Some call it a chain, some a network, while others say it is assuming the double-helix complexity of a DNA strand. However it's portrayed, the matrix that links electronics manufacturers with their customers, suppliers, and service providers is reaching new heights of sophistication.
Just look at the representation below, which was used as a roadmap by several speakers at the recent Supply Network Conference (SNC) sponsored by EBN and the Institute for Supply Management.
It's a rabbit warren of interrelationships, a community
of co-dependency whose livelihood is governed by its weakest link.
The intricacy of this picture is placing new strains on manufacturers, whether OEMs or EMS providers, and requires a strong gravitational pull to keep each element of the supply chain in its proper orbit. And the most daunting challenge may well be the relationship between manufacturers and their supply base, particularly as business conditions within the electronics marketplace appear finally to be improving.
As one SNC speaker said, OEMs do not have to see that their suppliers are profitable. But they do have a duty to share timely, relevant data to ensure the supply base is as responsive as possible to fluctuations in demand. This practice can be bolstered by spending the time to create sound contracts capable of withstanding the rigors of upside demand as well as any unanticipated market weakness.
That requires creativity and a willingness to truly consider your supplier as a partner. Rather than operating as the eye of the hurricane, whipping the supply chain furiously about, OEMs need to adopt more of a "hive" mentality. Sure, there may be only one queen bee, but the hive operates in a symbiotic fashion that contributes to the overall health of the group.
Consider this example offered by Dr. Hau L. Lee, SNC chairman and Stanford University professor: In the mid-'90s, Hollywood studios were charging video rental retailer Blockbuster $65 for a cassette that cost $3 to make. The expense led to frequent stock-out situations. In 1998, Blockbuster brokered a deal agreeing to share retail revenue with the studios in exchange for a new cassette purchase price of $7. Blockbuster won market share, the studios gained a new and lucrative revenue stream, and consumers were reasonably assured of getting their hands on the newest Hollywood releases.
The inability to break down old barriers and review opportunities from a broader perspective is the Achilles' heel of the attenuated electronics supply chain, where multiple interests often compete rather than cooperate. But it doesn't have to be. OR
E-mail comments to Andrew MacLellan at email@example.com.