Arrow Electronics, Inc.
Order/Demand Capture, Sourcing, Procurement, Fulfillment/Logistics, Payment, CRM, PLM, Integration & Infrastructure/ERP, Decision Support
Look to global, end-to-end supply chain orchestrators as the "next wave" of supply chain innovation for electronic components, says Arrow Electronics. The company believes that changes in the "Three Ps" – products, processes and practices – have created new challenges for managing the electronic components supply chain. Electronic components have become increasingly specialized. Today, a significant percentage of electronic components will only have a handful of customers. In addition, the number of components available is expanding and component lifecycles are shrinking. These forces combine to greatly increase forecast error rates and inventory obsolescence risks. At the same time, customers continually raise the bar on service expectations. This increased specialization has created two classes of electronic components, which require different supply chain processes. Highly specialized and complex electronic components require a supply chain that provides flexibility and minimizes inventory risk. Commodity electronic components require a supply chain that is extremely cost effective. Meanwhile, in this flat world, engineering, manufacturing and consumption often occur in different geographic regions. This has extended supply chains and amplified the bullwhip effect. Planning and execution activities have become more complex as today's supply chain managers must contend with multiple time zones, languages, currencies, business practices and cultures.
Arrow believes that the "next wave" of supply chain innovation for electronic components will be the emergence of global, end-to-end supply chain orchestrators that can create a "network effect," the phenomenon whereby a good or service becomes more valuable as more people use it. Just as the telephone became more valuable as more people acquired it, the cost and risk reduction benefits of a supply chain orchestrator will increase as more companies participate. In addition, Arrow sees these orchestrators providing decision-support tools and value-added services that optimize the total value chain. The proper decision-support tools will avoid decisions affecting individual value chain elements that sub optimize the total value chain.
Arrow believes that a network effect can be created through the aggregation of material, information and financial flows to reduce inventory risk and create economies of scale. For example, inventory levels (more specifically, safety stocks) grow exponentially as the number of inventory locations increase. Today's supply chains can stage inventory at multiple locations – suppliers, supplier hubs, distributors, original equipment manufacturers (OEMs), contract manufacturer hubs and contract manufacturers. This not only explodes inventory investments and the risk of obsolescence, it also increases transportation and inventory management costs. A supply chain orchestrator that can position the combined inventory of many suppliers, OEMs and contract manufacturers into a few strategic locations globally will reduce inventory investments, obsolescence risk, transportation costs and inventory management costs, Arrow says.
Today's supply chains typically rely on multiple, non-integrated information systems as different electronic components are managed through different supply chains or as handoffs are made between suppliers, third-party logistics providers (3PLs), carriers, customs brokers, OEMs and contract manufacturers. Best case, this creates inconsistent versions of the truth. Worst case, it prevents any version of the truth at all. The result is massive waste – distortions caused by padding forecasts, premium freight, time double-checking and verifying data, corrective actions – the list goes on and on. A supply chain orchestrator, Arrow argues, can utilize one integrated information system across the value chain and thereby eliminate massive amounts of time and resources that are wasted each and every day.
Finally, managing multiple supply chains causes a multiplier effect on transaction volumes. This applies to virtually all transaction types such as purchase orders, receipts and payables. This multiplier effect applies equally well to changes and corrective actions. More transactions create more cost. A supply chain orchestrator that can aggregate transactions will reduce transactions, transaction errors and associated costs.
In addition to creating a network effect, the supply chain orchestrator must also provide decision-support tools that can help answer questions such as: What are the supply chain risks of a given electronic component? Can our supply chain support a demand increase? What options exist if a component manufacturer discontinues a component or issues a problematic part change notification? What are the ramifications of more stringent environmental regulations? These decision-support tools must support optimization of the entire value chain. For example, a decision at the beginning of the value chain to use a lower-cost electronic component should be avoided if it can be predicted that the component will be discontinued in the near future.
Arrow believes that there is no one element or "magic bullet" that provides this "next wave" of supply chain innovation. Rather, the company says, it is the combined, total effect of many capabilities that is allowing an enterprise like Arrow to become a global, end-to-end supply chain orchestrator. These capabilities include a global partner network for sourcing electronic components around the world; a global information network integrated with the systems of many suppliers and customers; a global logistics network with distribution centers in key locations around the world; and engineering design services to help customers evaluate alternative technologies and select the best electronic components for their needs.
An orchestrator also could offer decision support tools that can help customers implement demand-pull Kanban or min/max replenishment systems; that provide customers with supply chain visibility, enabling identification of supply chain problems (such as supply/demand imbalances), determination of root causes and accurate assessment of inventory levels and risk exposures; that help customers make safer component selection and purchasing decisions – or find suitable alternatives – by allowing them to identify and compare the technical specifications and relative procurement risk; and that provide customers with a search engine to identify and compare alternative electronic components, and that automatically notify customers of part change notifications and part status changes.
Some suppliers and customers may resist joining a supply chain network out of fear that this may eliminate a potential source of competitive advantage. If their competitors are using the same supply chain network, how can they gain advantage? But Arrow believes that as its network grows over time, this resistance will fade as the benefits of participating increasingly outweigh the potential competitive issues.
In light of recent food-safety incidents and product recalls, the ability to safely monitor and manage one's supply chain represents the next wave of supply chain innovation for the clients of Avendra. Avendra continues to innovate and add additional layers of security to what were already regarded as some of the toughest quality assurance measures anywhere to monitor the supply chain. On the food side, standards start in the field and move all the way to the customer. On the room operations side, the standards start halfway around the world and continue until the products arrive in the guest's room. The company has worked across industries to strengthen food safety standards, added additional quality control measures, and developed surprise audit measures to check product at its final destination.
Integration & Infrastructure/ERP
With increased globalization and offshore sourcing, global supply chain management is becoming an important issue for many businesses. Managing a global supply chain involves a company's worldwide interests, rather than a network on a local or national level. Also, companies are faced with a more complex set of business procedures that need to be addressed in order to effectively and efficiently run the company.
Hosted solutions allow organizations to focus their IT staff on the core business applications while meeting industry regulations and providing operational improvements. Axway's B2Bi On Demand operates in a full software-as-a-service model to offer customers service provisioning, based on Axway's B2Bi Gateway Synchrony solution.
Order/Demand Capture, Decision Support
Carbon reduction and optimization is set to be the major issue as supply chain professionals face up to escalating global pressures. In response, Barloworld Optimus has launched its CAST-CO2 solution, which draws on technology not only to calculate carbon emission, but also to map out "best-case" supply chain optimization in terms of carbon footprint.
There are three certainties about to unroll on the issue of carbon: one, that it's inevitable that big changes are afoot; two, that the onus will fall on businesses; and three, that legislation will soon follow – the consequences of which could prove terminal to those not toeing the line on greenhouse gas emissions. Yet, Barloworld Optimus asserts that with the new technology now available, it only takes 25 days or even less start taking positive steps to dramatically reduce carbon emissions ahead of dire financial and other penalties likely to stem from future anti-pollution legislation. "Real-life" proving trials on the company's newly-released CAST CO2 program have returned results including 28 percent reduction in carbon emissions alongside a 9 percent decrease in transportation costs.
Procurement, Payment, Integration & Infrastructure/ERP
Think "big picture" when it comes to solutions to enable your supply chain. Basware, for example, says that e-procurement isn't just about automating purchasing transactions. It's about leveraging the visibility and insight into procurement that technology enables to gain greater control over the total financial supply chain, to help procurement professional operate more strategically and to ensure that purchasing reflects the greater values of organization. Basware says its solutions help companies do this by enabling businesses to see how their actual spend invoiced compares to contracts and purchase orders. "Now companies can truly analyze and manage their spend, have control over their purchases, and become fiscally accountable," the solution provider says.