Universally, supply chain managers in every industry have some common goals. In the global electronics supply chain, these elements are perhaps even more critical. For the organization to stay competitive, the supply chain needs to move product:
- More cost-effectively
- With greater predictability, and
- With lower risk.
Most often, achieving significant gains towards these objectives involves technology, supporting process improvement. And paradoxically, the harder you work in pursuit of these goals, the more difficult it is to achieve them. In many circumstances, things often move in the opposite direction. Hitting the intended target can be difficult.
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It not entirely clear to most practitioners why this happens, and the answer will likely surprise you. There are some clear reasons behind these challenges, and you need to reorient your thinking and execution to solve them.
The nature of global supply chains
It is important that we understand the environment that is the global supply chain. There are several defining characteristics of global supply chains that make it difficult to manage. The relevant ones include:
- Inter-departmental: Within your own organization, several departments require access to similar information. As a result, data needs to be available across silos within your organization.
- Multi-dimensional: Information being available across silos isn’t sufficient. Each department requires that the data be appropriately formatted for their needs.
- Multi-organizational: Unless you work for one of the world’s rare vertically integrated companies, you use third-parties to help move your goods and get them through borders. That means you need to pass information back and forth between your organization and the various third-party organizations.
- Temporal: Time is a reality.
- Ever-evolving: The macro-environment is constantly changing. Governments are changing regulations. Third-party logistics providers are entering and leaving the marketplace. Your internal processes are changing.
The five bullet points, above, have significant implications to designing any system or solution where the aim is to improve on the goals:
- Data availability/collaborative: With the same (or similar) information being required by several departments both inside and outside your organization, there is an imperative that the information be available to everyone that requires it. Limitations in data availability require stop-gap measures, typically in the form of offline spreadsheets, and additional communications between parties.
- Dimensionally comprehensive: While different groups need similar information, it is almost always required with a slightly different perspective. For instance, while someone in transportation might require the weights and measure for a given widget, someone in trade compliance requires its volume and harmonized tariff code, and the finance person requires cost dimensions.
- Coordinated:While there are many players that might be involved in the movement of your goods, it is an imperative that you are managing the overall process. This means that your organization needs to have a comprehensive overview of the entire process that includes the steps that are in your direct span of control and also those that aren’t. It also means that you need to understand the upstream and downstream effects of any deviation in the movement of your goods.
What this means for system design
- Your supply chain infrastructure needs to be broad. It must span the entirety of the supply chain process. While every company is different, this often means from issuance of purchase orders through to receipt at a customer, and every step in between. And while this might be achievable by cobbling together multiple systems, there are reasons why this is challenging.
- Your supply chain infrastructure needs to be deep. The infrastructure needs to have the functionality to support all the various processes and perspectives that need managing throughout the supply chain. Specifically, the functionality must be comprehensive and diverse enough to deal with everyone’s varies yet nuanced functional and operational requirements. This means that you need to be able to manage and control multiple and diverse processes from multiple perspectives: Purchase order management requires both a product- and finance-focused perspective; transportation and logistics management requires a shipment- and finance-focused perspective; inventory receipt and warehouse management (product-focused); and sale order management (product-focused). Additionally, you need to be able to manage all your regulatory compliance needs (product- and customs-focused). If you are interested in doing total landed cost, that requires a cross-supply chain finance perspective, which is near impossible for most companies. While there are many different perspectives, unless the underlying data is common, you will have a requirement to reconcile the data to make it consistent. That will be a lot of work!
- Your supply chain needs to be open. The various players (both internal and external) need to be able to appropriately interact with your entire process and its related data. The better your systems are at allowing the players into the process, the more effective your management will be.
- Your supply chain needs to be controlled. Although your architecture needs to be open to enable collaboration throughout the supply chain, it must also be controlled. This applies equally at the process and data layers. It is equally imperative that process is appropriately controlled as it is the data.
- Your supply chain needs to be flexible. As your supply chain evolves, so must your processes and systems. The biggest challenge in today’s design is that they are not responsive to the ongoing changes, and this limits your organization’s capabilities.
We now have a common understanding for what is required in order to build a modern supply chain infrastructure. In my next post, I will discuss why current design thinking doesn’t take into account many of these requirements. This will explain why most companies do not get the value they so desperately seek.