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What is an Adaptive Enterprise?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 September 2016
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    2003-2016
    Conjecture Corporation
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Sometimes referred to as an adaptive organization, the adaptive enterprise is any organization in which the demand for the goods or services produced by the business entity is in very close proximity to the supply that is on hand. As a rule, adaptive enterprises provide an excellent model for the efficient use of resources, in that they use what they need but very little else.

There are several advantages to attempting to operate with an adaptive enterprise model. One of the key areas has to do with the inventory of raw materials that are used in the production of the goods and services offered by the company. In addition to the cost of building and maintaining a place to store the raw materials, there are also often an array of taxes that must be paid on the value of the materials for whatever time they are kept on hand. Adaptive organizations will create relationships with vendors that are based on routine deliveries that provide just enough to keep production in pace with sales, but do not allow the raw stock to pile up and set in storage for months on end. The end result of this strategy is less tax to pay, smaller warehouses to maintain, and less of an incidence of materials missing from the production materials.

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Another point in favor of the adaptive enterprise model has to do with the storage of finished goods. Just as it is in the best interests of the company to not stockpile raw materials, a great deal of resources are used when finished goods have to set in warehouses for months before being shipped to buyers. Having a quick distribution of finished goods to customers means less taxes paid on finished goods. A smaller inventory of finished goods also means fewer taxes to pay long term and smaller storage facilities that cost less to maintain.

A third advantage of an adaptive enterprise is the ability to make quick changes in production when market conditions require some adjustment. For example, a textile firm that produces wide line corduroy may find that the taste is leaning more toward fine line corduroy. With no large finished goods inventory to be concerned with, the adaptive enterprise simply begins to modify machinery incrementally, phasing out wide line production as the orders filled and beginning to take orders for the slim line material. There is no panic regarding what to do with several tons of a fabric that is no longer desirable, and no worries on how to fill a new market need.

There are companies in just about every industry that use the adaptive enterprise model to keep expenses down while still meeting demands for goods and services. Unencumbered by large inventories and with an ability to respond rapidly to the changing tastes of their clientele, companies that choose the adaptive enterprise method are much more likely to remain successful for many years to come.

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