Optimising the global supply chain

Complexity is often considered the number one enemy when it comes to successfully establishing a global supply chain. Yet complexity harnessed can become the secret of success says Caroline Dowling, VP of sales and marketing for Flextronics Europe, a leading electronics manufacturing services (EMS) company.

The supply chain is an essential element of any manufacturing operation and remains a key factor in determining success or failure in today's highly competitive global market. At its best the supply chain will evolve into what can be described as a true value chain. Benefits available from innovation in R&D, design and engineering can then be maximised, coupled with smooth and timely logistics.

"complexity can be leveraged, enabling a manufacturer to better serve market demand"

When this state is achieved then manufacturing assets yield optimal returns, raw components arrive on time. And crucially, the delivery of finished goods to market is not delayed. This equation can add up to higher profitability, based on a good time-to-market factor and the satisfaction of market demand.

Yet global organisations often end up with a supply chain that has become overly complex and in many cases inefficient. However, this situation can be turned on its head.

Complexity need not be the enemy of supply chain practices. Rather complexity can be leveraged, enabling a manufacturer to better serve market demand and achieve a higher state of responsiveness to customer requirements.

Right place, right time?

Synchronisation of the global supply chain is the key to success. And the essence of synchronisation in the global context is taking a key decision -do you synchronise locally or globally? If you are a global manufacturer then the answer is simple. Synchronising at the local level will not yield the desired, profitable result-it has to take place across all operations wherever they may reside around the world.

Top consulting firms are now indicating that global supply chains should be conceived and implemented in this way. Yet many global manufacturing enterprises have made the mistake of localising their approach to supply chain execution and management.

 "time-to-market is considered a clearly stated strategic goal, while the supply chain itself does not always support such an outcome."

These are difficult decisions to make as markets are becoming evermore dynamic and demanding. The manufacturing sector is also being driven by the need to control costs and get the best efficiencies. Product development cycles are constantly speeding up and new channels are continuously being sought. The rush to meet these demands is one of the main reasons why complexity rears its ugly head.

Statistics taken from a survey by consulting firm Deloitte yield some insight into the manufacturing supply chain conundrum. Last year, the consulting firm researched many factors regarding the supply chains run by leading manufacturers in the US and Europe. These cover a wide range of industry categories, including technology and telecommunications.

 "the risk of quality deteriorating across the supply chain is rising rather than falling."

Paradoxes have been identified. For instance, time-to-market is considered a clearly stated strategic goal, while the supply chain itself does not always support such an outcome. There is no formal product life-cycle methodology practised by 57 per cent of the companies studied and only a quarter of the sample deploys the relevant software.

The need to reduce product costs is making supply chains less flexible, again contrary to most manufacturers stated goal. And the risk of quality deteriorating across the supply chain is rising rather than falling. As a result of these combined factors Deloitte concludes that around half of the 1000 top global manufacturers did not obtain profits that exceeded capital costs.

Making complexity work
Ultimately, a supply chain has to support the strategy of any aspiring world-class manufacturer. But once the complexity factor has taken hold it becomes harder to turn the situation around without external assistance.

Flextronics is one company that can help manufacturers achieve higher states of supply chain efficiency, leveraging the complexity factor to good effect. The companys expertise in running global manufacturing operations for its EMS customers extends to the supply chain, based on the best practice principles developed through years of working with a wide range of manufacturers.

Then complexity becomes a blessing rather than a curse. Diversity in manufacture processes can then lead to higher levels of innovation for EMS manufacturers, who can then focus on core strategy rather than fire fighting problems regarding supply and demand. Integrated supply chain management becomes possible across all sites worldwide.

There are further benefits to be obtained from synchronising and optimising the supply chain. One important example is collaboration with customers, in particular at the design level. While most manufacturers are keen to realise such a goal, most supply chains have not been capable of supporting such a scenario.

A truly synchronised global supply chain can be transformed into a value chain. The prospect of beating the supply chain complexity trap is now a very real possibility.