network can lead to reduced transportation costs,
improved responsiveness to customer demand, enhanced operational efficiency, and increased
flexibility to adapt to changing market conditions.

Several factors influence location decisions in the aviation industry, including proximity to
suppliers and customers, transportation infrastructure, labor availability, regulatory considerations,
and market demand. Proximity to suppliers is crucial for ensuring timely and cost-effective access
to aircraft parts, components, and materials. Similarly, proximity to customers, such as airlines and
MRO service providers, is essential for minimizing lead times and transportation costs. The
availability of well-developed transportation infrastructure, including highways, railways, and
airports, is also a key consideration, as it directly impacts the industry's ability to move goods and
personnel efficiently.

Labor availability and skill levels are important factors, particularly in the context of MRO
operations, where the presence of a skilled workforce is essential for maintaining and repairing
aircraft. Regulatory considerations, including safety and security requirements, also influence
location decisions, as compliance with industry regulations is non-negotiable. Finally, an
understanding of market demand and regional dynamics is critical for identifying strategic locations
that can serve the needs of the aviation industry effectively.
Understanding Location Decisions in Supply Chain Design and Planning

Location decisions in supply chain design and planning involve the strategic selection of
sites for various facilities, such as production plants, warehouses, distribution centers, and
transportation hubs. In the context of the aviation industry, these decisions are particularly critical
due to the nature of the industry's operations, which involve the movement of aircraft, parts, and
personnel across different geographical regions. The selection of optimal locations for key facilities
is essential for achieving operational efficiency, minimizing costs, and enhancing overall supply
chain performance.

A well-planned and strategically located network can lead to reduced transportation costs,
improved responsiveness to customer demand, enhanced operational efficiency, and increased
flexibility to adapt to changing market conditions.
 Several factors influence location decisions in the aviation industry, including proximity to
suppliers and customers, transportation infrastructure, labor availability, regulatory considerations,
and market demand. Proximity to suppliers is crucial for ensuring timely and cost-effective access
to aircraft parts, components, and materials. Similarly, proximity to customers, such as airlines and
MRO service providers, is essential for minimizing lead times and transportation costs. The
availability of well-developed transportation infrastructure, including highways, railways, and
airports, is also a key consideration, as it directly impacts the industry's ability to move goods and
personnel efficiently.

Labor availability and skill levels are important factors, particularly in the context of MRO
operations, where the presence of a skilled workforce is essential for maintaining and repairing
aircraft. Regulatory considerations, including safety and security requirements, also influence
location decisions, as compliance with industry regulations is non-negotiable. Finally, an
understanding of market demand and regional dynamics is critical for identifying strategic locations
that can serve the needs of the aviation industry effectively.
Impact of Location Decisions on Supply Chain Performance

The strategic placement of facilities in the aviation supply chain has a direct impact on
overall supply chain performance. Well-placed facilities can lead to reduced transportation costs,
improved responsiveness to customer demand, and enhanced operational flexibility. For example,
locating distribution centers in close proximity to major airports can facilitate the timely delivery of
aircraft parts and components to MRO facilities, reducing aircraft downtime and maintenance costs.
Similarly, the strategic placement of MRO facilities near key airline hubs can enable quick
turnarounds for maintenance activities, supporting the efficient operation of airline fleets.

Furthermore, optimal location decisions can contribute to risk mitigation and resilience
within the supply chain. By diversifying the locations of key facilities, the aviation industry can
reduce its vulnerability to disruptions caused by natural disasters, geopolitical events, or other
unforeseen circumstances. This resilience is vital for maintaining the continuity of operations and
minimizing the impact of disruptions on the industry as a whole.

Technology and Location Decisions in the Aviation Supply Chain

Advancements in technology, such as geographic information systems (GIS), simulation

modeling, and real-time data analytics, have revolutionized the way location decisions are made
within the aviation supply chain. These tools enable industry stakeholders to conduct
comprehensive spatial analysis, assess various location scenarios, and evaluate the potential impact
of different location decisions on supply chain performance.
 For instance, GIS technology allows for the visualization of spatial data, including
transportation networks, population density, and market demand, providing valuable insights into
the optimal placement of facilities. Simulation modeling enables stakeholders to simulate different
supply chain scenarios, considering factors such as demand variability, transportation costs, and
facility capacities, to identify the most effective location decisions. Real-time data analytics further
enhances the decision-making process by providing up-to-date information on factors such as
weather patterns, traffic conditions, and inventory levels, which can influence location decisions
and supply chain operations in real time.

The Concept of Cost-to-Serve

The concept of "Cost-to-Serve" raises three fundamental questions: 1. How much are we spending? 2.
Who are we spending on? 3. Are we spending wisely? These inquiries encapsulate the key aspects of
discussions surrounding the cost-to-serve metric.

Organizations have been applying lean concepts to corporate logistics systems and the wider domain of
supply chain management ever since Toyota demonstrated its undisputable leadership position in
production management. However, as so often occurs when new concepts are applied to supply chain
thinking, people can start to have unreasonable expectations about the actual benefits. The cause of
such unreasonable expectations always stemmed from the misconception of the original terms and
ideas.

If the cost that does add value to the supply chain has been cut, value has been cut with it. There is little
justification why the value adding cost is to be cut. Toyota’s three original criteria for value adding
activities are:

1) There must be physical changes

2) It must be concerned by the customer

3) It must be right first time Wasteful activities are therefore defined as non-value adding activities. This
is where the concept of ‘serve’ kicks in. If the activity adds value and the value is perceived by the
customer, the activity ‘serves’ the customer. Therefore an appropriate translation of the lean principles
in terms of attitude towards the cost should be that to identify and eliminate the non-value adding or
non- ‘serving’ activities. Thus, a measure for how wasteful is a cost or a cost incurred activity can be
defined by what’s known as ‘cost-to-serve’.

Benefits to Cost-to-Serve

● Reveals labor cost by product type, process and customer

● Identify and reprice unprofitable customers.

● Drive a culture of accountability for labor cost.

● Empower facilities, shifts, and supervisors to eliminate waste.

● Improve processes based on labor cost.

● Compare equipment types to their labor costs.

● Reinvest cost savings into facility innovation.

Lean Process Mapping Tools

In today’s business management world, lean method is still the most popular one across the
world. Over more than 70% of organizations have, to various extents, exercised lean. One of the
reasons why lean is so widely applied and continues to be the most favorable method is that it has a
set of practical tools that can be readily applied in almost all business circumstances. The tools
created originally by the Toyota production systems are called ‘lean process mapping tools’. The
purposes of those tools are to visualize the material flows in the production lines and in the supply
chains; to see where the waste is. They help to pull together the lean thinking principles and
facilitate the discussion and communication, and help to identify the bottleneck and priorities the
remedial actions.

•Value Stream Mapping

• Time Based Process Mapping
• Process activities mapping
• Supply chain response matrix
• Logistics pipeline map
• Production variety funnel
• Quality filter mapping
 Value Stream Mapping

The value stream mapping tool as shown in

figure 16 is designed to map out the value
adding and wastage from the supplier to
customer, including logistics, purchasing, order
fulfillment, production processes.

Time Based Process Mapping

Time-based process mapping tool is a simply

‘walk through’ tool to identify and map out the
activity time (supposed to be value adding) and
waste time (non- value adding) in every steps
that the material has gone through, as shown in
Figure 17.
 Process Activity Mapping

Supply chain response matrix is used to evaluate

the inventory and lead times incurred by a supply
chain in maintaining a given level of customer
service. It is used to identify large sects of time
and inventory and allows managers to assess the
need to hold the inventory.

Supply Chain Response Matrix

Supply chain response matrix is used to

evaluate the inventory and lead times incurred
by a supply chain in maintaining a given level of
customer service. It is used to
Identify as large sects of time and inventory and
allows managers to assess the need to hold the
inventory.

Logistics Pipeline Map

Logistics pipeline map is a

compliment to the supply chain
response matrix. It shows the
accumulation of process time on
the horizontal axis and of inventory levels on the vertical axis. It shows exactly where the inventory
and time accumulate within each operation.
Production Variety Funnel

Production variety funnel is a visual mapping

technique that plots the number of product variety at
each stage of the manufacturing process. This
technique is used to identify the point at which a
generic product becomes either increasingly or
totally customer specific.

Quality Filter Mapping.

Quality filter mapping is a tool designed to identify

quality problems in the order fulfillment process or
the wider supply chain. The map shows where three
different types of quality defects occur in the value
stream specific.

Demand Amplification Mapping

Demand amplification mapping is a graph of

quantity against time, showing the batch sizes of a
product at various stages of the production
process. This may be plotted with a company or along the supply chain. It also can be used to show
inventory holdings at various stages long the supply chain.

Value Adding Time Profile

Value adding time profile plots the accumulation of
both value adding and non-value adding costs
against the time. It is an excellent tool for looking
at time compression or mapping out where money
is being wasted.