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Our industry supply chain challenge is often described as the irreconcilable differences between a very erratic demand pattern and a very rigid supply side. Customers want product in days even though their forecasts aren't always accurate. They are also willing to accept orders that can be difficult to fulfill.
On the other side, component manufacturers, although racing for more performance per silicon square meters, have not found a way to reduce manufacturing cycles averaging in the 16-weeks range. In this environment, distributors have developed their value proposition, keeping close to customers to better understand their demand on one side and building inventory to absorb the ups and downs on the other.
In this multi-tier supply chain, the “bullwhip” effect associated with demand fluctuation can be quite significant, creating shortages, unused manufacturing capacity, or excess inventory at different stages of the chain. It amplifies a company's exposure to supply risk and diminishes its ability to react appropriately.
Information visibility is one key amplification factor of the bullwhip effect. If we could remove all delay in information sharing and operate in real-time, every actor in the supply chain could then instantly take crucial decisions, capture business opportunities, and mitigate demand changes on the spot. Improving visibility is no longer an option; it's the foundation of any supply chain maturity model. Companies have realized years ago the importance of information sharing and developed B2B connectivity standards such as EDIFACT or ANSI X12, and many have developed collaborative tools to share inventory, production plans, order books, or lead times. The limits of those initiatives are related to the point-to-point character of those connections.
Over recent years the development of complex, multi-tier, multi-regional supply chains has encouraged the development of end-to-end solutions, allowing all supply chain actors to share information such as inventory, forecast, and POS reports and generate exception reports or alerts with relevant partners. Those solutions are called Control Towers and can be defined as “a solution having a centralized view with the ability to drill down to the root cause of a problem and resolve it from that view,” according to a report by the Aberdeen Group. It's also interesting to point out that those solutions are protocol independent and can integrate any communication format used by the various supply chain actors.
Enhancing visibility and developing collaborative processes allow companies to resolve supplier issues faster, assist in capturing growth opportunities, and provide information to efficiently monitor and mitigate supply chain risks in real-time. This collaboration has huge potential for “mitigating the bullwhip effect, providing inventory stability, limiting lumpy orders and enhancing customer service level,” according to the International Journal of Production Research in a report titled “On the Bullwhip Avoidance Phase: supply chain collaboration and order smoothing.”
The more global and complex the supply chain is, the more crucial it is to have visibility enablers, and the more substantial the associated benefits can be.
The questions in my mind are the following: Are your supply chains culturally mature enough to see this bigger picture? And would you happily collaborate and share crucial supply chain information upstream and downstream to supply chain partners for the benefit of the supply chain as a whole?
These issues will be discussed in a Webinar hosted by EBN/Avnet Velocity on Tuesday, Oct. 16, at 11:00 a.m. ET (8:00 a.m. PT): “Enabling Supply Chain Course Corrections Through Control Tower Capability .” It will feature presentations by Douglas Kent, Global VP, Avnet Velocity; and Rich Becks, General Manager, High Technology, at E2open. Click HERE to register.
Hi Pascal: it's one thing to see something go wrong and another thing to fix it. I can't help but picture Air Traffic Control when they can't communicate with a plane. But Aberdeen's definition is spot on: “…the ability to drill down to the root cause of a problem and resolve it from that view.” The ability to head off or mitigate a disruption is a significant benefit to these systems. And, as you note, they are protcol-independent.
@Bolaji It's an interesting topic. I do hope that there is room for other countries to contribute a piece to the marketing pie. It would offer job opportunities there and more choice for sourcing elsewhere.
The challenges involved here are numerous and I believe that is one reason why this particular event is especially important for Europe. I will focus on these issues in subsequent blogs but each nation needs to have a dialogue on what roles it expects its companies and government to play in manufacturing. Letting the market sort it out might seem to be a good idea but the inherent inefficiencies and lack of clarity in how the market works haven't helped. Please take the poll we just posted on this subject and let me know what you think.
Another reason that Germany has retained some of its manufacturing prowess, specifically in automotive, is its refusal to compromise on quality. There's a spillover effect on “German engineering”. I just did a quick search on Keurig coffeemakers, which sound German to me. They are made in Reading, Mass. Haagen-Dazs is also made in the US, but the name was made up to sound European. Perception still matters.
@Barbara but those misleadingly European brands then actually signify American jobs, not really a bad thing for those of us in the USA.
This is a very encouraging news. I find many made in Germany products. I did see laundry pair at Costco with Made in Germany tag and I was very happy and purchase same. I like made in USA and Germany and will spend more money.
@Bolaji, this almost sounds like Germany could be integral in policy leadership across all business sectors where government support could help not just in manufacturing but also the acceleration of the entire supply chain. The amount and nature of European policy will depend upon how economical, implement able, and enforceable it isthroughout all member states. I cannot believe how many policy innovations are already being partially or completely funded by the EU Commission. Does this conference have EU Commission members in attendance or is this more of a grass roots movement towards getting the government's attention on behalf of business interests?
Bolaji, In my previous post I asked if the EU commission was participating? I read the blog again and saw that indeed there is a representative on board. Could you ask this question of the EU Commission rep during Q&A? Please ask how the funding required to enact more policy will impact the REACH funding requirements which are already over the EU's budget? Thanks.
Yes me too for any quality product. You can see the quality by checking the name of which it was made from.