Archive for February, 2007

There’s a new post from a new blogger over at EDN with a couple of interesting observations. According to Greg Frazier, executive VP of supply chain services, worldwide, at Avnet Electronics, the supply chain has gone through a transformation that makes it look like its gone from night to day. He said “when I first started…my job was simple, local, and consistent. Today my job is complex, global and changes like the weather.“

If you’re involved in high-tech electronics manufacturing, or many other markets for that matter, you’ve no doubt experienced the same transformation that Greg talks about. You’ve also seen that responding to these “changes like the weather” is really what makes or breaks your company. I continue to believe that some companies struggle with coping with this new reality and continue to believe that they just need to do the same old things better or faster, rather than looking at doing things differently.

I’ve heard this analogy before around here but heard it again today so I thought I would share it. It has to do with changing dynamics in customer expectations and what it means to brand owner and manufacturers.

Customers that take the bus essentially buy what you make available to them. That’s because a bus runs at a regular schedule and customers must align their needs with the service provided. Businesses that have such customers tend to optimize their resources for expected events and build expertise around execution with limited flexibility.

Increasingly, however, I’m seeing that customers want to take a cab. Customers that want to take a cab expect to buy what they want when they want it. As such, businesses that serve these customers need to optimize the usage of their resources around actual events. In addition, they need to be highly flexible with a goal to respond and then execute consistent with the needs of that changing condition.

If your customers expect a cab, what are you doing to ensure your supply network is optimized for your customers’ expectations? Have you built responsiveness directly into the core of your business and into your supply chain management processes? What are the implications of not doing so if that’s what your customers expect?

I find so many companies have been driven by the long-standing metrics associated with running your business like clockwork (which works well if your customers expect to ride a bus) that they struggle to deal with the business when it doesn’t run like clockwork (your customers want a cab now!). And more and more customers are opting for the cab.

Rajesh Gangadharan has written an article at Supply & Demand Chain Executive discussing strategies for dealing with demand volatility. He does a nice job of laying out several options.

One of the major complications of dealing with demand volatility today is the fact that many supply chains are now supply networks based on the heavy use of outsourcing. The inability to respond quickly to demand volatility has an added ripple effect across partners in a supply network.

We’re fortunate enough to work with many very large manufacturers. What we find in common across all of them is that they all do a good job of planning, but still find a high number of problems they just can’t plan their way out of. Demand volatility falls into this category. These companies build the best forecast they can and constantly work to improve its accuracy. But, inevitably, as soon as they’ve settled on a forecast, something changes. Or, at the last minute, a major customer wants to change or drop-in a new order.

In response to these unexpected demand changes, these organizations have found that they must empower their people to respond. Unlike planning which tends to be a centralized process, responding to change tends to be quite decentralized. Front-line decision makers have to act, and to do so they need to know the current state of the business and what options are available. This requires collaboration with colleagues, often geographically dispersed and frequently including 3rd partners in the supply network, to figure out what is possible and what the impact of each proposed action would be on the business as a whole.

Our customers employ the strategies listed in the article, but also have invested in a strategic solution to respond to change by empowering their people with the information and tools to act quickly and decisively in the face of these changes. Without this, they risk poor customer satisfaction and poor operating results from higher inventory (as Rajesh mentioned), expediting costs, overtime, etc.

I recently wrote an article on supply chain management trends in 2007. You can find it here at Electronics Supply & Manufacturing.