How a Supply Chain Planning System Drives Total Value, Part 2
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If your suppliers are doing their job right, life should be a bit like Oz. Somebody behind a curtain is managing things and everything looks great on the outside.
Every once in a while, though, it’s worth peeling back the curtain.
Several hundred people got that chance last week as Future Electronics celebrated the 10th anniversary of its Memphis Area Distribution Center (MADC). Whether you buy products from an electronics distributor or from Amazon.com, the effort that goes in to shipping a single item (I once bought a $4 phone case from Amazon) is utterly amazing. Yes, there’s a lot of automation in warehousing that minimizes human error. But human beings are in charge of operations and their role cannot be overstated.
Counterfeit components are a big problem in electronics, so I’ll use that as an example. Incoming shipments are, of course, opened, re-boxed (if necessary) and barcoded as they arrive in the warehouse. Visual inspection checks for package tampering or anything else that looks suspicious. There is an IT system that checks incoming and outgoing shipments against names, addresses and nations that are flagged for any reason. (Data is supplied by governments and other sources.)
Then there’s a lot of cool automation that stores and tracks the shipments. There are double and triple redundancies built in in the event of a power outage; a system failure; or some type of equipment breakdown. One of the more interesting things about the MADC is nearly 100% of inventory is stored in the dark—the systems are so good that humans aren’t really needed as long as components are sitting on the shelf. This saves a lot of energy.
Once a package is pulled, however, there are several hands-on and eyes-on checks and double-checks to make sure the shipment is correct. At any time in this process, any worker that sees something wrong can stop the system. That doesn’t back up all orders – those are still processed while a flagged order or item is checked.
At the MADC, people that assemble orders pack components based on the customer’s bill of material in the order the customer selects them. This might not seem like a big deal until you consider many BOMs contain hundreds of part numbers. The order is checked against the BOM as it comes in; is picked; goes out; and before packaging and shipment. Individual trays, reels and packages are visually inspected for incorrect counts, open or faulty packaging, incorrect labeling or physical defects. If something is noncompliant, it is sent to a centralized area and is quarantined.
Noncompliant isn’t the same as counterfeit and most of the parts that go into quarantine aren’t defective. But anything that goes into the quarantine area doesn’t leave until is it is resolved through the supplier of the product. If the traceability of the component is inconsistent, it stays in quarantine. If a supplier doesn’t recognize a product, it’s scrapped. If the device is old, damaged or suspect, suppliers are notified; they may take the product back or tell the distributor to dispose of it. Parts can also be tested at the facility to verify their authenticity. If a part or order is "orphaned," Future holds on to it for a period of time and then scraps the parts.
Most, if not all, of these practices and controls are standard operating procedure at all major electronics warehouses. There are standards and protocols that can be awarded and followed – ISO, JEDEC – and lots of numbers and acronyms (FIFO, LIFO, TQM) associated with quality control and compliance. All of those things are extremely important. But there is another aspect to electronics distribution that is just as important: awareness. People behind the curtain know about the industry; the components they are handling; the security issues companies are facing; where and how things go wrong; and the implications of making a simple mistake. People on the Future warehouse tour—customers, suppliers and people from the media—were able to ask questions of the employees of the warehouse. This in itself is unusual—Future and many of its executives are fiercely private. Nothing was out of bounds, and the people of the MADC know their business.
This is just the physical aspect of a transaction in the electronics industry: what goes on before an order is placed and after an order is shipped is another set of complex stories and transactions that EPS covers and will continue to cover. But after touring the 334,000-sqaure-foot facility; stopping by the dozens of inspection, QC and packaging stations; craning my neck at the floor-to-ceiling storage; seeing cranes locate 20-digit part numbers; and watching a shipment go out the door, I have a new appreciation of what goes on behind the curtain. As a consumer, I’ve become accustomed to getting what I order on-time and correct. I often forget what goes in to that seemingly simple task. Trust me—it’s a lot.
If your partner is doing things right, chances are you won’t even be aware of this stuff. But it’s still good to know.
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