Introduction
The requirements of the marketplace when conducting supply chain management is largely dependent on whether an organisation is in need of pursuing either the lean or agile paradigms. The two supply chain parameters are distinctively different. For instance, in terms of the market winner, the agile paradigm is tagged on availability while the lean one is pegged on cost.
In other words, nimbleness in a market that is overly sensitive works well in an agile supply chain contrary to the lean supply chain where waste definition is the clear-cut line. Another important parameter in supply chain management is the proper location of decoupling points.
This is imperative bearing in mind that there is need to engineer a hybrid supply chain where both materials and information can flow smoothly from the point of production to consumption. When the latter is effectively implemented, it will enhance positive outcome associated with both types of supply chain. For example, efficiency will be visible in a lean system while the agile supply chain will encourage an effective supply downstream.
There are quite a number of supply chain management technologies that have been adopted in the contemporary business spheres. One such technology is the use of RFID to track down materials or products from the point of production or sale to the end user.
The only loophole in the application of RFID in supply chain management seems to be emanating from outside such as lack of specified standards, security and privacy considerations, false promises as well as marketing problems. This business report offers a succinct critique of Naylor et al article on the application of lean and agile (leagile) supply chain management.
Additionally, the paper discusses how RFID and other modern supply chain technologies such as e-commerce, CPER and VMI can be used to mitigate against the bull-whip effect in supply chain performance.
Critique / Literature Review
Perhaps, it is pertinent to begin this literature review and critique by defining each of the supply chain paradigms. Although Naylor et al (1999) attempt to define agility simply as supply chain management processes that enhance effectiveness and performance in organizations, it is vital to emphasize that business enterprises that pursue this kind of supply have much more to encounter and implement.
The Flexible Manufacturing Systems (FMS) is indeed the origin of this concept. Sometimes back, manufacturing flexibility was thought to be only possible through automation. This idea did not last for long since it was later extended to incorporate other important factors in business that would influence rapid changes through product mix or volume.
Hence, the concept of agility in supply chain management has taken a sharp turn especially in regard to its composition and functionality. Hence, Naylor et al (1999) ought to have incorporated all the supply chain elements that affect the agile paradigm. While the authors have thinly differentiated agility and leanness in supply chain management, the two paradigms have a visible difference both in terms of application and effect in supply chain management.
When referring to leanness, a supply chain management focuses more to do with producing more using fewer resources. In fact, Naylor et al (1999) reiterate that the “just-in-time” approach or zero inventories is usually associated with leanness, especially in manufacturing. Although the latter terms are precise to use, a more relevant philosophy to use is Minimum Reasonable Inventory (MRI) since it is rather practical bearing in mind that “leanness” refers to the most minimal use of available resources to produce more.
On the other hand, it is quite impossible to separate the two paradigms, not to mention the fact that the agile supply chain is very common in business enterprises that have adopted lean manufacturing. This is paradoxical having highlighted the outstanding difference between the two supply chain tools. The point at which lean manufacturing starts can be practically traced by the Toyota Production System (TPS).
(Heinrich, 2005). This company largely targeted at eliminating and reducing waste in its manufacturing portfolio as one way of boosting production and hence manufacturing in its manufacturing portfolio. It is highly likely that the article by Naylor et al (1999) has laid much emphasis on the positive returns of lean thinking to factory production.
In any case, it is worth to note that manufacturing practices among several business organizations across the globe have been improved due to the lessons gained from TPS guidelines. Thus, restricting the benefits to factories per se may be myopic, so to speak. In connection to this, it is possible to encounter a situation whereby less working hours is spent against higher output in the production and supply of vehicles in a factory whereas the stock of finished vehicles may take up until three months to clear in terms of sale.
Again, this is another paradox in the supply chain management when deliberating on both lean and agile paradigms at the same time. Therefore, leanness, as much as it is unique from agility, can still be integrated in a scenario whereby an organization wants to attain both efficiency and effectiveness simultaneously.
The strategy used in supply chin and of course manufacturing should be that which fall between market winners and market qualifiers (Heinrich, 2005). The two concepts are well covered by Naylor et al (1999). In other descriptions, the two parameters have also been highlighted as order qualifiers and order winners. In retrospect, any organization entering a manufacturing field should deliberate on the requisite baselines to compete favourably in an open market economy as it is the case with the current effect brought about by globalization.
These prior considerations are referred to as order qualifiers. On the other hand, gaining market strength and equitable share of the market demands certain unique flexibilities also referred to as order winners. Supposedly, the most appropriate manufacturing strategy can only be met when both the order winners and order qualifiers is brought into light.
Unfortunately, Naylor et al (1999) does not explicitly underscore the two concepts that would prepare a ground for vibrant supply chain management. In real sense, companies do not compete; rather, it is the supply chains. Thus, it is quite tricky to elude the connection between agile and lean as well as winners and qualifiers. In a more simplistic term, the lean supply chain will carry the day if the element of cost is factored in the process.
However, service value coupled with customer satisfaction is of critical importance when discussing agile paradigm. At this point, there is a lot of concurrence with the article by Naylor et al (1999). The two paradigms have been illustrated in terms of their terse differences. Such a “compare and approach” approach is necessary in creating a clear cut difference as well as similarity between the supply chain paradigms.
Product quality level is an equal requirement in both lean and agile supply chains contrary to what Naylor et al (1999) propose. Whilst leanness is overly concerned with reducing or alleviating the level of waste in course of supply, the quality of either goods or services produced cannot be compromised. This also applies to lead times especially between the times when a client places an order and when the delivery is finally effected.
Agility too, demands that the total lead time be lowered to what may be referred to as the “irreducible minimum”. The only challenge when this requirement has to be applied in an agile supply chain is the difficulty in forecasting and the high level of volatile associated with predicting the total lead time. Naylor et al (1999) also confirm that marketplace demand will be cumbersome to exploit if the end-to-end lead-time is extremely long and possibly wasteful in the supply process.
The vertical distribution channel has been the supply chain art of Dell for long. It solely distributes its products. Through the use of internet or telephone, customers are able to start off the process of buying. Three modes of selling are applicable at Dell namely keyboard-to-server, ear-to-ear and face-to-face (Dell &Fedman, 1999).
The lead-time is usually specified by the company representative although in practice, it takes a much shorter time to deliver the product than earlier specified in the inquiry. Computers at Dell are built according to customer’s specifications. In order to satisfy the orders placed by customers, the company makes use of an agile supply chain paradigm.
Additionally, the inventory is not finished while the entire business platform takes the form of a direct model. The component inventory is also kept to the lowest level possible as one way of beating the competition in terms of prices. Indeed, this is a clear cut example on how both the lean and agile supply chains can be incorporated in an organization in order to simultaneously boost efficiency and effectiveness.
The lean approach at Dell is also evident when the company applies vertical integration in its supply chain management (Heinrich, 2005). Subsequently, the company has facilitated cost reduction as a way of reducing wastes. For instance, an agile supplier has been mandated to build relatively standard monitors. As such, the company may require as much as 9,547 pieces of monitors today from its agile supplier while in few days time, demand as low as 760.
RFID for Supply Chain Performance Improvements
Evolution, both socially and economically, is a daily experience that is encountered both at the individual and societal level. One of the visible fronts in evolution is the advances made in technology and especially in supply chain management. Technological sophistication has continually improved consumer experience not to mention the mammoth benefits to suppliers and manufacturers.
In particular, the use of the Radio Frequency Identification Devices (RFID) has created real world awareness in the managing supply chain. This technology is used to track down the design or unique product characteristics right from the point of production throughout the supply chain. Additionally, RFID is capable of either actively or passively transmitting the product information regardless of space and time.
Indeed, the technology has been used to minimize theft of goods alongside avoiding improper shipment sizes. By using RFID technology, it is possible to ensure that the products will arrive at their point of destination with minimum hitch in addition to giving a better forecast, especially of the delivery time to consumers. An organization can also use this device for impose restrictions to entering certain points within a building.
It can also be useful in assessing the exit and entry times for employees. Modern business indeed requires the implementation of RFID technology and especially in regard to improving product awareness throughout the supply chain management. When variability in the demand order are overly increased or amplified as they progress through the chain of supply, it results into the bullwhip effect (Heinrich, 2005).
In actual practice, the bullwhip effect is common when vital information is distorted as the supply chain is distorted. Worse still, such distortion is also a major cause of supply chain inefficiencies and failure experienced in some establishments. When companies thoroughly evaluate, assess and comprehend the latent causes of bullwhip effect, they can effectively counteract this scenario.
To this end, can RFID technologies assist in reducing the bullwhip effect in any way? Currently, industry leaders are in the forefront of implementing strategies that are innovative in nature such as the use of RFID tracking tool to facilitate smooth and unrestricted flow of information. This has been covered under the integration of new information systems (Heinrich, 2005).
Moreover, new measurement and incentive systems in addition to giving a better definition to organizational relationship have been applied to counter the bullwhip effect. In respect to new information systems, RFID has played an integral role in supply chain management. The RFID passive tags contain vital information of the product.
As part and parcel of reducing the bullwhip effect in its supply chain, Dell Inc. has embraced the use of RFID technology. Today, the company stands out as one of the well established computer and electronics manufacturers worldwide (Dell & Fedman, 1999). The six manufacturing plants of the company employ over 50,000 employees spread across different locations in the world.
As already mentioned, the company makes use of the idea on supply and demand depending on the orders placed by customers to drive sales. As the chairman and founder of Dell, Michael Dell confessed, the ability to obtain real-time data courtesy of RFID technology has indeed improved the working efficiency of the company in addition to boosting revenue growth of the company (Heinrich, 2005).
Currently, the company is fast on plans to decommission the old techniques that have been used in its supply chain for long and embrace better RFID technologies that have proved to be both effective and efficient in manufacturing and service delivery portfolios. In practice, the RFID technology being used at Dell has enabled customers to keep a close vigil of their purchases and how everything is progress from the assembly time, shipment and eventually to delivery.
In all of these processes, human beings are minimally involved thereby reducing the possible additional workforce that the company would require as part of customer support. Realistically speaking, such an arrangement would significantly reduce or even completely eliminate the bullwhip effect. Furthermore, congestion in warehouses has been a thing of the past bearing in mind that Dell has fully engaged itself in the manufacture of most computer hardware and software being sold.
The real-world awareness created by RFID technology has greatly improved the supply chain management logistics leading to extreme success of the company. The United States Department of Defence is also keen in the implementation of RFID technologies especially in the handing and tracking down of its ammunitions, weapons and military rations.
The department has realized that less time is spent when RFID is used as compared to the ordinary means of inventory processing. The maintenance of material, asset visibility, items management as well as improvement in data quality has been necessitated with the use of the RFID technology.
Using RFID to Complement Existing Technologies & Concepts
There are quite a number of supply chain technologies. However, the use of RFID can indeed boost the viability of other technologies and concepts being used in supply chain management. For instance, supply chain management is currently employing E-commerce, Decentralized Software Service Protocol (DSSP), Electronic Data Interchange (EDI), internet, Vendor Managed Inventory (VMI) and Customer Premise Equipment (CPE).
The lean and agile paradigms in supply chain are also important parameters when integrating RFID technology since the latter is one of the success factors in supply chain IT. For example, the process of gathering information from the manufacturing to the delivery point requires a more real-time data analysis and transmission (Attaran, 2007). This is in effect similar to the case scenario on how E-commerce is carried out at Dell inc. the use of RFID at this point is vital since all the parties engaged in the transaction will be visible enough in the entire supply chain process.
Additionally, RFID will improve E-commerce undertakings in the sense that it will be possible to expedite the assessment of orders by retailers as well as monitor possible delays. Secondly, E-commerce that has integrated the use of RFID technologies will be able to put in place a standardization process that will be able to identify products across various industries and companies.
A single contact point can be used to access data in the system since there is need for uniformity of the much-needed information by consumers. When old forms of technology such as telephones are used, there can be slight differences in the information passed verbally and the actual specifications of the product being purchased.
A robust RFID structure in internet use will also facilitate quick analysis of system data as well as improve planning that is needed in strategic decision making. Of utmost importance here is the Supplier Relationship Management (SRM) and Customer Relationship Management (CRM) whereby business processes can be integrated real time (Attaran, 2007). In terms of lean and agile supply chain tools, a collaborative approach between companies and supplies has been found to highly beneficial and that companies that exercise this approach usually outperform their competitors.
In order to boost profitability and innovation as well as maintain a high-quality supply chain in the procurement and sourcing processes, the adoption and full implementation of RFID technologies alongside other supply chain management tools such as Customer Premise Equipment (CPE) and Vendor Managed Inventory (VMI) cannot be ignored or underestimated.
A Supplier Relationship Management System (SRM) when well utilized alongside RFID will enable the smooth process of tracking down spending analysis by suppliers on a global basis. This can be implemented across different product categories.
Moreover, SRM will permit comparison of supplier metrics and benchmarks. In other words, it will be possible for the manufacturer to outsource the most viable supplier through real-time record. In the case of lean supply chain, the lead-time compression will be monitored with ease so long as the RFID technological platform has been fully integrated in the business cycle.
Contract Management (CM) when used together with RFID technology will enhance the sharing of vital information among suppliers alongside enabling the establishment of web-based procurement process that are fast and convenient to the users. Contact Management will also permit the continual monitoring of supply chain and most importantly ensuring that the performance of suppliers is up to date and according to the earlier proposed agreements.
Spend Management software such as Ariba, Statistical Analysis System (SAS) and Standard Assessment Procedure (SAP) to catch up with the implementation of RFID by most vendors in the supply chain. A case example is that of Xerox. The company ha s already installed and using the internet procurement system. The new system is intended to cut down on unnecessary costs associated with non-productive purchasing.
Sincerely speaking, this is one way through which Xerox Corporation will be practicing lean manufacturing and hence lean supply chain paradigm (Heinrich, 2005). The net effect will be transformation of the supply chain system of the company from the one that is geared towards waste elimination to one that is consistent with an agile approach whereby efficiency will be improved significantly.
In the long run, Xerox Corporation anticipates lowering down its expenditure on goods and services that have been deemed as less productive in the manufacturing and supply chain paradigm (Heinrich, 2005). The integration of SCM and Enterprise Resource Planning (ERP) systems alongside with RFID technology is also a vita practice in supply chain management since the latter may not be very fruitful its functionality is supported by other integral systems.
Both the SCM and ERP play pertinent roles in shaping a vibrant supply chain. The main reason why the two tools were developed was to standardize and optimize internal SC processes (Attaran, 2007). This standardization mainly targeted the following supply chain domains namely distribution, production, procurement and finance. While the initial generation systems were largely sole-based and lacked a collaborative approach, the modern systems being used in supply chain management are open and component based as well as web enabled.
As critical example is the application of modern ERP systems together with RFID technologies. Enterprise Resource Planning (ERP) has the potential of ensuring that data is centrally managed while at the same time facilitating the mobility of information from one point to another. This feature has enhanced consistency and visibility of data since it readily provides all information regarding customers, production needs, inventory, purchases as well as sales (Attaran, 2007).
Conclusions
In summing up, it is imperative to note that the lean paradigm demands the elimination of the unnecessary inputs that may not be directly proportional to the process of production. On the other hand, there is need to maintain a nimble approach to the agile paradigm. This is vital in supply chain management of this nature bearing in mind that the loss in sales can never be recovered.
One outstanding difference between the two paradigms is that while level scheduling is more valued in lean supply, the reservation of capacity to be able to deal with unpredictable demand is a functionality of the agile paradigm. On the same note, it is worth to note that most supply chains are cyclic in nature and therefore prompting the concepts of market qualifiers and market winners.
The two paradigms, though completely differentiated from each other, cannot be discussed in total isolation since companies which pursue lean approach in their supply chains still struggle to move towards an agile system while those undertaking the latter still require to minimize wastes in order to boost profitability and growth in revenue.
Finally, the pursuit towards improving the management of supply chains has witnessed the adoption and implementation of RFID technology in tracking down supplies from the point of production to delivery to customers. Other supportive tools such as the internet, e-commerce, Decision Support Systems (DSS), Enterprise Resource Planning (ERP), Electronic Data Interchange (EDI) and Customer Premise Equipment (CPE) have been integrated in the contemporary supply chain management.
References
Attaran, M. 2007. RFID: an enabler of supply chain operations. Supply Chain Management: An International Journal, 12(4): 249–257.
Dell, M. & Fedman, C.1999. Direct from Dell: Strategies that Revolutionised an Industry, London: Harper Collins.
Heinrich, C.E. 2005. RFID and Beyond. Indianapolis: Wiley & Sons.
Naylor et al. 1999. Leagility: Integrating the lean and agile manufacturing paradigms in the total supply chain. International Journal of Production Economics, 62: 107- 118.