Comparing Supply Chain Methods: Agile vs. Lean

In this post, we’ll compare two supply chain methods: agile vs lean. We’ll see how each originated, their applications to the supply chain, and their benefits. Let’s start by learning where agile began.

The Origins of Agile

Software development in the early days was problematic. Software development programs more often than not had cost overruns, the delivery time frames were consistently late, and they didn’t deliver the sort of capability and functionality that was originally stated. There had to be a better way of doing things. And that better way was agile.

The origins of agile can be traced back to around 1957, with the evolution of project management and the iterative and incremental development of software design. As these combined methodologies evolved, they became the basis of “adaptive software development” in the 1970s.

In the 1990s, software developers and teams started to introduce further refinements. These included scrum, rapid application development, extreme programming, dynamic system development method (DSDM), feature-driven development, and pragmatic programming.

Finally, in 2000, a group of 17 software developers got together to try to figure out a way to speed up software development and bring it to market faster. From that meeting they produced the “Manifesto for Agile Software Development,” more commonly known as the Agile Manifesto.

agile vs lean image

What Is Agile?

The Agile Manifesto outlines 12 broad principles of agile:

  1. 1. The highest priority is to satisfy the customer.
  2. 2. Easily adapt to changes throughout the software development life cycle.
  3. 3. Deliver working software quickly.
  4. 4. Developers and customers must work closely together.
  5. 5. Ensure a good working environment that allows those involved to get on with the job.
  6. 6. Delivering working software is the key measure of progress and success.
  7. 7. Face to face conversations are the most efficient way to communicate information.
  8. 8. Agile processes are geared to consistent development, i.e., sponsors, developers, and users must be able to maintain a constant pace indefinitely.
  9. 9. There must also be a focus and adherence to technical excellence and good design principles.
  10. 10. An emphasis on simplicity ensures consistent progress and productivity.
  11. 11. Self-organizing teams deliver the best results.
  12. 12. Teams also must be able to self-examine at regular intervals and adapt and change easily.

What Is an Agile Supply Chain?

When it comes to agile supply chains, the focus is on efficiency, productivity, cost saving, and flexibility. And since the advent of Industry 4.0 and the digitalization of supply chains, the concept of “agile” supply chain management lends itself very well to enabling the use of these emerging technologies to create high-performing supply chains. This leads to sustainable development of competitive advantages.

  • -Supply chains become more flexible.
  • -Additionally, the organization becomes more customer-centric.
  • -Becoming more demand driven allows the organization to react to the constant changes that the customer expects.
  • -With product life cycles becoming shorter, the organization can bring new products to the market and their customers faster than their competitors.
  • -Supply chains become more resilient in times of uncertainty. As a result, they can pivot faster when circumstances necessitate changes.
  • -Additionally, supply chain decision-making becomes more proactive rather than reactive.
  • -The organization becomes more data driven, which consequently allows for better decision-making at all levels.
  • -Shortcomings and weaknesses become more visible to the key stakeholders within the organization’s supply chain.
  • -The organization can focus on increased productivity, efficiency, and continuous improvement.

The emergence of the Covid-19 epidemic highlighted the fact that there were many inherent weaknesses in a traditional supply chain’s foundations. Indeed, one break in the link triggered a domino effect: everything downstream took a hit and just kept magnifying the issue. In short, it became evident that supply chains were inherently weak and way too linear.

Agile supply chains are far more flexible. They can change quickly to both internal and external influences. Additionally, they can deliver faster and take advantage of short profit windows. That’s a significant competitive advantage worth having.

Agile Supply Chain Strategies

Now that you understand the agile supply chain’s origins and benefits, let’s see some strategies for implementing it.

Process Alignment

Aligning the process across the supply chain is an important component of agile supply chain principles. Indeed, an agile supply chain is a strongly interconnected supply chain. Processes across the supply chains in many different but interrelated areas must be aligned and be as seamless as possible. All the key players in the supply chain must also be aware of key touchpoints and nodes within the supply chain network. That way, nothing gets lost in the cracks.

Data Integration

Another key point is that all communications are clear and concise. The data shared must be able to flow freely to all key parties regardless of physical distance. Additionally, data must be freely available in real time. In brief, we’re talking about end-to-end data visibility and having all key supply chain stakeholders referencing a single source of truth.

Responsibility and Accountability

Static or linear supply chains are infested with silos. Generally speaking, performance, and KPIs are not integrated into the supply chain as a whole. Responsibility must be shared, as it drives collaboration, communication, and cooperation. There’s no such thing as an isolated event or process everyone involved shares the responsibility. And the the same goes for success or failure. Everyone is accountable for supply chain performance as a single holistic framework and entity, whether we’re talking horizontally or vertically. It’s all for one, and one for all!

Market and Customer Visibility

Non-agile or traditional supply chains tend to react to events after they’ve happened. Forecasting is a prime example of this process. In general, previous sales data is analyzed, a bit of fiddling and tweaking goes on, and Bob’s your uncle, prediction is done and dusted. Certainly, this backward-looking exercise and mindset has lost its relevance. It’s no longer good enough.

To be sure, we’re referring to market sensitivity. The agile supply chain sensitizes the organizations involved to what’s happening in the marketplace and with their customers. You can see these changes as they happen. Consequently, you can quickly tune the supply chain to take advantage of those changes.

Now that we have a good handle on agile supply chains let’s take a closer look at lean supply chains.

The Origins of Lean

So, where did lean thinking start? Lean thinking first came about in the 1950s after a study of the Toyota Motor Company in Japan. Also, Lean was a new way of thinking about all the activities that went into producing a product. How can it be produced more efficiently, while reducing waste and in the process building a better final product? The key components of lean thinking are value, value streams, flow, pull, and, the holy grail, perfection.

There are three broad categories of lean

  • thinking
  • production
  • services

These can then be translated into four basic components:

  • tools
  • concepts
  • culture
  • planning

Defining Lean

principles of lean

The Lean Supply Chain

In the simplest terms, the overriding goals of a lean supply chain are to reduce waste and increase profits. In supply chain terms, we can classify waste as time, costs, or inventory. When we talk about a lean supply chain, we can break it down into several key areas.

Procurement

Rationalize the organization’s supplier portfolio. Eliminate duplication at the procedural level and reduce or remove overlap completely. Then, reduce the high number of contact points with suppliers. Additionally, develop strong strategic relationships with key suppliers. Focus on supplier relationship management, and make it a high priority core competency.

Manufacturing

You can improve manufacturing by eliminating waste as an integral part of the manufacturing process. This reduces the need for resources while maintaining operational performance.

Warehousing

Managing and controlling inventory more effectively can mean higher turnover rates and faster throughput. Additionally, it can reduce the overall cost of inventory by not needing to carry as much over given time frames. Reducing inventory holding costs frees up working capital that you can use in other areas to improve the business.

Transport

By reviewing the transport component of the business, you can identify inefficiencies and take remedial action. It’s not unusual for organizations to improve customer service levels to artificially and, in the same fashion, unnecessarily inflate the cost of transport and distribution.

If an organization decides to go down the lean supply chain management route, they must ensure that all their supply chain processes identify those that use necessary resources that can be measured against dollars time duplication, overlap, or efficiency. Today, you can automate many traditional repetitive processes by spending the necessary time and resources. Also, employing the right technology can not only reduce costs but improve margins and profitability. It can also increase customer service levels.

The Comparison: Agile vs. Lean

Agile Lean
The focus is on interaction and individuals The focus is on eliminating waste
Collaboration and communication between teams, customers, and end users Maximizing customer value while increasing efficiency
Iterative delivery while being open to refining and changing requirements Defers commitment and can value processes over customer expectations
End results are achieved through cooperation and customer feedback Systematic planning reduces the need for meetings and overly detailed documentation
Small team mindset enables faster delivery The team is an integral part of the whole
Planning proactively, responding to changes as they happen Disciplined changes to requirements and a focus on the here and now

Which Is the Best to Use?

Lean supply chains are useful if the organization has a high volume of products at a low cost. The primary goal of lean supply chain management is to deliver the best value outcome to the customer. The objective is to create goods that you can sell at the lowest possible price while removing anything that doesn’t add value to the end customer.

An agile supply chain strategy helps an organization become more flexible and receptive to market fluctuations. Agile supply chain management depends heavily on the concept of postponement, i.e., waiting to see if the market moves in a particular direction before making final decisions.

An agile approach suggests that a business responds directly to demand rather than forecasting or anticipating it. This reduces or even entirely removes the risk of overproduction or not procuring enough products to meet the customer’s predicted demand. However, this could lead to missed opportunities if a business with a lean approach reacted earlier and decided to go ahead with production or building inventory anticipating a surge in demand.

agile and lean variability

Is There a Hybrid Approach?

Is there a lean-agile strategy that gives some of the benefits of lean without the rigidity or the cost of agile? It’s possible, but the added complexity would require a fair amount of innovative or creative thinking. The ability to adapt comes down to the organization’s capability. A good example worth taking a closer look at is the Spanish retailer Zara, which has built a supply chain that uses lean principles for its product lines that are easy to forecast and predict demand quite accurately.

With the less forecastable products, it delays or postpones the final completion stage until demand patterns become clearer. At that point, the final stages of production are triggered to match customer demand accordingly.

This post was written by Mark Vernall. Mark is a supply chain specialist with over thirty years of experience in the field, working across many industries as a consultant, advisor, and project manager. Mark has a high level of expertise in business process re-engineering, change management, and the selection and implementation of advanced supply chain systems. He is also the Senior Responsible Officer & Founder of Supply Chain Specialists 4 Hire.

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