Customers and suppliers are echoing an idea that has been discussed since EDI was first introduced years ago -- the idea of supply chain integration. This could be mainly something the software providers are driving -- a nirvana where the supply chain is one transparent, integrated entity, with product flowing seamlessly from the manufacturing location to where it is needed without the cycles of drought and flood that have plagued the industry for decades.
The industry obviously hasn't gotten to that desired place, yet. Why? It could be lack of trust between players, lack of process alignment, conflicting incentives among supply chain participants, or inequitable risk-sharing arrangements. Whatever the reason, perhaps the industry has been 'barking up the wrong tree' on this issue. Perhaps total supply chain integration is not really necessary to achieve significant improvements in efficiency and profitability.
Conventional thinking about the supply chain suggests the chain is a line connects Point A (supplier) to Point B (end customer) with few stops between (distributor, contract manufacturer, third party logistics provider, etc.). We think it works in a linear fashion. In reality, the supply chain is not linear - it does not work like an assembly line where one party performs its function then moves the process along to the next guy. Instead it works similar to a spider's web - at the core are the suppliers' components, and multiple threads weave off from the center forming a network of interdependent links. And it is this interdependence that causes unforeseen -- and often undesirable -- effects when our customers try to integrate all their supply chain partners.
We should get back to a focus on simply improving the areas that can significantly affect the overall performance of the supply chain. There are many ways to do this. And the task increasingly is falling to distributors, since we operate in the middle of the supply and demand sides.
At Avnet IMS, we have learned the best way to create a better supply network is to look at the symptoms instead of the disease. Start by determining the goals of the enterprise. Next, seek the cause for the roadblocks to efficiency. Then, look at what capabilities are available to get around the issues. It's a coordinated back to basics effort.
You can have many of these coordinated systems in place and it appears as though you've implemented a complicated solution; however what you've really got is a collection of tried-and-true fundamentals that are working well together. We get used to constant change in our fast-paced industry. Sometimes we forget that changing something isn't the same as improving it.
The goal is to improve performance, without a significant amount of inventory build-up. And how do you do that? You manage the inventory at the point where it is required, using the best solution for that situation.
Distributors may have the answer to many of these point-to-point, specific problems the industry is grappling with. In-plant stores and distributor managed inventory strategies are proven supply chain solutions distributors offer that bring measurable results.