Archive for July, 2006

I had the pleasure of meeting with executives at Casio, a Kinaxis customer, while in Japan two weeks ago. During our visit, we learned about Casio’s IT and supply chain plans. Quite impressive.

Casio’s CIO has chartered a course to ensure that their IT organization is a global leader. He’s established objective criteria for evaluating the impact on the business and benchmarked themselves against both Japanese and global leaders. They’re really making incredibly contribution to their business and have plans to continue to excel.

Likewise, they’ve gone through tremendous change in their supply chain strategy as well. A couple of years ago they came to the realization that change was happening so fast that they needed to really empower their people with the ability to “solve today’s problems today.” This is where we came in. The CIO had a vision that to respond to change you must involve people - and these people need to be armed with up-to-date information and tools to act on that information.

They’ve seen multiple years of continually improving revenues with simultaneously declining inventories as just one measure of their success in transforming the way their supply chain works. Casio gets it.

There’s a series of good articles on supply risk management over at e-Sourcing Forum. The articles define supply chain risk and a series of strategies for identifying and proactively managing risk. There are three articles:

Supply Risk Management I: An introduction
Supply Risk Management II: Risks and the need for resilience
Supply Risk Management III: Managing risk

These all make sense.

Response Management is a complementary strategy. I find repeatedly that our customers do proactively put such strategies in place. But, they’ve also come to realize that there’s no fail-proof plan. You have to ensure that the organization is armed with the right information and tools to response to the unexpected. Planning is a requirement, but not sufficient to deal with the constant changes prevelant in today’s outsourced manufacturing environments.

IndustryWeek has a new story featuring research from the AberdeenGroup on global supply chains. The article states that “this lack of visibility and control not only creates longer lead times and higher inventory levels but also seriously impacts corporate risk levels and financial performance.”

I’ve talked at length here about the need for greater supply chain visibility - and the ability to actually act upon that visibility - to drive greater operations performance. It really has become the new imperative given today’s market dynamics.

I heard an executive at a brand owner speak recently about their business evolving toward an increasingly outsourced business model. They are now utilizing various component suppliers and contract manufacturers (EMS providers) to do the bulk of their manufacturing. When asked about accountability for delivery times and other key supply chain/manufacturing metrics, the person responded “that’s the responsibility of our contract manufacturers. That’s why we outsource, so we don’t need to worry about that.”

That certainly is one reason to outsource, to benefit from specific expertise in meeting these objectives. However, who do you think the customer will hold accountable if they are not seeing your commitments to them being met? Who will the customer call? Who will the customer hold accountable if, when they want to change or drop-in an order at the last minute and you can’t commit to meeting their needs?

While outsourcing has brought tremendous benefits to brand owners, it’s also brought increasing complexity. Brand owners remain accountable for the end result and for meeting (and hopefully beating) the expectations of their customers.

To achieve this, brand owners must be “in the game” and coordinating the activities of their extended supply chain. Increasingly this means that they must be able to effectively respond to change across their supply network. To do so, they must have broad and deep visibility into the supply network since visibility is the foundation of effective Response Management. They also must be able to fully leverage this visibility by putting it into the hands of the people that can make a difference, the people that must be able to respond quickly to change and coordinate effectively with their supply network partners to achieve the desired result.

While brand owners can realize tremendous benefits from outsourcing, they still remain accountable in this new distributed manufacturing environment and must leverage technology, people and processes to ensure they achieve their end goals.

OK, admittedly this is self-serving, but there’s a new article at IndustryWeek highlighting research from AberdeenGroup that shows that companies that outsource have increasing needs to leverage technology to meet their business challenges.

According to the article, the study also shows that outsourcing is increasing the need for more visibility throughout the supply chain. Of respondents surveyed, 69% ranked supply chain visibility their top supplier and global trade technology priority, followed by supply chain costing (58%), supplier/contract manufacturer collaboration (56%), supplier enablement (56%) and trade compliance and free trade agreement management (43%).

I’ve talked about the need for increased visibility repeatedly and it’s been echoed by other analysts as well. And, as I’ve mentioned in the past, while the term visibility is used quite liberally, the real benefit comes from what you do with that visibility - how you get it into the hands of the right people accompanied by tools that actually let them respond rapidly to the changes that are impacting your business that counts.