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Electronics Production | June 03, 2009

Importance and Development of Supply Chain Management

A major focus of Technology Forecasters’ Quarterly Forum was the rising importance of Supply Chain Management (SCM), its optimization and visibility.
A major focus of this forum was the importance and key success criteria of Supply Chain Management (SCM). Participants from all over the world, representing OEMs, EMS and logistic companies, shared best practices and discussed key issues of today’s SCM activities.

SCM Optimization
Supply Chain Optimization strategies consist of several key areas to be taken into consideration. Lively discussions and examples were kicked around at the event.

As inventory management is facing demand volatility or supply chain disruptions, a negative impact on cash flow is a real risk to business. Inventory optimization is part of the inventory right-sizing strategies of companies; this should be formalized in inventory policy. The connection between target inventory days and product life cycle is a vital factor to be considered. Aspects of the inventory policy are demand, lead times, number of products, objectives (like service levels or minimizing costs) and the general cost structure.

The inventory strategy should be set by the business strategy and can be mapped out in a simple format, as Douglas Kent, President of eKNOWtion, showed in his presentation. It could be composed of competitive requirements, like reliability, responsiveness and flexibility, and also cost requirements and asset management efficiency goals. Each supply chain needs to prioritize these requirements and consider their hierarchy with each specific product life cycle.
As a summary, one could say that each product needs ITS OWN inventory and supply chain strategy.

As a key factor it became clear that not one supply chain strategy fits all organizations. The future can be seen in the concept of supply chain design and optimization, where an optimal business result will be generated from the combination of supply network optimization and inventory optimization.

SC Visibility
What is Supply Chain Visibility? The availability and visibility of the right information to enable the right product, at the right time, at the right place to ensure cost-effective decision-making for efficient product or service delivery, says Hitesh Attri, Supply Chain Consultant at eKNOWtion. To achieve improved customer performance and reduce internal costs, Supply Chain Visibility is needed. A clear SC Visibility roadmap is critical for implementation. Some aspects to consider are: identify the right metrics and define targets, identify root causes for missing information, set up a cross-functional team and involve all stakeholders in the process. A clear process with responsibilities, automation of data acquisition wherever possible and continuous improvement is vital for success. Clear SC Visibility can create value for shareholders and a competitive advantage for the business.

As quoted during the discussions, within the top 25 rated SCM companies, you can find 9 who are rated as top innovative companies as well. During difficult economic times, optimized and visible SCM can help companies to stay flexible, innovative and successful in the market.

Author: Carsten Barth, Elcoteq Blog

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