[From iSource Business, August 2001] Electronics carries a vaguely mysterious, intellectual, Einsteinian air about it. Just pick a few terms diodes, printed circuits, impedance, wattage, transistors, resistors and start throwing them around in conversation and you suddenly sound brainy. (Whether or not you really are, only you and your dictionary know for sure.)
But the plethora of electronics terms actually signifies something more than an easy ability to term-drop and impress the country club set. Construction of the electronics that increasingly permeate our lives requires an amazing amount of technological diversity and a crucial need for accuracy. A paper clip is a paper clip, but a X453BMA thermistor can only be replaced by another X453BMA thermistor, for example. Wattage, amperage, voltage and a host of other characteristics are contained in that classification, and if any digit or letter is off by one unit, catastrophe can result. A part that looks right but has the wrong impedance or configuration can cause truly PR-killing effects like house fires and class action lawsuits.
Parts, Parts Everywhere
Since the enabled supply chain is designed to help manage reams of data, it's not surprising that the electronics industry was one of the first to adopt some of the new supply chain capabilities. Michael Bittner, research director of e-fulfillment and logistics with AMR Research, says that the inherent complexities of the industry motivated the move to the enabled supply chain. Companies also saw the benefits of extending these types of capabilities beyond the four walls of the company itself. He explains, Electronics was one of the first industries to recognize the opportunities brought forth by the Internet to do Web-based procurement, supply chain visibility, and supply chain event management.
Event management, the ability to cope with problems in the supply chain, or what Bittner calls filling the gap between backbone systems and planning systems, is particularly well suited to electronics. The latest technologies allow real-time exception management of the supply chain, which can be crucial to an industry with cross-border manufacturing.
The Shortest Line Isn't Short
Bittner gives a real-world example: SANYO Electronics, one of the largest providers of televisions to Wal-Mart, has a manufacturing plant in Tijuana, Mexico. The majority of components used in their television manufacturing come from NAFTA nations (The United States, Mexico and Canada). But the small components, such as diodes, resistors and transistors, come from Singapore and Hong Kong.
Here's where things really get interesting. The components are shipped in full container loads via ocean freight from Singapore and Hong Kong to Long Beach, Calif. Those container loads have to clear customs. There then has to be an intermodal move from a drayage yard into trucks for each container, which, in turn, have to cross the border into Mexico and have all the appropriate documentation. Once the materials are used in the manufacturing of television sets, the sets are then palletized in full-load containers and shipped back to Wal-Mart distribution centers in the United States.
With so many potential snags, and a complicated scheme to work through even if a shipment goes through snag-free, to say that supply chain visibility and management is a much-needed capability is an understatement. That whole cycle can take anywhere from two days to two weeks, depending upon exceptions and border hang-ups; and believe me, SANYO would love to have it closer to the two-day than the two-week cycle, Bittner said.
Eric Schlumpf, research director with Deloitte Consulting, says that the bullwhip effect can still cause problems. He explains the plight of the consumer electronics manufacturer in this way: If I have a contract manufacturer in Taiwan who's making printed circuit assemblies for me and I'm shipping them to Guadalajara, if I ship those circuits and then the forecast changes, the logistics and distance challenges and costs associated with those logistics are high.