Mitigating supply chain risk continues to be an increasing area of focus for numerous businesses across the globe. Those whose facilities were impacted by the recent Oklahoma tornado, Superstorm Sandy and the like know first-hand the lessons learned and key measures necessary to prepare (as much as one can) for such natural disasters. And while preventing such events from happening is unrealistic, they perhaps serve as a learning road map for other risks impacting businesses, their key stakeholders, suppliers and customers that the global supply chain must take into account.
In fact, suppliers are the ones who are significantly less prepared than their clients to respond to climate change, according to findings in the “Reducing Risk and Driving Business Value” from the Carbon Disclosure Project (CDP) and Accenture released in Q1 of 2013. Not surprisingly, this increases supply chain vulnerability and threatens customer relationships.
What’s more, no market vertical is exempt. Climate risk impacted those electronics manufacturers in Thailand during the 2004 earthquake and tsunami. But one must not exclude such threats as the political risks based on region; health hazards and poor working conditions; cyber- and intellectual property risk; factory fires; strikes; capacity issues; and much more that we face today. Now, take a specific market vertical, such as the electronics industry which houses numerous level of activity where even the smallest change can wreak havoc on the entire process of the chain, from pre-production all the way to the consumer reporting a defect, or better yet, a product recall. For any company within this sector, having the right business partner can help an enterprise track all of the systemic challenges it faces in addition to offering solutions and implementing them while at the same time, addressing those different levels of risks in the electronics industry.
“At the high level, the challenge that we face is that we are operating supply chains that today have an enormous number of risks,” said Douglas Kent, Vice President of Avnet Velocity. “The likelihood for supply chain disruptions has never been so high. If we look at natural disasters, for example, we’ve not been lacking in the occurrence. In the automotive industry, we face the possibility that second- or third-tier suppliers may not be able to fund research and growth in that sector. The supply chain is riddled with risks, and the challenge that we all face is: ‘How can we cost-effectively de-risk the supply chain?’ Everything that we do is about removing risks on a cost-effective basis, whether that is through ensuring supply continuity or getting a better handle on demand volatility upstream and downstream. That’s where our industry is focused, and that’s where Avnet Velocity is positioned.”
Avnet addresses the challenges with innovation
Avnet Velocity (of Avnet Inc.),which serves as a liaison of sorts for those in the electronics industry, supports the functions of Avnet Electronics Marketing and Avnet Technology Solutions. The business unit is atypical of the industry in its solutions offerings, which reach across the entire market to OEMs; electronics manufacturing services (EMS) providers; component suppliers; third-party logistics services providers; and other players at regional and global levels. It’s a comprehensive attempt to help identify trouble spots ahead, smooth bumps in the system and create the specific supply chain(s) that businesses need to be the most competitive and cost-efficient enterprise in the market. In addition, the company creates new value streams that can add additional revenue to the divisions; and incubates models and new tools that can be leveraged across different customers.
So what are the new tools and models that Avnet Velocity uses to assist its customers?
The business division houses primarily nine different categories or types of solutions—some which fit better into EM and some of which fit better into its Technology Solutions (TS) business. For Avnet Electronics Marketing (EM),the company provides TAM Transfer to help its customers address demanding global requirements coming from their direct customer base.
“They come to us when they realize what customers are asking them to do is beyond their capability or when they realize it is more cost-effective to outsource it,” explained Kent. “That’s why we call it TAM Transfer.”
Additionally, the company provides a range of services on the customer side, including its Trade Services end-of-life (EOL) program. In other words, when a customer supports a product that is reaching its EOL and it has to find some way to ensure supply continuity of that component, the customer may choose to do that through Avnet because they can financially ensure supply, enabling the customer to not have to bear inventory responsibility.
Avnet Velocity’s solutions such as Control Tower or Network Design may support all the elements of the supply chain—from planning to delivery and returns—differentiating it from other solutions on the market today that may serve only one of the basic processes.
Its’ on field replaceable units (FRU) solution enables a customer who has equipment in the field to offer to customers the ability to either switch out the equipment or make repairs to the equipment from the spare inventory that Avnet will supply on a post-service basis. Additionally, Avnet can supply equipment or parts to more than 100 countries within a 24-hour period.
Successful strategies to address supply chain risk
Yet in addition to innovation come the strategies and measures businesses must initiate on a continuous basis to address the supply chain risks of today, at all multi-tiers and across all sectors—not just in the electronic components segment.
“What we are seeing right now is the trend toward and perhaps a return to the concept of segmentation,” said Kent. “The supply chain executive today must determine requirements on a per supply chain basis. That is the notion behind segmentation. I can’t think of a single customer that can honestly say [it has] a single supply chain today unless it is a single production to a single customer business. Customers all have multiple supply chains and each of the supply chains competes on a different attribute. What’s important for the supply chain executive is to determine which of the attributes is important to which supply chain, and then we can build the network that supports the attribute of choice. For example, one may focus on resiliency, things such as agility and responsiveness of the supply chain. The other supply chain may compete on cost, where the supply chain competes on inventory improvement. What is important to executives today is that we develop and deliver solutions that support the overall supply chain segmentation of that company.”
Yet as segmentation continues to take hold, important to note that not only will customers continue to face increasing challenges in today’s global economic scope today, but that they will not always have completed all the steps necessary for segmentation. They may also have not evaluated their supply chain for current effectiveness in design, processes and implementation. One of the ways that Avnet Velocity does to help combine the two elements is through its professional, consultancy-type services to help customers figure out the unknown.
“If they don’t have it figured out, then our talents, tools and methodology have to support helping them translate their business strategy into a supply chain strategy and develop solutions that support that strategy, “continued Kent. “Second, we help them do network design and create a supply chain strategy that supports their business objective.”
As the electronics supply chain continues to face such challenges as natural and manmade disasters, severe economic downturns and more, Avnet Velocity will continue to help industry executives keep their supply chains functioning and agile to proactively counter the unanticipated changes in demand and supply.