Visibility. Agility. Efficiency. Networking. All of these attributes apply to today’s electronics supply chain. Since the memorable component-inventory glut of 2001, the electronics industry has applied both tools and processes to improve inventory management, share meaningful data, reduce costs and keep partners connected. Few experts would claim, however, that there’s no room for improvement. The cloud, big data, social networking and new operational strategies are among some of the recent solutions that are enabling further supply chain advancements.
“I have come to be convinced that you cannot be proficient in today’s environment if you are not using social media,” said Tom Derry, CEO of the Institute for Supply Management. Derry was one of a number of presenters at a recent forum hosted by Procurious, a social network for supply chain professionals. “People need to be able to access peer-to-peer information,” he said. “Say I’m looking for a supplier that I can count on, or someone who manages risk well or someone with a strong sustainability program. The best way to find these things is through talking to colleagues.”
Supply chain partners have been alerted to significant disruptions through social media, Derry points out. “There may be an event that isn’t widely reported such as a plant closing in China,” he explained. “I may not hear about that until my order is supposed to be shipped in four to six weeks. A guy I know tweets about the closing and I know about it that day. I now have a four- to six-week competitive advantage because I have more time to respond.”
Derry added that the industry has to be prepared for the next wave of professionals—millennials. “It’s important from the standpoint of the ISM, as millennials ascend in the industry, to understand where people want to consume information, find something relevant, or get the 15-minute version [of something],” he said. He particularly sees value in a professional social network such as Procurious. “Procurious has taken the concept of the social network and put it in a contained space,” he said. “I know I am not going to be interacting with just anyone. If I have a question I know I’ll find someone with actual experience in that area.”
In general, Derry said, the industry is becoming more comfortable with social media. “It’s one way of having a common ‘vocabulary’ or language for communicating in real time, or gathering local market knowledge on the ground.” Ultimately, social media is going to be a critical element in both business and interpersonal networking. “We have to be able to provide information in the way people want to consume it,” Derry concluded.
The flip side of the coin for many electronics companies is too much information. Big data has opened the door to collecting all kinds of customer, supplier, market and trend data. But data has to be analyzed to be useful. Scott Slinker, electronics industry veteran and founder of startup Paradata, has developed a system that culls through data to find and fix weak links in global supply chain networks. Paradata's predictive analytics software enables supply chain transparency, which, in turn, helps companies uncover potential problems even before they happen.
Manufacturers are often concerned they’re being overcharged for parts, for example. Paradata processes hundreds of millions of dollars of “material spend” through its big data platform every day. On average it finds more than 6.8 percent of materials spend reduction. Because cost of goods sold (COGs) make up a big part of a company’s net income statement, Paradata helps drive more profitability and a healthier product for consumers and enterprises.
Slinker, a serial entrepreneur, founded a fraud-protection company that analyzed data to verify a person’s identity. He figured the same concept could be applied to the supply chain. As a component moves from production to consumption it leaves a verifiable trail of information in its wake, he explained. Paradata analyzes the data for gaps, anomalies, and patterns. Paradata software as a service can verify and authenticate every part, every person, every location and every event involved in the manufacturing of a product. The three-year old start-up plans to expand into new verticals soon including automotive and industrial.
Data management and retrieval is also a key concern on the factory floor. The ability to track production from raw material to finished product is essential in highly regulated industries such as defense, aerospace and medical. Manufacturing execution systems (MES) are among the tools factories use to monitor and aggregate essential compliance information. The ability to capture and share such data is crucial as regulatory mandates become more stringent.
MES, like ERP systems, are complex, expensive and time consuming to implement. Startup 42Q is leveraging the cloud with an MES solution that offers advantages in speed of deployment, operational agility and low total cost of ownership.
“In mission-critical industries it’s essential that a manufacture understands what’s going on in every aspect of the device,” said Bob Eulau, CEO of 42Q. “It’s not just about liability [if a device fails]; we are talking about an auditor walking into your factory and asking you about a product you designed three years ago.” Much of that information, Eulau explained, isn’t instantly available. “We can compile that data in a matter of minutes,” he said. “We can also demonstrate the policies and procedures followed are consistent with regulations.”
42Q’s cloud-based system, explains Srivats Ramaswami, CTO, is easier to implement, is less expensive, and more scalable than existing MES solutions. “Typically an MES is a significate investment across multiple factories,” he said. Companies are likely dealing with legacy systems. The 42Q system is scalable to a standalone shop floor or to multiple sites. 42Q’s MES solution provides pay-per-use subscription pricing that eliminates capital expenditure and allows customers to start small and scale. “On premises servers and software are no longer the best solution for today’s smart factories,” said Eulau. “At 42Q, we deliver cloud-based MES solutions that are easy-to-implement, flexible, scalable and cost effective.”
A common thread among supply chain tools and practices is enabling agility. “If you think about a business, agility is the ability to react to something quickly,” said Chris Sawchuk, principal and global procurement advisory practice leader for The Hackett Group. “So how do you develop that?”
There are multiple dimensions to agility, Sawchuk explains. “There are people, practices, processes and technology; information, governance, the organizational model, whether you outsource—and one of the main questions is, how do I look at this model holistically?”
Agile enterprises, Sawchuk said, have four common attributes. The first is information-driven, proactive decision-making. Enterprise agility is predicated on effective use of current information and predictive analytics to support decision-making and business planning. In a volatile business environment, traditional annual planning and budgeting and periodic fixed-horizon forecasting is inadequate to manage the business. “Take procurement, for example,” Sawchuk said. “Procurement tends to look in the rear-view mirror and conducts spend analysis. How about analyzing what the company expects to spend in the next 12 months?”
Other attributes of an agile business:
- A digital value chain
- Agile enterprises are leading their industries in the digitization of their value chains. This is not only transforming supply and demand chains, but also internal operations.
- Digital value chain and analytics monitor, integrate and contextualize customer information behavior for decision-makers. This type of information is the primary feedback loop in agile enterprises. Customer-centricity revolves around the company culture and mindset of decision-makers.
- Operational responsiveness
- In traditional management theory, lack of operational responsiveness (to changes in the supply chain, customer demand and competitive landscape, as well as internally) was often associated with the strategy/execution gap. In today’s business environment, when change is more likely to come unexpectedly and rapidly from the outside, operational responsiveness extends far beyond the ability to execute changes in strategy. For example, as “on demand” business models reshape the technology industry, only the most agile incumbents will thrive.
The ISM’s Derry said that supply chain businesses are going to have to get used to the level of information-sharing that will be required in what many call “Industry 4.0.” “There’s going to be a lot of transparency,” he said, “and companies are going to have to get comfortable with that. Technology is blowing up the prevailing paradigm that companies share the least possible amount of information. Trust and transparency are going to make companies more successful. They’ll have to get used to ‘the new normal,’” he concluded.