This report will outline and evaluate what supply chain management is and
the three supply chain strategies – lean, agile and hybrid, taking into account
strategic, tactical and operational decisions. It will also discuss how Brexit could
potentially have an effect on these supply chain strategies.
is supply chain?
A supply chain can be
defined as the “sequence of events that cover a products entire life cycle,
from conception to consumption” (Blanchard, 2010, pp.3EH1 ). It
can involve the “facilities, functions and activities involved in producing and
delivering a product or service from suppliers (and their suppliers) to the
customers (and their customers)” (Russel et al., 2014EH2 ). In
other words, it is the flow of products and services from the originator to the
et al., 2008EH3 ).
It has been stated that
having a high level of supply chain management can enhance competitive
advantage, thus driving improvements with the organisations overall performance
al., 2004). EH4 Supply
chain has three elements – strategic, operational and tactical. Strategic
decisions made in supply chain deal with the more high level and ‘riskier’
decisions which are usually long term and are relevant to the whole
organisation. An example of this would be ensuring your supply chain is the
most developed and positioning it in your market within the next 3-5 years.
Tactical supply chain elements can be planned monthly (Madu and Kuei, 2005EH5 ) and
usually focus around making decisions regarding minimizing costs and trying to
eliminate risks. Aspects of this include safety, quality and standards and
ensure that best practise is being implemented throughout the organization.
Operational elements of
supply chain are planned frequently, and can include the day-to-day processes
and activities that are carried out. The focuses with operational elements are
usually based around individual customer orders, which could be related to
specific planning of shipments and resources (Madu and Kuei, 2005EH6 ).
Supply chain strategies
Supply chain strategies
can be defined as “how the
supply chain should operate in order to compete, which is an iterative process
that evaluates the cost-benefits and trade-offs of operational components” (Happek, 2005EH7 ). There are different types are supply
chain strategies that are used within markets. The three supply chain
strategies that will be discussed in this report are Lean, Agile and Hybrid.
Lean supply chain
management focuses on efficiency and cost reductions that can help to eliminate
waste within supply chain (Kerber and Dreckshage, 2011EH8 ). To
eliminate waste within a supply chain, companies will identify areas such as
time, costs and inventories and examine these in thorough detail (Murray, 2016EH9 ).
A lean supply chain management
does not need to be necessarily focused on those that produce products, but can
be for those who want to “stream-line their processes” (Murray, 2016EH10 ). The principles of lean supply
chains are as follows:
Converting the process to flow
Optimisation of value stream which
involves removing waste and losses where possible
Product value which can include
quality, cost and best performance
Perfection of all products, processes
and services which includes continuous improvement of all principles
Activating Demand Pull by producing
and delivering the product to meet customer needs
(Ross, 2011EH11 ).
As a lean supply chain
aims to eliminate waste, it tries to only produce what it needs to and whenever
it is needed. This ensures that the supply chain stays efficient. Lean
manufacturing was established by Toyota, and was known as the Toyota Production
System (TPS), with its focus on “the reduction and elimination of waste within the
factory environs” (Ohno,
1988EH12 ). Having a lean supply chain often means that customer demands are met
on time, which increases overall satisfaction and can give a competitive
However, as a lean supply chain puts so much emphasis
on trying to reduce costs, they may struggle to adapt or react quickly to an
Agile supply chain management is focused on “the rapid
response for change in market and customer needs” (Baharmast and Kashani, 2017EH13 ). “Speed, cost and efficiency” are the top drivers of an agile supply
2016EH14 ). Agile is a strategy used when the market is volatile, unpredictable
and extremely demand driven (Sher, 2016EH15 ). Consumer patterns can change from one day to the next, so the supply
chain needs to be able to respond and keep up with these changes (Sher, 2016EH16 ).
Agile supply chains are flexible, and having flexible information systems allow
for evaluations to be made with regards to business practice and those have can
have any sort of impact on the organisation (Baharmash and Kashani, 2017EH17 ). The key characteristics of an agile supply chain are:
Flexible and market driven
Enhanced collaboration between
product development and common systems between the customer and supplier
Agile supply chains are
used when there is little predictability in the market and responses are made
in real time demands (Bruce and Daly, 2004EH19 ).
Both lean and agile
strategies are different from each other, but it is possible to combine the
both to create a Hybrid strategy.
A hybrid supply chain
is a combination of both lean and agile supply chains. In some markets, there
are products that have a predictable and stable demand, for example, toothpaste
or other essential toiletries, but there are other products in the market that
do not possess this stability. To create a hybrid approach, the lean strategy
can be used for stable demand products and an agile approach can be used to
meet unexpected demands. Lean supply chain will be used downstream and agile
will be used upstream, thus hybrid will “enable cost effectiveness of the
upstream chain and high service levels in a volatile market place in the
downstream chain” (Mason
et al., 2000EH20 ).
The European union is a
political union with 28 member states based primarily in Europe. One the 23rd
June 2016, the British public decided to vote in favour of leaving the European
Union, and the term Brexit was coined.
It is still unclear how
Brexit will unfold, but there are two ways in which Britain could implement it:
‘soft’ Brexit or ‘hard’ Brexit.
Those in favour of a
‘soft’ Brexit would prefer for the UK to “retain some form of membership with
the European Union single markets in return for a degree of free movement” (Ahmed, 2016EH21 ). Norway is a good example of a
country that has a deal with the European Union like this.
Those in favour of a
‘hard’ or ‘clean’ Brexit would prefer for the UK to be completely removed from
the European Union and the single markets, which would enable Britain to have
full control over its laws, boarders and trade deals which they haven’t had in
over 50 years.
As it stands, Britain’s
businesses are busy preparing for what seems like a very unpredictable future
ahead with unclear consequences Brexit could potentially bring (Rossi, 2016EH22 ).
Brexit could potentially be a huge change to businesses, and many might have to
change the way they are structured, represented, how they deal with new
legislations and how they deal with the European Union (APM, 2017EH23 ).
impact of Brexit on supply chains
As Brexit has not yet
been fully implemented and is still undergoing negotiations, nobody really
knows the true extent of what impact Brexit will have on supply chains. The UK
is now in a two year period of negotiations discussing exit terms, and new
trading agreements have to be agreed on, which will either be the signing to
the European Economic Area or the World Trade Organisation (WTO) (Ahmed, 2016).
negotiation, it has been assumed that the Pound Sterling will weaken against
the US dollar, potentially making “imports and raw materials more expensive” (Rossi, 2016EH24 ). International currency rates could
be altered drastically, and those have implemented an agile supply chain will
most likely cope best, as they are flexible, market driven and able to adjust
quickly to real time demands (Rossi 2016EH25 ).
It has also been
assumed that Brexit could have an impact on the free movement of people (Rossi,
2016). If free movement is reduced, the operations within the UK that are
staffed by large numbers originating from outside of the UK could see a fall in
labour, resulting in an increase pressure on costs (Rossi, 2016EH26 ).