NEXT GENERATION
SUPPLY CHAIN
MANAGEMENT
DRIVEN BY DEMAND
D elivering just what your customers need, when they need it, isn’t easy. But some
leading companies are combining strategy, business processes, and technology to
create what’s known as demand-driven supply chains — a highly efficient mode of
operating that scores a perfect 10 for businesses and customers alike.
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“The benefit of a demand-driven solution is an improved that the spot improvements made in the last 10 to 15 years
overall company performance,” says Pete Sinisgalli, CEO of to supply chain operations are not enough to sustain a
Manhattan Associates Inc., a maker of supply-chain execution competitive advantage in today’s economy,” says Carol A.
and optimization software based in Atlanta. “Companies that do Ptak, vice president and global industry executive for man-
this achieve better customer satisfaction, higher profitability, and ufacturing and distribution industries at PeopleSoft Inc.,
chart ▼ ▼
stages: beginners that have almost no integration along the sup-
ply chain; companies whose enterprise is connected internally;
DEMAND SUPPLY enterprises connected externally to business partners with
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▼
▼ which they are beginning to collaborate; and companies with
multi-tier integration, which supports demand visibility and
supply chain collaboration.
The transition to DDSN is made more complex by
the increasing use of global outsourcing practices in many
PRODUCT manufacturing segments. When components or assemblies
are outsourced to suppliers, the degree of complexity multiplies
exponentially — after all, your supplier’s suppliers can affect your
▼
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S
upply chain complexity has multiplied exponentially in quickly and easily with its
all markets, but nowhere is the mix of design, manu- supply chain partners.
facturing, and assembly more intricate—and delicately FLEXPASS links RiverOne
balanced—than in the electronics industry. With global technology with Flextronics’
outsourcing splintering manufacturing processes into ever-small- enterprise resource planning
er specialties, partners in an electronics supply chain require systems. The result is an envi-
unprecedented levels of collaboration and communication. ronment where suppliers can
At Flextronics, the world’s leading electronics manufac- view demand changes, adjust By reacting more quickly to changing
turing services (EMS) provider, headquartered in Singapore, production plans, and share customer demand, Flextronics is reducing
achieving a better understanding of volatile fluctuations in cus- information about delivery supply chain costs and excess inventory,
says Mike Webb, CIO.
tomer demand has contributed to its success. The $14.5 billion dates and volumes.
global company, which contracts with as many as 2,500 “With FLEXPASS, we’ve enhanced our supply chain
suppliers in 32 countries, coordinates design, engineering, clarity,” says Webb. “The platform clearly indicates changes in
manufacturing, and logistics operations across its network for requirements in a very timely manner, sending messages to
leading original equipment manufacturers (OEMs). “We our supply chain partners that keep everyone informed.”
needed to collaborate with our suppliers regarding our Currently more than 700 of Flextronics’ suppliers are linked
requirements in a more efficient way,” says Mike Webb, CIO to FLEXPASS, with the remainder scheduled to come on line
for Flextronics. “By continuously becoming more agile and in the next year. Although specific business improvement
reacting more quickly when customer demand changed, we metrics are confidential, Webb confirms that the platform has
could reduce customer supply chain costs and avoid predica- delivered substantial benefit to Flextronics.
ments with excess inventory.” “Materials management is one of the most important
Flextronics worked with RiverOne Inc., an Irvine (Calif.) cost considerations in the success of our manufacturing
provider of supply-chain management software for manufac- operations,” he says. “FLEXPASS has provided tremendous
turers, to develop a new tool: FLEXPASS, a clear, integrated value by enhancing our communication with our customers
technology platform that enables Flextronics to collaborate and business partners and avoiding unnecessary costs.”
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chain, you need to understand the business processes and GET THE RIGHT GEAR
try to optimize the future state,” he says. “That is extremely Although the shift to demand-driven supply chain processes
important. Otherwise, you can find yourself automating bad is not strictly a technology fix, there are software and tools that
processes.” Rexam is using Lean Enterprise and Six Sigma can support the transition. According to AIM Global,
management initiatives to align supply chain processes. a trade association for automatic identification and mobili-
Aimi of AMR Research argues that the first step in ty, radio frequency identification (RFID) is the next step in
making a successful transition to demand-driven supply reading demand signals closer to product consumption.
chain practices is to develop corporate supply-chain strategies Enterprise resource planning vendors are using their
at the executive level. Company leaders must focus on gath- strengths in transaction processing to support information
ering more detailed demand-oriented information, and exchange among companies across the supply network.
breaking down the silos that separate departments is a first Whichever technology you consider, it makes sense to look
step. Establishing a sales and operational planning (S&OP) for one with the flexibility to serve not only today’s needs, but also
team that meets frequently to share this information can help tomorrow’s. Look for a technology that is flexible and adaptable.
a company integrate the planning of production, procure- The architecture should be open and standards-based, which will
ment, logistics, and sales information. This in turn will help allow a company to add and subtract components as needs change.
the organization orchestrate the company’s delivery capacity It’s not necessary, however, to buy and implement all the
so that it matches customer demand. supporting technology at once. “If you choose a modular solu-
The second step is to understand or create cross- tion, you can pick the parts that will have the greatest impact
functional best practices that frequently review and assess on your supply chain operation and implement them over
production against demand. A typical planning window time,” explains Sinisgalli of Manhattan Associates. “As each
might be 120 days. When production is planned to meet area of the supply chain is optimized, the savings generated can
demand, the time frame shrinks to monthly, weekly, or even be used to fund the next area.”
more frequently. “In this way, companies can become more It is critical, though, to make sure each component can be
nimble as they develop a flexible ability to deliver on integrated into a uniform whole —parts that communicate with
demand,” Aimi says. one another and that provide visibility across the enterprise.
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NEXT GENERATION
SUPPLY CHAIN SPECIAL ADVERTISING SECTION
MANAGEMENT
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