Meltdown in the supply chain

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Supply chain management has been the catch phrase since the industry’s last bloodletting a few years ago, but so many companies were caught off guard by the latest slowdown in demand that it’s clear people are not practicing what they preach.

The problem hinges on accuracy of forecast. Information is being shared between supply chain partners, but that it’s not organized in such a way that all partners can process it efficiently. Experts say that if you don’t organize the data coming out of the pipe and present it in a fashion that can be used by planners, it’s useless.

Basic training
Geoffrey Bock, an analyst with the Patricia Seybold Group, believes that retailers should give small suppliers basic training on what to expect from an online supply chain, which online forms they’ll use, and what kinds of follow-up communications to expect after an invoice or electronic payment.

Bock recommends that merchants supply ongoing operational support, even if this means making IT-savvy customer service representatives available. The alternative, he said, is to operate dual ordering and payment operations – one electronically and one through the mail – for twice the cost and none of the benefits.

Lack of know-how
From the suppliers’ perspective, a simple lack of know-how is keeping many small firms from linking to their big retail customers, and such links often mean revamping their entire businesses.

Retailers want inventory levels to be visible; and the flow of goods within supplier operations, but many small suppliers lack management systems that can provide that data.

The process of managing relationships between contract manufacturers, distributors, suppliers, design teams and vendors is immensely complex. There’s masses of information available, but is it in a useful form?

Tying the systems together
As big companies acquire smaller competitors, they are dealing with multiple manufacturing sites, running multiple systems, but very few companies seem to understand on a worldwide basis what they need, when they need it, and who they need it for.

Progress is being made to streamline internal systems on an individual basis, but tying all the systems together is the next step.

Common data flow
The chip-maker ON has begun coordinating its front- and back-end manufacturing to save shipping time. The company has also implemented a web-based B-to-B system that integrates various supply chain software tools into a common data flow that manages ON’s business from the design-in stage through order fulfilment and post sales support.

This has greatly improved the company’s ability to meet delivery schedules. Another company is working to remove latency at the earliest design stages, by standardizing business processes associated with trading intellectual property cores, the components that go into systems-on-a-chip.

Meltdown
Retail experts agree that web links between retailers and suppliers speed up the order process. But that link alone isn’t enough. Even if a specialty bicycle maker can make internal changes to keep up with an athletic retailer’s web order process, it might not have as much luck linking to its own small suppliers – say, the company that makes prefabricated spokes. The result can be a supply-chain meltdown.

No access to net
Fundamental business processes need to be reconfigured, and small companies usually aren’t geared to do that, according to Deepinder Sahni, vice president of AMI, a research firm that specializes in small and midsize business issues. Some 44% of US businesses with fewer than 100 employees don’t have internet access in their offices, and another 37% don’t operate a website.

If companies had more choice at the starting end of the supply chain, maybe they wouldn’t be fighting for the same business at the other end.

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