Supply chain flexibility a necessity

Many corporations are looking to cut costs any way they can, whether it's by implementing strategic sourcing policies, changing up logistical operations or trying to lower direct material cost. However, many corporate decision-makers may be surprised to learn that cost reduction isn't the only thing that's critical to a successful business - in fact, a flexible supply chain may be even more important than slashing spending.

While corporations have long subscribed to the theory that cheaper is better, the modern world calls for more malleable supply chains that can better adjust to market demands. While saving money is important, being able to optimize purchasing, manufacturing and shipping is vital, even if it's sometimes a little more expensive.

Global problems highlight need for change
Problems occur throughout large supply chains that stress the need for more flexibility. Natural disasters, resource scarcity, unexpected events or sudden changes in consumer demand can all force a company to change up its strategies, and for a corporation with a more rigid supply chain, quick adjustments may be difficult.

"The emergence of new markets, material shortages and fluctuating transportation prices all represent challenges in the center of gravity in the supply chains," said Martin Christopher, a marketing and logistics professor at Cranfield School of Management, according to The Load Star. "In the past, the best supply chain decisions represented the lowest cost to shippers, but the best decisions might be those that keep the most amount of options open, even if they are not the lowest cost."

Can flexibility increase growth?
There may be more benefits to keeping plenty of options open besides the ease of dealing with volatile global markets. The ninth annual Global Survey of Supply Chain Progress found that corporations are continuing to make changes to operations in order to keep up with new demands, but those who lead in implementing the changes see the highest benefits. While optimizing a supply chain for flexibility may not seem like the most cost-effective option, it seems as though it can increase profits if done properly.

Those that see the most benefit and growth from supply chain changes are corporations that respond to markets and retain flexibility. Companies that were able to quickly and easily change the amount of products manufactured and keep up a high level of visibility through their supply chains saw cost reductions compared with corporations that weren't able to adjust to the market in a timely manner. The survey showed that companies whose supply chains yield to demands more easily see higher growth and profits, making flexibility a legitimate concern for many businesses.