In my last post, I discussed how Apple’s demand-driven supply chain has been a big reason for its success over the past decade. In this post, I want to discuss how you can make your own high-tech supply chain more demand-driven. These 7 tips are based on the deep experience the co-authors of the recent white paper, Supply Chain Priorities for the High-Tech Industry, have with implementing demand-driven technology and best-practices within the high-tech industry. So, with that said, here they are:
- Choose the right operations strategy. The high-tech industry faces chronic issues of supplier problems, component shortages, and higher costs than necessary. It’s key that you choose an operations strategy that puts you in the driver’s seat—one that allows you to “orchestrate.” Orchestrating simply means that you’re leading the planning and execution according to customer needs based on a “near-zero latency signal across multiple networks of people and trading partners” (Gartner).
- Don’t forget processes and people. The best supply chains do a superior job of integrating technology with their people and processes. It’s shocking how many “high-tech” supply chains still require planners and managers to operate on Excel spreadsheets. But where to start? I recommend breaking up your “processes and people” issues into 4 main categories: supply chain processes (e.g. S&OP); demand planning and execution; supply planning and execution; logistics and network planning and execution. You need a tailored strategy for each. Next, you need to focus on “change management”–even the most sound strategies face an uphill battle because change, even for the better, is uncomfortable.
- Integrate your business planning and execution. Most high-tech companies have invested in improving their forecasts, but until now they have focused on ERP systems and point solutions. They have also established better processes for those who should be involved, how forecasts should be developed, reviewed, and approved, and the sign-off procedures. However, not many have made progress in collaboration across their supply chains or established integrated business planning and execution. With proper use, the cloud is the key enabler of this.
- Focus on demand-driven operations—create a value network. Demand volatility has impacted nearly all high-tech companies. Furthermore, the “pull” model has been overtaken by a “push-pull” operations strategy that must deal with more than sales forecasting. It must redirect supply chain attention from focusing 90% on the supply base to more than 50% on the demand side, with the proper mix depending on the product and its reliance on special components. Again, demand-driven supply chains today are taking advantage of the cloud…and the companies that successfully balance new cloud-based technologies with new processes and new mindsets experience profitable growth, operating margins, and capital efficiency. Finally, free cash flow—the ultimate creator of value—is positively impacted as well.
- Optimize logistics globally. Having the right product at the right place at the right time is what demand-driven is all about. Logistics plays a key part in this. Top tech supply chains have focused on an end-to-end logistics strategy—key areas include global optimization of the inbound flow of materials, the outbound flows of semi-finished goods and finished products, the storage of product in the right facilities, and the deliveries of product to customers or consumers.
- Choose technology architected for the 21st century’s challenges. Simply put, high-tech’s supply chain challenges are best solved with technology that is architected to optimize what lies outside the four-walls of a supply chain. Such technology should be: cloud-based; puts all trading partners on a single platform; enables numerous points for optimization all along the supply chain; can be implemented in months not years; supports architecture with multiple tiers, multiple parties, multiple environments; senses and responds in real time; and finally, does not rely on forecasts, but instead updates them continuously.
- Manage risk in real time. As supply chains have become more global, companies have been exposed to more risks. These risks include weather events (e.g. Hurricane Sandy), labor disruptions, terrorist actions, supply shortages, human error, technology failures, infrastructure breakdowns, or poor sales forecasts. Most high-tech companies have risk mitigation strategies that merely include back-up contingency plans. However these scenarios are often based on theory and not reality. Furthermore, these plans rely on old news and by the time the disruption occurs, might well be worthless. The best high-tech supply chains can react in real time and can run analyses of alternate scenarios. This is what you should work toward.
If you want to know more, download the full report here. What do you think about my seven tips for high-tech success?