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The Case for a Multiple Supply Chain System

If you want a modern supply chain, take a walk down memory lane and learn from past masters of the trade. Let me start with one lesson a senior executive at {complink 1131|Cisco Systems Inc.} shared with me more than 10 years ago. A manufacturer, he said, should have more than one supply chain system even for a single product. I've since come to understand why.

I wasn't too surprised to hear the same last week from Douglas Kent, global vice president for Avnet Velocity, during an interview. Kent should know. His division of {complink 577|Avnet Inc.}, the global electronics component distributor and systems integrator, helps companies optimize their supply chain operations. Companies need more than one supply chain system to be effective and cost-competitive, Kent said.

If you're surprised by this then get ready for another shocker. The proliferation of multiple supply chain systems at manufacturing companies is sure to accelerate in coming years, driven by an ongoing move by enterprises to finesse their operations to use the most efficient and effective strategies. Today, the review involves whether companies should continue to offshore production, bring manufacturing back in-house, or even outsource it in high-cost Western locations. How about a combination of all these, depending upon the products, volume, and end-markets?

One single example will drive home my point. A company like {complink 379|Apple Inc.} has multiple supply chain systems for its varied products; the supply chain that supports the iPod isn't exactly suitable for the iPad, the iPhone, or Apple TV. Beyond this, the supply chain system that Apple will use to support the planned production of some of its Macintosh computers in the US will be markedly different from the one currently supporting the same products being made in China.

Even {complink 9284|Lenovo Group Ltd.}, the Chinese PC and information technology equipment maker, will find that the supply chain systems it uses in China will need to be modified when it starts producing computers in North Carolina, as expected in February.

The complexity is set to deepen because Western manufacturers that in the last two decades avidly embraced outsourcing and offshoring of production are rethinking this strategy. Companies like {complink 8019|General Electric Co.} are moving some manufacturing back to the US and, in cases, in-house. This requires the development of a new set of supply chain system to support the new strategy.

We will in future see the adoption of a higher level of automation and the need for a vastly different labor force with higher talent levels. Some companies will be surprised at how much they'll have to change and how much they'll need to learn. Take {complink 2125|Foxconn Electronics Inc.}, the world's leading electronics manufacturing services provider, with multiple campuses of hundreds of thousands of workers in China. The company wants to open plants in the United States, but one core part of its China operation will not make it across the ocean. Americans working at Foxconn's US plants will prefer to return to their own homes and not to a hostel.

Here's a good tip I picked up from an industry pro: Forget about creating a unique supply chain system for your company. Instead create supply chains that can most efficiently support the product and markets under consideration. This may mean managing multiple supply chain systems if your company has many products or sells into many markets.

This shouldn't faze you. As I said, the concept of multiple supply chains emerged long ago, and it's even more valid today.

11 comments on “The Case for a Multiple Supply Chain System

  1. Susan Fourtané
    February 2, 2013

    “We will in future see the adoption of a higher level of automation and the need for a vastly different labor force with higher talent levels.”

    That is exactly what will play a paramount role in the future of manufacturing. 

    -Susan 

  2. prabhakar_deosthali
    February 3, 2013

    Multiple supply chain system is also a necessity when a company is playing more than one role in the supply chain context.

    A manufacturer is a “buyer” in the supply chain context  for buying components and other raw material like PCBs , solder paste , wires etc.

    The same manufacturer becomes a “seller” in another supply chain where he is selling his finished products , working with a totally different set of supply chain partners.

    In a typical product company the Purchase dept, the sales dept and the service dept will be working on their own and totally different  supply chain system

     

  3. bolaji ojo
    February 3, 2013

    Prabhakar, You nailed it. In fact, Douglas Kent at Avnet Velocity told me in an interview that companies with a single supply chain system are very rare today.

  4. elctrnx_lyf
    February 4, 2013

    Does multiple supply chain really mean a method of mainitaning alternative suppliers for same products in different places or we are talking about entirely a different supply chain for different products. Always based on the market we need to serve, volume we need to build will decide the effective supply chain for a product even in case of any electronic product. But some time a signle supply chain may be good enough to serve entire global market.

  5. vigehi
    February 4, 2013

    automation is a good move  it will make work much easier and quicker.but what about the increased rate  of layoffs of the people who initially worked before the machines came.a case of kenyan tea firms which has created alot of unemployment.

    Magozwe

    Bondo university,kenya

  6. vigehi
    February 4, 2013

    the concern for environment is rising,companies must take more account of the external costs of logistics associated mainly with climatic changes,air pollution,noise,vibration and accidents.ways of reducing these externalities and sustainable balance between economic,environmental and social objectives.

  7. Susan Fourtané
    February 4, 2013

    vigehi, 

    Yes, that's a concern that comes in the package. At the beginning there will be a time of transition, and unfortunately some people may lose their jobs. However, those workers are going to be doing a different kind of work.

    The machines can't be operated by themselves, can they? At least someone needs to see they are functioning well. Different and new jobs than the ones we know will be created.

    What is the case of the Kenyan tea firms?

    -Susan 

  8. bolaji ojo
    February 4, 2013

    As the phrase implies, a “supply chain” is a network of related and connected activities and processes stretching often from the design and product conception and development stage all the way through manufacturing, supplier selection, distribution, after-market services, etc. Each supply chain can pick a range of these providers and they may be used by the same company to support exclusively a set of products. Nothing here implies a physical structure.

    It's all about selecting the best processes, partners and systems for a particular product. Variations may occur depending on the market, product type, demand environment, etc. Companies will support even a single product with a variation of the same structure (multiple supply chain) and modulate these to fit specific needs.

  9. bolaji ojo
    February 4, 2013

    Vigehi, Change is going to come whether or not we want it and that applies to all events in life, including in the workplace. Automation has a long history — the conveyor belt had a revolutionary effect on manufacturing and by extension the workforce. It eliminated some jobs but also created new ones.

  10. Daniel
    February 5, 2013

    “supply chain systems it uses in China will need to be modified when it starts producing computers in North Carolina,”

    Bolaji, what's the need for modification in supply chain for the same product? Is it due to geographical differences? If it's for a different product like Apple with IPad, IPod etc, they needed different supply chains for each product.

  11. Daniel
    February 5, 2013

    Vigehi, all such automations can create more profit and can make the tasks easier to the corporate world, but may affect the job opportunities. Affecting labors in the sense, number of job opportunities can be slashed because in automation human interventions are very less.

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