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Velocity, the supply-chain-focused section of EBN sponsored by {complink 577|Avnet Inc.}, is a mere three weeks old, but it is already drawing kudos from observers for helping to direct attention to critical issues affecting all companies involved in the design, manufacture, sales, and support of electronic equipment.
In July, writers and contributors to Velocity explored the theme: “Elements of a Competitive Supply Chain.” Under this topic we tackled various subjects, including agility, adaptability and flexibility, risk management and mitigation, competence and speed, strategic fit, and consistency, all of which executives say are vital to building and sustaining a competitive supply chain operation.
Industry executives also weighed in on some of the more vexing issues facing the industry. Wade McDaniel of Avnet considered how rising labor costs in the so-called low-cost nations must be factored into decisions on where to situate manufacturing plants. And Dennis Omanoff, head of supply chain services at hard disk drive vendor {complink 4842|Seagate Technology LLC}, looked at how companies can benefit from constantly reviewing “what-if scenarios” as risks multiply in the supply chain. (See: The Evolving Cost of Labor and Opportunities Beckon as Risks Rise.)
We will be kicking up the discussions a notch in August by continuing the focus on issues of significance to the industry, this time on compliance with environmental rules and regulations throughout the world. This is among the more challenging problems manufacturing industry executives must sort out on a daily basis, because many of these rules are still evolving, so execs must find ways to stay on top of the regulations as they emerge. The number of regulators is also rising as each country develops its own laws governing the production and disposal of electronic equipment and other environmentally sensitive products.
To help manufacturers navigate through the maze of environmental laws, EBN will focus over the next few weeks on the following topics:
- Elements of a sustainable green supply chain
- Critical steps to achieving compliance with environmental rules
- The changing face of RoHS, WEEE, and other environmental mandates
- The US compliance puzzle — how different states enact different standards and what this means for the industry
- China RoHS — still waiting on scope, catalogue
- Environmental audits — how to reduce the burden
- When will green benefit the supply chain — an overview of government grants, efforts, subsidies in significant global regions
- Next on the green “hit list” — other chemicals and materials up for review in China, Europe, India, and elsewhere
- Front-end of the supply chain — designing for green
- Back-end of the supply chain — recycling, reclamation, reverse logistics
- Green and obsolescence planning
- Support structures for achieving compliance — who can you call upon?
- Medical electronics — bumping up against green?
This list is, of course, not exhaustive. We will add to it as new issues emerge and as discussions on this page bring up new concerns, challenges, and opportunities. Feel free to suggest topics you would like EBN editors and contributors to focus upon, and we'll do our best to accommodate them. Or, send in your own contribution. I would be glad to review them for publication. Just click on my name above or send to . Don't forget, the focus is on how these topics hit the electronics supply chain in your neck of the woods or globally.
Also in August, Velocity will host its first Webinar, titled: “Supply Chain – It's Risky Business.” The Webinar will be presented by Douglas Kent, vice president, Avnet Velocity, and a veteran of the electronics industry supply chain business. Kent will address three key topics on the subject, including: how to understand risk areas in the extended supply chain; tools for measuring risks and determining the level of corporate risk tolerance; and how to leverage visibility and analytics to identify and mitigate risks.
The Webinar is scheduled for August 22 at 11:00 a.m. EDT. To participate please click on the following link: Supply Chain – It’s Risky Business.
I'd be interested to learn how the green regs are going to be policed. For instance, how do we know people are meeting recycling targets and not simply dumping the stuff in other parts of the world where the components then appear on the black market.
Flyingscot,
When you say people, you mean the general consumer or the suppliers?
-Susan
Bolaji,
These are great topics for this month. I like the focus very much.
-Susan
The rules and regulations about the environment are being introduced by government bodies globally and they are similarly implementing monitoring and enforcement actions that may also include fines or the ban of impacted components and equipment from that region.
The onus for compliance is on the suppliers of the components and the original equipment manufacturer (OEM) buyer. If regulators receive a complaint and if investigations show failure to comply, the seller and its suppliers will be penalized.
One more point about the dumping of the parts in other regions of the world. Many countries where old electronic equipment and other high-tech devices are currently shipped for disposal are introducing similar laws to protect their own environment and workers. What this means is that the regions where manufacturers can allow these equipment to be shipped for disposal are fewer today than 10 years ago.
India used to be one such spot but now they are much more closely monitoring these activities. The same is happening in India. We will be focusing on some of these over the next weeks in EBN Velocity.
This is the big question, Bolaji. When something should be called a waste. The definition of waste differs from the society to society and also upon the standard of living.
What one may call a waste may still have good utility for other, without any recylcing.
The food that is termed as waste in a 5 start hotel may contain enough quality food to fill many a empty stomachs of those hungry poor . So in India, there are NGOs who collect “waste” food from such high profile places and after ensuring that it is healty enough to eat, distribute it among the needy poor.
Similar middlemen are required for processing of “electronic waste”, the trusted middlemen who will judiciously decide what can be paased as “good” and what should be destroyed as the real waste.
@ prabhakar_deosthali You mean something like “One man's trash is another man's treasure?” Even in places where food waste is not collected to feed people, some people still gather it for compost. But many of us are so lazy about disposal that we just toss out everything — even those items that are marked for recycling.
Exactly Ariella!
The developed countries need to give perticular attention to this issue of judiciously deciding what is the real waste and what can be used for some other purpose without recycling it.
I know of entire consultancies that assess risk, and on the financial side of things there's a lot of activity as well. I wonder, though, if risk management is appraoched much like insurance–users have to weigh the monthly outlay vs. the likelihood of something actually happening. There is a lot a company can do internally, but the supply chain depends on so many partnerships to work…I wonder if the risk is greater the more partners you have?
Yes, that would definitely improve efficient use of resources.
The VAR calculation sounds simple enough but I am not sure how the probability (P) and the impact (I) can be quantified accurately. There will obviously be a set of assumptions involved in the calculations but then how accurately can VAR be represented? I cannot see how the impact of an event can be quantified. What is its unit to start with?
Great question Barbara-This is a hot topic given the events last year in Asia that disrupted so many supply chains. Many insurers are requiring this type of analytics in order to obtain contingent business interruption coverage to transfer risk against a disruption in the supply chain. Dempsey Partners is one of the leading firms doing this type of analysis. They quantify the impact of a lost supplier based upon dependency, which gives supply chain managers, and risk managers a tool to rank and insure against suppliers that would cause the greatest impact.
T o answer your question, yes the more suppliers you have the greater the probability and risk it poses to an organization. D empsey Partners also works with the cat modeling companies that can calculate the probability ofa given event and its impact to an organization.
I just wonder about how the electronic components companies or oem's are getting insured. So the assessment of all the risks in supply chain could be a major requirement from the insurance companies. Insurance is everywhere.
Although the number of suppliers, as well as how many levels of supplier, can increase the level of risk an organization is exposed to, much risk can be understood and mitigated if we institute a scalable framework of business processes that extends up into our supply chain. We need to change the dynamic to bring down the fear factor and the costs. Insurance is always an option but does not replace good business processes and knowing who you are doing business with in the first place.
A couple of the first steps include deciding on the criticality to the organization of the mission/program you are looking to mitigate against, and then prioritizing the areas/products that could impact that mission/program based on interdependency across the organization and/or impact of that product on that specific program. This might sound like a big job and it can be. But given the consequence, we each much understand and decide if the effort is worth the investment vs. just looking at this as a 'cost.'
Some may say we're up against a new and unprecedented hazard – we need to take steps to invest in our organizations against this new hazard just like we would with any other new hazard or threat to our businesses.
Mike–thanks. This is interesting. It has only been a recent development that supply chain risk is being addressed from the insurance (third party) standpoint. I'm not saying it didn't exist, but most risk management was covered by contracts between suppliers, distrbutors and customers. Finance has its own type of “insurance.” Now, the supply chain has to expand beyond contracts into third-parties.
Jennifer–good points. The key word is scalable, and it does seem to me that companies have to prioritize which “nodes” of the supply chain are most critical, or which products.
@Barbara – you are exactly correct. The VAR measure was in fact “borrowed” from the financial community and leveraged for use in SC Risk Management and the decisions of whether or not to mitigate must be ROI based. An organization simply cannot mitigate all risks or we will go broke! 😉
These are real challegnes and the VAR measure is not easy. However the SCC council and its members have done a great deal to move this forward. Often probabilities and impacts are considered/calculated using a myriad of external information in addition to an organization's own data. This is NOT an easy measure that is for sure – but ignoring the need to do it is also not acceptable 😉
@cryptoman I was wondering the same thing. I imagine that it takes quite a bit of data and number crunching just to come up with a fairly accurate probability.
@Ariella I agree. The key point here is how accurate can it all be calculated? This depends on how P and I are calculated and more importantly the assumptions made in their calculations.
In physics, for example, one of the most popular assumption statement goes like: “Let's assume that we are in a vacuum…” The truth is we are not living in a vacuum and therefore the results are often irrelevant in the real world although the analysis may be impressive and clever.
As Albert Einstein said:”Everything should be as simple as possible but not simpler”. What I mean is VAR = P x I looks simple enough but is it too simple?
@Cryptoman You explain the point very well. The setup in physics reminds me of the setup in teaching the forces of economics. It starts on the assumption of ceteris paribus– that everything else remains the same — a situation that is never possible in the real worlds.
Jennifer, Well stated. The risks highlighted in the article and the ones you pointed to are in the normal course of doing business but how companies approach these issues is even more important than the problems themselves. As you noted, fear can paralyze. Rather than worry about how “problematic” the challenges posed by outsourcing can be, ofr instance, it would seem to make more sense to figure out how to mitigate them and prioritize the response. I also believe that all players in a company's supply chain and the extended partnerships should be involved in these activities.
And, of course, there are those risks that no insurance would be able to mitigate. Insurance can help reduce total loss, it cannot recoup all losses. Goodwill is one of those intangible elements that a supply chain disaster insurance policy would likely not cover and this often has tangible financial implications if it results, for example, in business lost because a vendor or customer declines to continue the relationship.