Social Media Will Revolutionize Supplier Management

Proponents of social media expect tools such as Facebook, Twitter, and Google+ will revolutionize the way supply chains are managed. A recent article in CFO magazine lists five benefits social media provides to the supply chain. They are:

• Creating Knowledge Networks
• Balancing Speed and Contemplation
• Portable Information Vaults
• Replacing Collaboration with Community
• Building a Platform for Innovation

CFO cites Wal-Mart, Intercontinental Hotels, and Network Rail as examples of companies that have used social media to innovate:

Wal-Mart has developed its Supplier Greenhouse Gas Innovation Program to reduce GHGs across its supply chain. Intercontinental Hotels engages its suppliers to develop sustainable food-resource chains in order to reduce cost, improve quality, and support local communities. Network Rail launched an Innovation and Supplier Engagement Program in 2011 to improve customer-service levels and reduce cost.

The electronics supply chain also strives to reduce costs and improve quality, yet social media hasn't gained a lot of traction. A recent study conducted by IBM Corp. (NYSE: IBM) shows how executives' attitudes about social media vary from industry to industry. The report stated:

A higher percentage of CEOs in education (77 percent), telecommunications (73 percent) and retail (72 percent) expect social media to be a key channel for customer engagement. In industrial products, only 34 percent of CEOs believe social media will play a significant role -- the lowest of all industries; insurance (51 percent) and electronics (52 percent) are below the overall average.

The study doesn't delve into the exact reasons for the differing attitudes. But it appears that rather than using social media as a platform to conduct business, electronics executives view it as another means to collect information about customers. The IBM study adds:

An electronics industry CEO from Japan described how his organization is helping B2B customers innovate by "incorporating the end user's voice directly into product development."

In this regard, electronics distributors may be uniquely positioned in the supply chain to benefit from social media. Components makers share their product development roadmaps with distributors so distributors can target new-product design opportunities. If a component is placed in a design, that information is channeled back to the supplier. This data helps suppliers determine which products are most successful; which applications components are being used in; and the profile of customers most frequently using the devices. All of this information, industry insiders say, can assist component makers in developing their next-generation products.

For manufacturers and OEMs, the channel can provide feedback on supplier quality, order and delivery performance, lead times, pricing, and potential second sources. Since brand owners (OEMs) frequently outsource their manufacturing, suppliers have to be carefully vetted because a missed delivery can mean entire production lines shut down. Manufacturers also have to know that if product A is unavailable, product B is ready to ship.

However, much of this data is already captured and utilized by the typical electronics supply chain systems: ERP, MRP, EDI, and in-house solutions. Much of this data is considered highly proprietary by suppliers, distributors, and OEMs. Brand owners frequently secure preferential pricing from suppliers that they don't want to share. Component and board designs are considered a "secret sauce" by both component makers and OEMs. Since distributors and electronics manufacturing services (EMS) providers both service OEMs that compete with one another, a great deal of information is kept in silos to keep it secure from prying eyes. The "openness" of social networking may conflict directly with certain supply chain practices.

For this reason, electronics executives may be approaching social media with caution. According to the IBM study, which noted:

Despite social media's frequent use as a way of communicating to customers, CEOs recognize its real value as a source of insight and a means of collaboration. “We use social media less as a marketing or distribution channel and more as a knowledge platform to obtain information about customers,” explained an insurance CEO from Switzerland. Of course, engaging with customers via social media escalates expectations for timely, relevant and individualized interaction.

The role of social media in the electronics supply chain is still very fluid. Could it be used as a transactional platform? Possibly. Can it be used for sales and marketing information? Absolutely. In upcoming blogs, I will look at the portability and collaboration benefits of social networking. The challenge for the supply chain will be balancing these benefits with the unknowns of social media. "We're not yet comfortable that social media has matured to the point we'll benefit more than we'll suffer," explained an industrial products industry CEO in the IBM report.