Bishoftu automotive industry (BAI) is the predominant manufacturing company in Ethiopia and is known for the manufacturing of multipurpose vehicles. The study sought to establish the effect of agile supply chain management practices on the operational performance of the Bishoftu automotive industry and examine challenges faced by the implementation of agile supply chain management practices in the Bishoftu automotive industry. Primary data were collected from 83 sampled respondents. The study employed a descriptive and explanatory research design. Descriptive and inferential statistics were employed to analyse the data. The finding reveals that all the agile supply chain management practices (CRM, strategic supplier partnership, customer sensitivity, and postponement practices) were explained and practiced in the industry. From the challenges faced by BAI, the inability to predict demand uncertainty of buyers and lack of management support to agile supply chain management practice challenges BAI to a great extent. All the agile supply chain practices were found to have a positive and significant correlation with the dependent variable which is the operational performance of BAI. Furthermore, the regression analysis shows that the construct of the model explained the independent variable (OP) by 54.6% and the independent variables of CRM and customer sensitivity had higher predicting power on the operational performance of BAI. The implication is that operational performance can be achieved and boosted through utilizing effective implementation of strategies of agile supply chain management practices.