How Resilient is Your Supply Chain?

| February 5, 2014 | 1 Comment
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Bolaji Ojo 4-20-2012A customer will soon ask you a version of the question in the headline of this article — if they haven’t already. The question may not be similarly phrased but it still comes down to this: does your company have a supply chain system that is optimized to perform at the best possible level in today’s volatile and uncertain economic environment?

Electronics equipment manufacturers pose this question to their enterprise partners on a regular basis but oftentimes the questioners work at OEMs and sometimes at contract manufacturers. They want and ask outside support teams at electronics manufacturing services (EMS) providers, component suppliers, distributors and logistics companies to assure them systems and processes are in place to guarantee specified supplies meeting all regulatory requirements would be received on time, at the right price, quantity and quality and at the desired location.

Rarely do OEMs themselves have to provide this level of granular information to anyone but internal accounting teams and cost-center leaders. Why? Because it’s often assumed that OEMs are the dominant and controlling partners in the supply chain. They are the ones who need to know they can rely upon their business partners and as such they don’t have to answer to anyone aside from shareholders, analysts and the occasional frustrated end-customer.

What this lopsided relationship between OEMs and members of their supply chain has fostered is an environment where EMS providers, electronics parts suppliers and distributors often seem to be the ones with identifiable systems in place for mitigating risks. They are required to regularly test such resiliency plans. Again, this is because OEM customers want evidence these partners can be relied upon.

But what about the OEMs themselves? Who gets to ask Apple, Cisco, Dell, Hewlett-Packard, Huawei, General Electrics, Lenovo, Microsoft, Siemens and other large electronics and industrial OEMs whether their supply chains are strong enough and have redundancies built in to withstand demand fluctuations, natural disasters and geo-political disruptions?

Participants within an OEM’s manufacturing supply chain may never raise the question of resiliency with the big bosses at equipment vendors but that issue is increasingly being raised indirectly – and often worded differently – by end-customers. These are the consumers who blurt out their worries and frustrations to service reps or mutter to themselves after being told the particular model or color of a device they wanted wasn’t available.

Queried further, sales reps often say things like “We should get additional supplies later this week or next week. Check back, then.” At times like this, the consumer might wander off to purchase a competing product or simply head home, leading to lost sale for the OEM and the retailer.

Was that what hit Apple Inc. (NASDAQ:AAPL) in the December quarter when the company said it shipped fewer than expected iPhone 5S because of supply problems? The company got slammed for not meeting analysts’ target even though revenue and profits rose to levels competitors would kill for. A resilient supply chain, it turns out, is not just the one that is able to avoid or reduce its exposure to dangers but also one that is able to hit its goals accurately most of the time. Is your supply chain resilient enough or just toddling along? (See: Apple Inc (AAPL) Sells Record iPhones, But Below Expectations).

Why is supply chain resiliency even more important today than ever? Logistics services provider DHL International GmbH, a division of Deutsche Post AG (ETR:DPW) explains in a recent sponsored research report that resiliency is a must-have in today’s supply chain because volatility is always around the corner for most enterprises. The report titled “The Resilient Supply Chain” and authored by Lisa Harrington, associate director, Supply Chain Management Center, Robert H. Smith School of Business, University of Maryland, drew many conclusions, amongst them that the traditional systems no longer work in an interconnected world.

“Volatility has emerged as a systemic condition, disruption occurs at any time, often with unprecedented magnitude, and there are no longer discrete sets of risk events with periods of stability in between,” Harrington said. “When disruptions occur, the global supply chain – now an intricately intertwined web – acts as a massive neural network, spreading impact instantly among all the connected parties. Effects cascade across the extended supply chain, and frequently gain intensity as they ripple outward from the epicenter.”

I will share in a forthcoming blog some additional insights into supply chain resiliency as outlined by Harrington. We will also excerpt the conclusion of the report.

DISCLAIMER: Bolaji Ojo is editor-in-chief and publisher of Electronics Purchasing Strategies. The views expressed in this blog are those of the author alone who promises to base his sometimes biased, possibly ignorant, occasionally irrelevant but absolutely stimulating thoughts on the subjective interpretation of verifiable facts alone. Any comments should be sent to the author at bolaji.ojo@epsnewsonline.com.

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Category: Featured Blogs, News Analysis, Ojo-Mojo Tech Report, Supply Chain, Supply Chain Tools

Comments (1)

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  1. Barbara Jorgensen says:

    Bolaji–I’m convinced Apple falls short of its supplies because it wants to. Let’s look at the facts: They are the biggest customer of all of their suppliers (except Samsung); they manufacture through the single largest EMS ever (Foxconn); they own their own retail front (Apple Stores) and they have released an average of what 10 products a year for the past five years? Do people really believe that a company that gets forecasts from its own retail stores; keeps its suppliers on a short leash; and has thousands of arm’s-length workers can’t get enough product? Yet Gartner lists Apple among its best supply chain stars. According to whom? I wonder if customers would agree.

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