Trends in supply chain management
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Chris Abraham has commented on a Supply & Demand Chain Executive article by Tim Vaio entitled “Six Key Trends Changing the Supply Chain Management Today“.
The key trends identified in the article are:
1. Demand planning begins at the end of the cycle
2. Globalization
3. Increased competition and price pressures
4. Outsourcing
5. Shortened and more complex product life cycles
6. Collaboration between stakeholders in the extended supply chain
I think this is a great list and it does accurately reflect on the trends I’m hearing as well. I wanted to offer a couple of comments on the trends and observations in the posts and article.
There’s no question that improvements in demand planning are necessary. Most companies we meet with admit their forecasting is relatively weak. But there’s also a connection between some of these trends that make this a tricky one to solve. Globalization also means that your markets are more global and so are your distribution channels - making the challenges of accurate forecasting even more daunting. Combine that with shortened and more complex product life cycles and increasing competition, and you have a perfect storm. The reality is that forecasting, while clearly an area for improvement, will never be perfect, and you need to build plans assuming that reality.
Outsourcing is inevitable. It varies by geography around the world, but everyone is doing it and I see no signs that it will reverse itself (I do believe brand owners can compete without manufacturing themselves by differentiating and excelling at sales/marketing, distribution, etc.). What I do see happening though is a moderating of extremes in terms of the relationships and how they work. In early outsourcing, I think a lot of companies tended to “throw it over the wall” and declare that “it’s not my problem anymore, I’ve outsourced that.” I see companies today looking to strike a better balance - let the outsourcing partner focus on execution, but increase collaboration amongst stakeholders to ensure coordination and desired outcomes. The reality is that all stakeholders are connected in an extended supply network now and coordination is key. They must be on the same page and understand the implications of their actions on the other partners and the ability to achieve the end result. I see companies realizing this and taking actions to adjust.
What all of these trends point to is an accelerating pace combined with a more complex, competitive environment. The companies that thrive will be those that are nimble and able to respond the quickest to change.
September 5th, 2006 at 1:06 pm
There is also a trend to use the Total Costs of Ownership (TCO) to ensure the manufactured products, either made or outsourced, to be the lowest without necessarily selling the end products at a lower price. This is even more obvious when increasing number of manufacturers set up factories in China, India, Vietnam, Indonesia or any other emerging nations where the total cost of acquisition is relatively lower.
Taking into consideration the increased competitiveness of Toyota and the Lean Manufacturing principles, the product life cycle can be shorted and new product introduction (NPI) can take advantage of SIMPLIFICATION & STANDARDISATION. This also makes Nokia highly competitive in the mobile phone NPI.
Foxconn of Taiwan has definitely created a leadership to become the world’s largest electronics manufacturing services (ECM)provider. The former top ECM providers were Flextronics, Solectron, SCI and other American enterprises. Foxconn has almost created its own city in Southern China. This has helped to redefine SCM at its best at the moment. It does not mean Foxconn does not have all the challenges and issues confronting the ECM providers, but rather they have the clear TCO advantage. On top of that there is a huge domestic market in China for all the products produced at Foxconn.
The global SCM has to ensure that the spirit of free trade under the bilateral Free Trade Agreement (FTA) preceeding the WTO’s trade liberalisation, can be addressed effectively. The current practices of trade quotas and volume can pose threats to develop more effective global SCM.
The need to manage the business relationship in a foreign country cannot be under-estimated, and have to be handled in a win:win situation. Some countries are more corrupted than others, so the TCO equation must be worked out correctly to either avoid the malpractice or incorporate it into the product costs against the professional code of ethic.