Managing supply chain risk in outsourced relationships
It’s been well chronicled that most major manufacturers today are outsourcing at least some of their manufacturing to more specialized contract manufacturers (CMs). The main goal, of course, is enhancing financial performance. We sell our software to both original equipment manufacturers (OEMs) and CMs and have seen firsthand that managing the process effectively can be challenging. OEM expectations often exceed the terms and conditions of a typical outsourcing contract, and the CMs they work with have widely varying support capabilities.
OEMs who outsource manufacturing must continue to respond quickly to customer requests and new product launches. And because only OEMs have global visibility to demand, supply, and order fulfillment, they typically must still coordinate key segments of the supply chain—a daunting task with an outsourcing equation that involves hundreds of products and thousands of parts. Constant unplanned changes in demand, supply, and product configuration further complicate matters—resulting in missed shipments, low factory productivity, unnecessary inventory liability, and higher material costs. ERP and planning tools are no solution, since they tend to be batch-driven and model the enterprise rather than the extended supply chain.
Response Management resolves many outsourcing-related challenges, allowing OEMs to:
> Ensure adequate, timely material coverage throughout the supply chain—including the ability to respond to demand flexibility programs—through immediate access to data from multiple legacy systems and real-time modeling of proposed change impacts.
> Efficiently manage inventory liability via comprehensive tracking of all demand changes and lead times throughout the production process.
> Enhance cut-in timing of lower-priced material by accurately monitoring and modeling live CM inventory data and production plans.
> Optimize execution of product introductions or end-of-life, engineering changes, and sales promotions through instant, collaborative evaluation and scoring of multiple “what-if
