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I was talking to a Contract Manufacturing company the other day and discovered an interesting predicament.
A hot-button issue for this Contract Manufacturer (and others I’ve talked to as well) is the need to get better information from the Brand Owner about how the product is selling to the end customer. The Contract Manufacturer’s concern is that the forecast changes from the Brand Owner often come too late to prevent procurement of components needed to satisfy the current forecast. If the CM had better visibility to demand, and more importantly to the rate of consumption, they could provide an essential service to the Brand Owner by warning them about unrealistic forecasts BEFORE the purchase orders go out.. Additionally, the CM would like to be able to challenge new forecasts as well…if only they had the data. This could save the Brand Owner millions of dollars in inventory liability! Unfortunately, the Brand Owners often don’t want to give this information to the Contract Manufacturers.
Amazingly, when talking to Brand Owners, I’ve often heard them say that if only they had access to the contract manufacturer’s data, they could evaluate changes to the supply plan and make sure they are realistic before we send it to the Contract Manufacturer. Not only that , but we could get visibility to shortages to the Contract Manufacturers and we could help apply pressure to component suppliers Unfortunately, the Contract Manufacturers don’t want to provide detailed manufacturing information to the brand owners as they fear that the Brand Owner would want to interfere with their planning processes.
So both Brand Owners and Contract Manufacturers feel that they need more information from the other party to better manage the relationship, but yet neither are willing (or are able to) provide this information to the other party.
Hmmm.
So what is the answer? I have my thoughts, but I’d be really interested in what you, the reader, has to say. I suspect that many of our readers either work for a brand owner of some sort or a contract manufacturer of some sort. What level of visibility do you provide to your business partners? What information do you hold back? Why? Do you have clearly defined roles about what the Brand Owner does and what the Contract Manufacturer does?
Comment back and let me know what you think.
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Tags: Collaboration, Forecasting, Outsourcing, Supply chain planning, Supply chain risk management, Supply chain visibility, Supply management
Posted in Supply chain collaboration, Supply chain management
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I think one of the problems is that the data requested by each party is usually data that you would expect to exist but in a lot of cases it does not. In my experience the reason data is not shared is that it either does not exist or it is not readily available. I have seen situations where you would expect the brand owner to have better visibility of their sales channel than they actually have. I have even seen major, global corporations that still do not have integrated, readily available operational and planning data. This generates a standoff with both parties claiming they don’t want to share information but both knowing that it would be beneficial to do so (it seems as if it is better to work in the dark than admit your own shortcomings). The drive towards the true integrated, extended enterprise will only come when businesses address their own underlying data problems.
The 3 Ts spring to mind – Time, Transparency and Trust. These are the foundation for effective and collaborative commerce. Both Time and Transparency can fundamentally be addressed with a combination of IT tools and techniques, however Trust is the key and the hardest to achieve. Trust is required in order for all parts of the supply chain to co-operate, once co-operation occurs co-ordination of all activities are enabled, and this then leads to collaboration in order to achieve competitive advantage. I recommend reading Dr Richard Wildings article “The 3 Ts of Highly Effective Supply Chains” http://www.som.cranfield.ac.uk/som/dinamic-content/news/documents/focussum2002.pdf
Anyone that has or does work in supply chain areas knows that it is NOT the data that is important but the ability to interpret the data in context of what else you know….about the market, the customers, your sales force, your marketing efforts, your competition, etc. Data without experience, context and knowledge is just numbers and they have less than no meaning. Making decision on just the numbers leads to bad decisions, fire drills and total breakdown of trust.
Let’s say you have a new product and you want to absolutely insure there is no chance a customer will not have access when you begin selling it. So, you flood the market, stuff the channel and pack the shelves. Then, you have to let that sell down to normal levels before re-orders come in. If you look at the numbers (re-orders) you could assume it is not selling. If you look at other numbers (POS data) you could assume it is “over selling” and in both cases you could either adjust production too low or too high.
Collaboration, sharing more than the data but the insight is critical. This goes both ways. Insuring the customer knows what the component re-order points are, when that is due and the impact of missing it is critical. Collaborating to on plans to “hedge” the bet can be done if both sides discuss options, share insights and explore options and ideas.
I might be wrong, but I can send you the numbers to back this up!