by Milosz Majta on 27/04/12 at 4:18 pm
Supply chain is the lifeline of any manufacturing company. With the onset of globalization, managing supply chains have become more complex and business critical than ever before. The recent disasters in Japan and Thailand have highlighted the need for effective risk management along the supply chain for manufacturers to minimize disruptions and resume normal business conditions quickly in the event of an outage.
When a company’s operations are under its own control, there are fewer moving parts. As a result, the company has greater access to information. In this type of scenario, it is much easier to identify, quantify, prioritize and mitigate risk for better decision making. In an environment that has become increasingly global in nature, there are more parties involved and less information available at any point in the production process. This makes it much harder to identify, quantify, prioritize and mitigate risk for better decision making.
There are two major factors that impact supply chain risk: Increasing supply chain complexity and decreasing access to information. The ability to anticipate and address risk effectively has been handicapped by complexity. Now that manufacturers are outsourcing more work to suppliers across the globe and are managing second and third tier suppliers, it has become difficult to track, trace and monitor production.
Supply chain complexity is increasing in many ways. Companies are outsourcing more aspects of their business to globally distributed supplier networks. The manufacturing process has become infinitely more complex than a simple assembly line. Manufactures today need to manage multiple product lines, which are each assembled from parts coming from different suppliers. And those parts may even sub-assembly by other suppliers. Confusing already, isn’t it?
In addition to all this, manufacturers need to manage logistics, knowing where and when products need to be to meet demand, across the globe. The large numbers of geographic markets where products are now being sold continues to increase. With this growth has come an increasing volume of regulations that must now also be complied with.
Complex supply chain partnerships simply can’t be avoided, offering manufacturers an efficient, cost effective strategy to access new markets to develop and deliver products in otherwise untapped regions.
Lack of Data
As companies continue to expand globally, operational decisions will be made regardless of whether all the right information is available. Unfortunately, if the proper communication and collaboration systems aren’t implemented, a lack of data correlates directly to an increase in risk. When organizations don’t have the right information to make an informed decision, a higher level of risk exists that an undesirable outcome will occur.
So, what does this all mean when something goes wrong or there is a supply chain disruption?
Because of globalization, it means that there is an increased likelihood that companies will be exposed to and impacted by more adverse events, such as natural disasters, political and economic instability, supply disruptions, economic volatility and more. If you operate in more markets with more partners, the odds are you will be more likely to face one of these disruptions.
Let’s look at the Thailand floods as an example. Companies such as Seagate and Dell were hit hard after a large percentage of their driver suppliers were out of commission. The companies needed to reroute work to other suppliers not affected by the floods. Without the correct, real-time data of when, where and how much supplies were affected, it is difficult to regain stability.
These events are hard to manage. Manufacturers need to find a way to succinctly manage multiple suppliers across a number of regions.
As a result, the value of supply chain visibility has increased significantly. This capability helps to significantly minimize risk of loss, order delays and reduced quality. Manufacturers that take a wider, more holistic perspective across operations can better manage complex supply chains. By implementing technologies that can increase visibility into the supply chain, manufacturers can more easily collaborate and communicate with suppliers. Not only will processes instantly improve, but the ability to prevent (or at least minimize) disruptions will help to increase the bottom line.
About the Author
Milosz Majta has more than a decade of product management experience within the manufacturing software industry. Currently a Product Manager with Apriso, Milosz began his career in a Professional Services capacity for five years, then transitioning to product manager for Quality & Maintenance applications within Apriso’s FlexNet suite. Milosz has a degree in Automatics & Robotics from AGH University of Science and Technology in Cracow, Poland.
About The Author: Apriso is a software company dedicated to helping its customers transform their global manufacturing operations by achieving and sustaining manufacturing excellence while adapting quickly and easily to market changes. Apriso serves nearly 200 customers in 40+ countries across the Americas, Europe, Asia and Africa, including GM, Volvo CE, Honeywell and Essilor. More information can be found at www.apriso.com.