Thursday, 3 March 2016

What are the Preconditions for Successful Agile Practice? – Part One

The following preconditions are needed for an agile practice to become successful.

Enterprise Level Reality Check
Most of today’s senior managers are well aware that turning logistics to the supply chain is considered to be a good idea when things get tough. Logistics is mainly mentioned in earnings reports when the act of cost cutting is given as a responsive to poor performance. 

However, logistics shouldn’t be seen as the first place where improvements can be made in the bottom line. Agility is focused on winning in the market based on responsiveness and service and it can do less in order to earn more. Competitors can be outperformed by improving the responsiveness to the customers and the areas such as speed and reliability can earn more business.

Cost of Complexity Sanity Check
Logistics has value potential that can be capitalised on provided the other functions comply with the precondition of lowering the cost of complexity when the differentiation has no competitive value. The agile supply chain demands can be met without the costs spiraling out of control. It’s necessary not to exceed the capability of the supply chain in order to deliver the promises made in the market. Any revenue enhancing proposals for the logistic services need to consider the profitable short term gains.

Deals such as special delivery services can close deals in the short term, but they can also come at a cost to the logistics and supply chain, meaning they are not profitable. Assessing the economic gain from service or product differentiation can be checked by answering the following questions:

1.     Do the customers really want fast delivery or would they rather have a reliable service even if this means a slower delivery time?
2.     Do customers want delivery at a time they ask for?
3.     Does the company need product proliferation for the short term gain, or is it because the company wants to add sustainable revenue to the business?
4.     Is the marketplace limited on the amount of product variations it’s able to absorb and recognise?
5.     Were the warehousing and distribution costs offset against added revenue potential?

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