Archive for June, 2006

EMSNow has a new story featuring new research by Technology Forecasters, Inc.

The research identifies a continuing disconnect between what electronics companies want and what they say they are receiving from the contract manufacturers that build their products. The article says, “This study gathered an unprecedented volume of good primary source data for the industry, with some surprising results. For example, 64% of the OEMs interviewed said that communications with their manufacturing suppliers were implemented through phone, fax, and email, rather than through any kind ERP system,” explained TFI Senior Economist Matt Chanoff, principal writer of the EMS/ODM Report Card and Buyers’ Guide. “Although nearly all companies on both sides of the supply chain run their own automated ERP systems, the majority appears not to be connected, and many respondents expressed frustration to us.”

One of the biggest challenges we see in this distributed manufacturing environment is the disparity of ERP systems. If you’re an OEM, you may be running Oracle as your ERP system. Yet, you may outsource to 3 contract manufacturers that are running Oracle, SAP, and Baan as their ERP systems (this situation gets worse if you’re in multiple plants across these contract manufacturers since there’s no guarantee they have the same ERP system in each plant). So, integrating data across these systems is challenging at best.

Then there’s the issue of what to do with the data. First, ERP systems are excellent at executing transactions - helping you run the business like clockwork. But, they weren’t designed for the problems that we’re dealing with today - multiple, integrated 3rd parties working together to form a supply network and having to deal with the reality that the business rarely runs like clockwork anymore (as one customer told us, “we build a good plan…then the phone rings.”).

The reality is that all parties across this extended supply network need multi-enterprise visibility to get everyone on the same page, but then tools need to be put into the hands of the people so they can react quickly to constant change. OEM’s are in a particularly tough spot given that they’ve outsourced their manufacturing, but are still accountable for the end result with their customers and shareholders. They, as much as anyone within the supply network, need visibility and the ability to coordinate the efforts of all involved to ensure their objectives are met. An OEM can’t simply outsource and say “that’s not my problem anymore, that’s why we outsourced.” The reality is that they are still responsible for the result and, therefore, need to be actively involed in ensuring it’s outcome (this should not be confused with micro-managing the contract manufacturers or even taking back manufacturing - there’s a coordination role here that the OEM must play).

You’re most important customer is on the phone wanting to drop in an order and wants to know if you can meet their needs - what they want, where they want it and when they want it. You know that if you don’t, they can and will go elsewhere since your competitors are a click away.

What do you do?

If you’re like most brand owners and manufacturers, you kick into “response mode.” The customer service rep that took the call needs to talk this over with the planners, buyers, contract manufacturers and others throughout the supply network that can answer the burning questions to respond quickly and accurately. To do this, all of these people need to have instant access to the right information pertinent to their areas of expertise, they need to be able to collaborate with other key stakeholders and they need to be able to figure out what their options are and what impact any of those options would have on the rest of the business.

These deviations from plan are happening literally hundreds of times throughout the day in most organizations. It may be a key customer calling, a field failure that needs to be dealt with, an unexpected delay in receipt of a critical part of any number of things that “just come up.”

At the core to solving these problems is compromosing. Teams need to get together and figure out what tradeoffs and compromises need to be made on the spot to solve these types of problems….and they need to do so while weighing the impact on the rest of the business.

Some have thought that ERP or traditional supply chain planning applications may be the answer to these increasingly common occurences. Many have tried and failed at this approach since these systems lack real-time, holistic views of information, don’t support broad user adoption and collaboration, do not provide for rapid and simultaneous simulations, etc. ERP and traditional supply chain planning applications are good at what they were designed for - building a longer-term plan and executing it well. In essence, they were designed to run the business like clockwork.

When it comes to dealing with the business when it doesn’t run like clockwork, new solutions are required. You can’t plan your compromises, so you need to empower your people to respond effectively to change and determine their compromises “in the heat of the battle.”

ARC has released their views on the growth of the supply chain management (SCM) marketplace where they expect to see 8.6% annual growth.

According to the story at Manufacturing Business Technology, ARC sees efforts to synchronize the supply chain are also spurring growth. The role of a manufacturing plant is becoming the focal point in a supply chain network and is often the determining factor of its overall performance.

This is directly in line with our views and the reason we introduced our RapidResponse Glass Pipeline capability.

At the recent AMR Supply Chain Executive Conference (see summary here), many of the world’s leading companies spoke out on the need for supply chain visibility and the ability to sense and respond to change. In particular:

> Motorola presented highlights of their supply chain transformation and the view that technology cements the transformation. Without a single source of data, people will drift to their own processes.

> Cisco talked about “managing uncertainty and turning it into a competitive advantage.” They have adapted lean to an outsourced manufacturing environment. To do this required real-time visibility into every aspect of the supply chain. They view their end-to-end near real-time global visibility as the foundation of a responsive supply chain.

It was also stated that transparency is paramount to any multi-tier supply chain. The pace of change is driving this since there is little time to make major decisions anymore.

AMR commented that on average, a company has 38 contract manufacturer relationships and 5 supply chains. There is a move toward consolidation and deeper relationships.

It’s clear that the globalization of supply chains combined with the increasing competition has made it a mandate to ensure a responsive supply chain. Brand owners have become virtual enterprises of 3rd parties responsible for the manufacturing of products while still retaining accountability for the result.

The key to success is ensuring that key decision makers throughout the organization have global visibility and tools to collaboratively coordinate a rapid and accurate response to any unanticipated event that occurs.

I attended AMR’s annual Supply Chain Executive Conference in Phoenix last week where it was about 110 degrees each day! I’ve been to quite a few AMR conferences now, but this one was quite different. The theme of the event was “Making money and saving the world.”

To start with, former President Bill Clinton was the keynote. And he was excellent. You really have to appreciate someone that is so comfortable presenting and has such a command of facts/figures (ok, so we all assumed these were facts).

Clinton’s message was about inspiring everyone to change the world, by leveraging the collective skills and capabilities of the attendees (and their respective companies) to solve some of the major challenges facing the world today. It was a great, inspirational message. I’ll save the full details since there’s a good summary here at
eWeek.

Joining Clinton in supporting this visionary theme were executives from Hewlett-Packard and Procter & Gamble who discussed the impressive programs and efforts of their companies (HP around recycling and P&G dealing with the aftermath of Hurricane Katrina) in support of the conference’s theme and Clinton’s message to follow.

From there, the sessions moved to a more traditional operational focus - although the presenters were still key executives from companies like Siemens, Motorola, Best Buy and a host of AMR research staff.

In one session, an executive from Cisco described the elements of a supply chain as a competitive advantage as: collaborative, virtual, real-time data driven, adaptive and agile. These themes were consistent with other presenters.

Other key themes discussed were the growing complexity of supply chains as they truly have become global and outsourced and the unique challenges this presents in terms of risk management, reiliability, etc. In addition, everyone talked about the incredible pace of change and increasing competition and the premium it has placed on supply chain agility, supply chain visibility and the ability to sense and respond to change - themes I obviously enjoyed hearing.

Overall, a really different but very interesting event.