Lean and Agile Supply Chain

A lean supply chain focuses on cutting costs by producing high volumes of

products with low variability. An agile supply chain focuses on responding to the

market demand with customizable batches of items.

Can Companies Use Both Lean and Agile Supply Chain (i.e., Hybrid Supply Chain)?

In today’s global, dynamic economy, it is beneficial for companies to operate a

supply chain that is both Lean and agile. Using Lean and agile in combination is

known as having a hybrid supply chain strategy.

A hybrid supply chain strategy may be appropriate for a company attempting to

become a "mass customizer"—producing progressively smaller batch sizes

(sometimes as little as one item) specific to customers’ sometimes unique needs.

A Lean supply chain focuses on adding value for customers, while identifying and

eliminating waste—anything that doesn’t add that value. Being agile and

responsive, on the other hand, implies that your supply chain can handle

unpredictability—and a constant stream of new, innovative products—with speed

and flexibility.

On some occasions, either an agile or a Lean strategy might be appropriate for a

supply chain. But many companies will probably face situations where a hybrid

strategy is a better fit. If so, they need to carefully plan and execute the combined

strategy with excellence, which is often easier said than done because it involves a

lot of moving parts. As in so many aspects of supply chain and operations

management, there is more than one way to accomplish this goal.

One example of a company using a hybrid strategy in its supply chain is Zara, a

Spanish fashion designer and retailer. Zara directly manufactures most of the

products it designs and sells, and performs activities such as cutting, dying,

labeling, and packaging in-house to gain economies of scale. A network of

dedicated subcontractors performs other finishing operations that cannot be

completed in-house.

As a result, Zara has a supply chain that is not only agile and flexible, but

incorporates many Lean characteristics into its processes.

Many organizations can find some form of hybrid supply chain that works well

for them. In today’s ever-changing, volatile, and competitive global economy, it

may often be in a company’s best interest to operate a supply chain that is both

Lean and agile.