Sunday, October 6, 2013

VUCA - Acronym for today's supply chain

While we will be studying the effect of customization, increasing demand , etcetera on Supply Chain, I found this term quite interesting in the blog written by Trevor Miles. To give background about Trevor, he is vice president of Thought Leadership, and serves as an expert source for Kinaxis.

In the article he mentions VUCA - Volatility, Uncertainty, Complexity, and Ambiguity. According to Trevor, this is what defines the correct market scenario. The companies are working on how to improve profits while handling the uncertainty and volatility they face in the market. This would lead them to think about not only product innovation but also supply chain innovation.

Volatility according to him is the active ingredient, whereas complexity, uncertainty, and ambiguity seems to be the large effects. Globalization is the key to volatility leading further to product complexity, which when combined with outsourcing leads to supply chain complexity.

Because of volatility involved in mass customization, company has very small demand for each variant leading to high uncertainty about the demand. Whereas multi-sourcing and outsourcing has led to longer and more variable lead times, making it uncertain about the response time to the demand.
He also mentions about the need of  solutions by frontline people too.

Agility is the only approach you can follow as per the writer.

And according to the writer Agility is the best option. As shown in the figure above, the time spent by company in the Maturity phase is increasingly decreasing and is shifting more towards the "Agile Response", rather than "Efficient Response".

The three main steps toward Agility which he suggested seemed to me the only strategy to achieve profitability in today's world.

They are:
- Knowing sooner that markets have changed
- Analyzing the profitability and alternative approaches sooner than anyone else
- Acting faster towards demand shifts


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