Archives for "Supply Chain"
Two free resources offer a wealth of information for operations, manufacturing and supply chain
Whether your purview is operations, supply chain management, new product development/new product introduction or executive management, you’ll find information you can use in these two well-established—and newly free—resources.
- APICS, the Association of Operations Management, has made its APICS Operations Management Body of Knowledge (OMBOK) Framework available to the public, free of charge, for the first time. As a resource that “builds on more than 50 years of operations management knowledge” to provide an understanding of “the state of operations management today,” it’s clear why anyone working in the field would be interested in the framework. APICS CEO Abe Eshkenazi makes a convincing case for why others might be interested too: “The APICS OMBOK Framework can become an essential reference tool to all businesspeople as supply chain and operations management becomes a more visible function throughout the enterprise.” Learn more in the June 23 APICS news release, or download the APICS OMBOK Framework.
- Aberdeen is offering free access for a year to its research library, the Vault. (Vault access normally costs $995/year.) The offer is being made in conjunction with Eye for Transport, a provider of transportation and logistics information and services. Aberdeen Vault research is organized into categories that span an enterprise’s many functions and offer something for everyone. Manufacturers may be particularly interested in the categories Product Innovation and Engineering, Manufacturing and Supply Chain Management, which include reports like: Lean Operations: Software Strategies for Manufacturing’s New Normal; Manufacturing Operations Management: Capitalizing on the Economic Recovery; and Supplier Quality Management: Seven Tips to Reducing Non Conformances in the Value Chain. Read more about the Aberdeen/Eye for Transport free year of research offer, or sign up for free access to the Aberdeen Research Vault.
Thanks to SupplyChainBrain.com for the tips on these two resources!
Manufacturing success strategies: Use well-crafted agreements to build strong supply chain relationships
SupplyChainBrain.com offers a summary of a new whitepaper on outsourced manufacturing that focuses on how to develop agreements with supply chain partners that lead to positive relationships and successful results. The whitepaper was written by practitioners and academics from University of Tennessee, Georgia Southern University, Cranfield School of Management and the International Association of Contract and Commercial Management. Titled “Unpacking Oliver,” it’s based on the work of 2009 Nobel Prize-winning economist Oliver Williamson, who studies transaction cost economics and its impact on contracts and organizations.
The whitepaper offers 10 lessons for crafting agreements that help you make the most of your relationships with contract manufacturers and other supply chain partners. At a high level, these lessons are:
- Outsourcing is a continuum, not a destination.
- Develop contracts that create “mutuality of advantage.”
- Understand the transaction attributes and their impact on risk and price.
- The greater the bilateral dependencies, the greater the need for preserving continuity.
- Use a contract as a framework – not a legal weapon.
- Develop safeguards to prevent defection.
- Predicted alignments can minimize transaction costs.
- Your style of contracting matters; be credible.
- Build trust; leave money on the table.
- Keep it simple.
An excerpt of the executive summary of the whitepaper, with more detailed descriptions of these lessons, can be found at SupplyChainBrain.com. The complete whitepaper can be downloaded from the Vested Outsourcing website (registration required).
No capacity for capacitors: How world issues impact product development and supplier selection
I have recently been talking to people in small and mid-size businesses about their goals for this year and the challenges they face. New product development is on many companies’ list of goals, but blocking it—the supply of parts. I expected to hear about delays from suppliers or contract manufacturers (CMs) who reduced capacity during the downturn and are now trying to balance their hiring efforts with returning business. (And I did hear some of those stories.) What surprised me was not that part supply was delaying products, but that the decreased supply is often caused not only by problems like the worldwide economic crisis, but also by global issues like political turmoil in Africa.
I heard about product launches being delayed because of a capacitor—specifically a tantalum capacitor. Tantalum capacitors are common in high-tech devices because of their high reliability, small package size and high maximum operating temperatures. Prices and lead times for these parts are increasing because of a drop in the availability of the element tantalum.
The 2008 closing of an Australian tantalum mine, which contributed more than a third of world tantalum production, was a major cause of that decrease. Those facilities shut down when the market price for tantalum was too low and mining the material was no longer profitable. Although this has happened before, and prices are high enough now that Australian production is expected to restart soon, in the meantime manufacturers are left with a difficult choice.
Tantalum mines are also located in Africa, in a part of Congo that has been politically unstable for a long time. At a minimum, the supply of tantalum from this region is unreliable due to war. Worse, to get raw tantalum from Congo, capacitor companies must do business with brutal militias who do horrible things to women, children and each other.
Minerals like tantalum are being called “conflict minerals” and being compared to the “blood diamonds” mined in other parts of the continent. In a recent blog post and New York Times op-ed piece Nicholas Kristof calls for companies making electronic gadgets to demand that their capacitor manufacturers not only state that they use conflict-free materials, but also provide proof of it. Groups like Run for Congo Women and the Enough Project (with its Raise Hope for Congo campaign) are working to raise awareness about this issue through efforts like this Mac vs. PC video spoof that suggests an unsettling similarity between the two types of computers:
Awareness of the Congolese conflict minerals has reached Washington, D.C. An amendment to the financial reform bill currently in front of Congress calls for companies to disclose any materials in their products that originated in Congo or adjoining countries. If that bill gets signed into law, it will surely help. But will it be enough?
And what about other minerals and other regions? A recently published study shows that war-torn Afghanistan is rich in elements important for manufacturing, including lithium, a primary component for new battery technologies. How will this discovery impact Afghanistan? Tantalum and other key elements for electronics manufacturing could have helped improve the life and living conditions of the Congolese people instead of continuing to promote and perpetuate war. Can the elements found in Afghanistan be used to help bring stability and wealth to the region and not cause further violence?
As end users start demanding conflict-free contents in their devices, manufacturers will want to think hard about the choices they make as they design and source their next product.
AMR Research spotlights supply chain standouts in 2010 Supply Chain Top 25 report
AMR Research has just released its 2010 Supply Chain Top 25 list, and for the third year in a row, Apple is in the #1 spot. The annual report’s goal is “to raise awareness of the supply chain discipline and how it impacts business” by recognizing companies that deliver both operational excellence and innovation excellence. In fact, this year’s report mentions a recent study by researchers from University of Alabama and Texas A&M, led by Dr. Alex Ellinger, that used the Altman Z-score to show that companies in the Supply Chain Top 25 do enjoy greater financial success than their competitors.
To be considered for the Supply Chain Top 25, companies must be large, public companies in the manufacturing or retail sector; most are among the Fortune Global 500. Working from a master list of companies, researchers rank companies with a formula that gives equal weight to financial measures (inventory turns, return on assets (ROA) and revenue growth) and opinion (votes from a peer panel and an AMR/Gartner panel). According to the report’s authors, Kevin O’Marah and Debra Hofman, these rankings help show “which companies are furthest along toward the demand-driven ideal of supply chain excellence.”
After Apple, the next companies on the list are Procter & Gamble, Cisco Systems, Wal-Mart Stores and Dell. The figures to the right list the complete 2010 AMR Supply Chain Top 25, along with scores and rankings, while the full report offers a snapshot of each company’s supply chain successes. The diversity of the Top 25’s collective accomplishments is notable and makes the report an interesting read. About Apple, for instance, the study authors say:
“Apple has broken new ground in the area of transforming its supply chain into a value chain, starting with the consumer experience and designing its network to serve that master first and foremost. This means demonstrating some of the behaviors we look for in Top 25 companies, including embedded innovation, networked supply and demand shaping. It’s also instructive that Apple, which most observers think of primarily as a design and software company, in reality has a vertically integrated value chain that reaches from logo-bearing, pure-play retail all the way back to superfast chipmaker Intrinsity, which was recently acquired by Apple to ‘steal a march’ on competitors looking to enhance the performance of mobile devices. Not shying away from any operational challenge, Apple’s value chain controls its most strategic nodes all the way from silicon to synapse.”
PepsiCo (#6) is cited, among other reasons, for the “increasingly high-profile role being played by CEO Indra Nooyi on matters of social justice and consumer health. These initiatives appear to be more deeply embedded in daily operations than what’s typical and may offer benefits in the future as emerging markets increasingly drive profit growth.”
The report lauds Intel (#18) for a new supply chain strategy focused on “cut[ting] cycle times by as much as half and accelerat[ing] planning in order to simultaneously double the rate at which customer requests can be met, while still dramatically reducing unit costs.” In the authors’ opinion, this “is a testament to the potential of applying supply chain principles across the entire business rather than in functional silos.”
While the report focuses on the accomplishments of large companies, it offers a number of recommendations that small and mid-size manufacturers may wish to consider too:
* Apply demand-driven principles to coordinate and integrate the functional areas of supply, demand and product management in order to better sense, shape and respond to changes in market demand.
* Take a cue from the leaders when designing your own supply chain strategy. Think outside in, starting with your customers and working back through your trading-partner network to design a profitable response. Remember that one size does not fit all. Define how many supply chain types you have and design a customized response for each.
* Balance operational excellence with innovation excellence for superior overall performance.
* Focus on acquiring, mentoring, growing and retaining supply chain talent.
* Measure your supply chain as your customer experiences it. Use the right supply chain and product metrics to consciously manage performance, and foster a culture that embraces measurement for continuous improvement.
[source: AMR Supply Chain Top 25 for 2010 report]
To learn more about the study methodology and read about the supply chain accomplishments of the companies on the list, read the full AMR Supply Chain Top 25 for 2010 report on the Gartner website.
Manufacturing success strategies: Treat suppliers like valued partners
A recent article in Entrepreneur magazine discusses a number of areas where suppliers can impact a business’s performance. These include many of the attributes on which manufacturers compete, like quality, timeliness, competitiveness and innovation. Given the important role suppliers play, it makes smart business sense to build good relationships with the key ones.
The article offers four tips for how to strengthen your supplier relationships and “be a valued customer.” Greater detail can be found in the piece, but the high-level version is this:
- Always pay on time.
- Provide adequate lead times.
- Personalize the relationship.
- Share information.
For those manufacturers who think that being the customer gives them complete control of their supplier relationships, these strategies may be a revelation. For others, they probably seem like common sense…but depending on the state of a company’s internal operations, they may not be easy to achieve. If you start with the right attitude—that is, that your key suppliers should be treated like valued partners—and leverage available tools and practices to get your product data and development processes under control, you’ll have a foundation upon which to build the good supplier relationships that are so critical to your company’s success.
Read the complete article about supplier relationships on the Entrepreneur website.
(Thanks to SupplyChainBrain.com for highlighting this article in a recent newsletter.)
A story in every surface – Vetrazzo countertops
Anyone connected to the construction industry has been hit hard by the economy in the past few years. And now, unless a company is part of the green revolution, the construction industry is going to rebound without it. Vetrazzo recycled glass and concrete countertops are a green product—that’s what led me to select one for my recent kitchen remodel (a simple 2-3 week project that ended up taking more than 2 months after I broke a water pipe, but that’s another story…). The company’s manufacturing process and unique supply chain show that it’s a company with a different approach.
Vetrazzo, the name of both the company and the product, was invented in 1996 in Berkeley, California, by a glass scientist working on his PhD, who had a passion for the environment. He had the idea of adding recycled glass to a concrete-like material to create a new type of building supply. Demand for the product grew quickly from small, handmade batches for the local building community to an installation at the Ritz-Carlton South Beach in Miami Beach, Florida.
In 2006, armed with a new management team and some venture capital, Vetrazzo opened its doors in a brand-new state-of-the-art manufacturing facility in Richmond, California.
To manufacture the countertops, Vetrazzo combines recycled glass with cement, additives and pigments, pours the mixture into a flat tray and with its patented technology, vibrates the tray to spread glass evenly throughout the cement. The slab is then baked, hand-polished and examined by eye for any flaws that need mending before it’s ready for sale.
All of the glass used in Vetrazzo is recycled, and it makes up about 85% of the total material. Most of the glass comes from curbside recycling programs. Other glass comes from windows, dinnerware, stemware, windshields, stained glass, laboratory glass, reclaimed glass from building demolition, traffic lights and other unusual sources. Every Vetrazzo surface has its own history. We track that history, and after you purchase and register Vetrazzo, we provide a Certificate of Transformation that tells you where the glass in your Vetrazzo came from.
Some color choices are offered all the time because the materials come from a readily available supply. Other colors, like Firehouse Red and Traffic-Light Red, are limited editions only available when a collection of the appropriate glass can be acquired—anything from a manufacturing defect to a demolition project could provide it. One reason for the demise of Traffic-Light Red, for example, is that the source traffic lights are now made of plastic instead of glass.
While I find the company’s manufacturing batch process and unique supply chain cool, what makes Vetrazzo interesting to me is the company’s internal drive for sustainability. They practice what they preach. They are reutilizing an old Ford plant that uses existing daylight, has a ‘negative-pressure dust booth’ to minimize air pollution, and has a system to recycle water. In the company’s blog, Message in a Bottle, you can read about Vetrazzo’s victory garden, as well as its 4-Legged Waste Diversion Program (aka – Mama Goat).
Vetrazzo’s green process and philosophy has the company well-poised for the future. I recommend visiting its website to see samples of all the different stones and read about the colorful glass that’s in each one.
New IDC survey cites importance of improving product quality
An article in Supply & Demand Chain Executive reports on new research from IDC Manufacturing Insights and IDC Retail Insights. The “Business Strategy and Supply Chain Innovation” report finds that:
Improving product quality is the top supply chain initiative for manufacturers and retailers this year, a reflection of the growing number of recalls in categories such as automotive, toys and grocery and increasing pressure on brands from retail private label.
IDC surveyed 415 manufacturers and 179 retailers in the United States for the report. A complete summary can be found in the SDCE article.
Sustainability and the supply chain: A lean operations perspective
Arena partner Bill Schneiderman of The Results Group recently wrote an article on sustainability and the supply chain for World Trade magazine.
His premise is that environmental sustainability is here to stay and that companies who marry an authentic approach to sustainability with a broader effort to make their operations more lean will achieve benefits for themselves, their supply chains, and their customers.
“Supply chain players must take notice that once again the forces of demand, public opinion and energy input cost are aligning with sustainability actions. In any reasonably imaginable economic scenario through recovery, it is likely that these forces will remain aligned. The temporary “blip,” as important as it is, will prove to have been this recession, not the push for more environmentally sustainable business. The key question going forward for any world trade protagonist is no longer whether environmental sustainability matters, but how businesses and various elements of the supply chain will respond to the threats and opportunities for innovation present in the business landscape.”
Schneiderman offers his perspective on where the big opportunities lie, discussing initiatives like the development of regional supply chains, improvements that could make rail and ship more attractive transport methods, and continued innovation in solar and other alternative energies.
Read the full article on the Results Group website.
A product designer on “going it alone”
At a Chinese contract manufacturer, an employee mounts a PCBA in a fixture before soldering a sensor.
In 2003, Adam Hocherman went big and founded a consumer electronics company called American Innovative. With the help of the U.S. government’s SBA loan program, he began turning his ideas into products that were built in China. Hocherman has written about this in a series of guest articles for CrunchGear. In Part 1 and Part 2 of “Going It Alone: How to Make Your Stuff in China,” he interleaves the experience of his manufacturing trips to China today with the process he went through to build his first product there in 2003.
Hocherman talks about why a company would pick the “go it alone–build it” route instead of licensing a product idea to another firm, and he offers suggestions on how to get the build process started. He recommends steps like having a detailed product specification so you can clearly communicate how the product should act, feel and perform, and he goes into detail on where to find manufacturing partners (for instance, through services like Alibaba and Global Sources), how to approach potential partners and how to narrow your choices.
Contracting out your design and manufacturing always has its challenges, but those challenges are greatly multiplied when you work with people many time zones away in a different language and different culture. Hocherman’s first two installments have brought back my own memories of the exhaustion of jetlag, sketchy taxi rides and having to communicate through pictures. They also remind me of the satisfaction of seeing rows and rows of pallets of my product, boxed and ready to ship to customers. I can’t wait for the rest of the series to learn how building products in China has changed since 2003 and how it has stayed the same. (Keep an eye on Hocherman’s new blog, DesignTheatre.net, for future installments as well as other articles on product design, outsourced manufacturing and starting a company.)
Don’t let a natural disaster spell disaster for your business
As a business headquartered in California, disaster preparedness has been a must since our earliest days in operation. Yesterday’s tragic earthquake in China and the spate of recent earthquakes in Haiti, Chile, Taiwan, Turkey, Indonesia and Mexico—not to mention the blizzards, extreme weather and power outages that affected nearly every part of the U.S. during the winter—are reminders that every company should have a plan for how to continue its most critical operations in the event of a natural or other type of disaster.
Many companies already know what they’d need to do to ensure continuous operations, but if yours doesn’t, the best way to start is to identify your most important priorities and figure out what steps you can take to make sure no disaster will prevent you from delivering on them.
As an example, at Arena we provide software for capturing product data and managing product development. After the safety of our people, what’s most important is making the Arena service continuously available, and we’ve gone to great effort to make sure this happens. Our primary site has full internal redundancy with automated recovery mechanisms, and we maintain a full-capacity disaster recovery site. We choose vendors carefully and fully qualify their products before relying on them in production. (Our collocation providers, for example, are officially designated as “critical infrastructure” and thus have priority for resupply in a disaster.) The bonus is that by building a system to withstand a catastrophic occurrence, we’ve built a system that’s largely immune to minor incidents and as a result has had 99.98% lifetime uptime.
If manufactured products are your business, your first priority is most likely being able to continue supplying those products to your customers. You should have a detailed business continuity plan that’s specific to your company’s situation, but here are some fairly universal steps that can help you mitigate, avoid and/or overcome several of the major causes of disruption. Even better, you can start benefiting from these measures long before any disaster occurs.
- Make sure your engineers and designers can access their work-in-progress even if they can’t get to their desks. You can do this by managing drawings, models and other CAD files in a vault (for instance, a product data management (PDM) system) and standardizing the configuration of your desktop machines. New product introduction schedules rarely have room for delays, and you don’t want your global launch threatened by a local disaster.
Bonus: When the lead designer’s hard drive crashes, you won’t lose weeks of work or fall weeks behind in development.
- Know which critical components of your product are difficult to source, know which ones have long lead times—and know at least one alternate supplier for each. You don’t want to have to stop the manufacturing line just because a supplier’s operations are knocked out or its regional transportation systems are compromised.
Bonus: You may identify new sources that can provide critical components faster or less expensively.
- Make sure your product information can’t get wiped out if a single facility is wiped out. Yes, not a surprise that we recommend managing mission-critical data in an on-demand (SaaS) tool like Arena, which has fully redundant systems and multiple sites backed up with its own continuity plan. But if you’re managing the data yourself, make sure you have the hardware and processes in place to regularly perform full backups, store them offsite and use them to periodically run test restores.
Bonus: When the power goes out at the office, your team can access information managed in the cloud from anywhere.
- Have your bills of materials (BOMs) and assembly instructions in order in case your contract manufacturer (CM) or another critical supplier is hit by a disaster and you need to move production to another location. Again, Arena makes this easy by collecting information in a central location and allowing you to invite multiple partners in to get it, but you can also try to replicate this centralization with shared servers, a well-organized (and well-labeled) system of web folders and a designated person whose role is to consolidate the pieces and keep them updated as changes are made.
Bonus: When business is good and demand is high, you can quickly and painlessly bring on an additional CM or supplier to increase capacity.
In a true disaster, a well-constructed, well-executed business continuity plan can mean the difference between success and failure. These suggestions are not a substitute for that plan, but they’re relatively simple measures that will help position your company to withstand a disaster. And when you’re prepared for the big problems, you’ll find that the disruption and inefficiency caused by the small ones are dramatically reduced.
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