As extended supply chains in the high-tech industry continue to straddle multiple geographies, new vulnerabilities get introduced.
Each additional supplier, manufacturing site, or distribution center is a potential failure point in the extended network, and large disruptions can have significant impact on revenue, customer experience, and brand loyalty. Natural disasters over the past few years have led to greater urgency in understanding and managing risks associated with increasing number of nodes in supply chains.
While configuring supply chains that account for every single risk is not feasible, some demonstrate better resilience -- that is, their ability to rebound from disruptive events is significantly better than others. These organizations leverage the resilience of their supply chains for competitive advantage.
Research published in the MIT Sloan Management Review provides insight into the factors that affect performance when a disruptive event occurs. Leading organizations in the technology industry have focused on improving resilience by understanding these factors and taking an integrated view of risk management across the enterprise. Others have opted for addressing resilience through additional raw material or finished inventory, along with manufacturing capacity redundancy -- this approach ends up being expensive and runs counter to the goal of reducing waste through lean manufacturing.
Source: Yossi Sheffi & James B. Rice Jr., MIT Sloan Management Review, 2005
Avnet Inc. (NYSE: AVT) takes an integrated approach to supply chain resilience. We focus on three drivers, and offer services that assist our customers improve resilience of their supply chains. A critical lever in driving resilience is visibility into the extended supply chain. This directly affects first response, recovery preparation, and recovery phases of a supply chain's response to a disruptive event.
These drivers can be summarized as:
Understanding risks in the network and defined mitigation strategies.
Understanding the upstream and downstream capabilities in the network relative to criteria such as production capacity, tooling modification, and production process modification. The FMCG industry has successfully linked Collaborative Planning, Forecasting, and Replenishment (CPFR) and S&OP to create Integrated Business Planning (IBP) that creates a competitive advantage for every participant in the extended supply chain.
Reliable communication links that allow information to flow through the supply chain despite geographic, time zone, and language diversity.
Customers leverage Avnet's services -- focused on component and supplier selection, IP security, inventory solutions, transaction-level visibility into their geographically dispersed supply chains, and transportation and warehousing services -- to increase resilience. These customers engineer resilience into the supply chain at the design phase through an understanding of factors such as impact to revenue for critical components, product life cycle, and network maps for wafer/assembly/test and packaging of sole-source components.
If you face similar challenges in your complex and geographically dispersed supply chain, I invite you to share your experiences and insights.
After reading this blog, it occurred to me that everyone in the supply chain--with the exception of the OEM--seems to be scrambling to build in this flexibility and resilience we are talking about. Natural disasters are one thing, but it seems to me there is not enough focus on the poor forecasting that pervades the industry. It seems to be a given that this problem will never be solved, but isn't it easier for one company to change, rather than 50 or 100?
Great question, Himanshugupta! The shape of the curve is representative of the fact that measures such as finished goods or raw material inventory are leveraged, but ultimately depleted during "Time of Full Impact" portion of the curve. A relevant article related to the resilient enterprises can be found here.
Lalit, i am curious to know the reason of the double dip in the plot/curve during 'Preparation for recovery'. Is it only artistic impression or something hardcored into the recovery process? I expect a single dip if the disruptive event is transient.
This is the reason why lean program is embraced in most manufacturing companies. Reduction in waste and effective use of all available resources. Lean process is a smart move!
"it's important to know beforehand about all the possible sources and causes of disruptions."
Agreed! When you can't possibly predict every points of failure, you can still know in advance which sources are more reliable and less subjcet to disruptions than others.
@Flyingscot - True, but most manufacturers don't want to have to much excess capacity - efficiency depends on full use of as many resources as possible.
Technology plays a critical role in assimilating large and complex data sets from upstream and downstream members of the value chain, analyzing it and modeling it to optimize the supply chain.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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