With the increasing frequency of product recalls and production delays, it’s easy to fall into the trap of assuming that these have become an unfortunate but unavoidable consequence of today’s outsourcing practices. But think again: they should be unacceptable to any manufacturing executive. After all, do you want to be the next Apple or another GM footing the bill for a recall?
Modern supply chains are increasingly susceptible to unexpected disruptions, yet too often brands are failing to take the right steps to avert these issues. Today’s reliance on outsourced manufacturing has introduced supply chain complexity that is difficult to manage, threatening brands’ ability to build quality products quickly. In a recent Supply Chain Matters blog on the importance of connecting product management with the supply chain, Analyst Bob Ferarri writes: “Product innovation focused supply chains are clearly more challenged in the ability to integrate product information with manufacturing and other supply chain business process needs.”
As brands continue to expand their network of manufacturing partners to leverage manufacturing capabilities and ensure low-cost manufacturing sites closer to the customer, they are too often relinquishing control over critical business processes and assets. However, outsourcing manufacturing doesn’t mean a brand should outsource — or abdicate — responsibility for oversight and monitoring. In fact, in order to remain competitive, the opposite is true: outsourcing requires orchestration. True supply chain orchestration transcends planning and execution, and requires the integration of product lifecycle management (PLM) into all supply chain activities.
A Collaborative, Gain-Sharing Model for Modern Manufacturing
Manufacturing partners’ capabilities have become an extension of brands’ own capabilities, calling for extreme visibility into multiple dimensions of the extended manufacturing network.
“Efforts to drive increased supply chain sustainability imply deeper collaboration among product design materials engineering and cross-functional supply chain teams,” writes Ferarri. “Design for sustainability and design for supply chain must come together under a singular umbrella of initiatives.”
The integration of PLM supports a collaborative, gain-sharing framework — from design to delivery — that optimizes the outsourcing process. With complete visibility into partners’ real-time facility transactional data, brands can plan more accurately and support an agile supply chain.
Making Design for Manufacturing a Priority
In industries that are characterized by complex, multi-tier supply chains or a complex BOM, where multiple suppliers and outsourced manufacturers are involved in delivering the final product, a sequential approach to new product introduction (NPI) has become extremely cumbersome and risky. This is especially true for semiconductor equipment, storage equipment, and networking and communications equipment, where product quality and delivery issues can significantly threaten success.
A decade ago, the unidirectional buy-sell model reigned. Brands “threw the product design over the wall” with an eye towards reducing costs and offloading excess capacity from their own production lines. In contrast, brands today need to monitor production events and transactions on a real-time, granular level in order to discover detailed causes (e.g. why a new product is failing on the manufacturing floor and under what conditions), immediately collaborate with partners to address issues, and adapt on the fly with decisions that impact output, inventory, costs and customer satisfaction.
The need for extreme visibility starts with design. Brands should strive for more visibility into processes by following a design for manufacturing philosophy supported by:
- The use of real-time operational details for an iterative, “continuous improvement” approach to PLM built on close collaboration between the contract manufacturer (CM) and the brand;
- Active involvement of product and test engineers working closely with the CM to design the right manufacturing process for the product, and fine-tune the design over time as needed;
- Processes and systems that support partner compliance with quality parameters, BOM changes and spec changes (e.g. ECOs and MCOs); and
- Constant monitoring of the “as designed” versus “as built” variations and ability to bring that data into a shared environment.
The focus on design for manufacturing is a valuable approach, which companies are already benefitting from. In one example, NVIDIA, a leader in visual computing technologies, supported the above philosophy with a single, global system of record that shows manufacturing specs across the entire supply chain. This resulted in a significant improvement in the productivity of product and test engineering teams, elimination of manufacturing errors and $2 million to $4 million in annual savings.
At the core of executing on a design for manufacturing model in an outsourced manufacturing world is implementing a “trust but verify” approach to working with partners. Under this approach, both parties share access to what only they have visibility to on a continuous basis (not on an episodic basis), ensuring both parties see the same information and make decisions based on a common source of truth.
For example, the brand can provide the CM with early visibility into the market success of their new product launch and end-of-life plans, while the CM can offer visibility into quality excursions, shortages and resource constraints. This not only eliminates non-value added steps from outsourced manufacturing, but also streamlines processes, maximizes productivity and strengthens the collaborative relationship. As a result, the relationship matures to involve both “gain-sharing” and “risk-sharing.”
Collaboration Platform for PLM Integration
Traditional SCM, ERP, B2B integration tools and planning solutions were built for “an arm’s length relationship” with outsourcing partners. As the industry has become more sophisticated, these tools haven’t kept up. Today, brands need a new mechanism to monitor real-time data across the entire partner base that will enable effective orchestration of cost-effective, on-time manufacturing.
To effectively integrate PLM with other process coordination across outsourced supply chains, a collaboration platform should include:
- Extensible, real-time integration of heterogeneous data sources from suppliers and manufacturing partners;
- Support for collaborative workflows, even when conversations happen over email or Skype;
- Ability to collect and analyze large volumes of transaction data at appropriate levels of granularity;
- A cloud-based platform for effective collaboration and ease of use within varying environments, regardless of CMs’ technical sophistication; and
- Analytics and data visualization to proactively identify and quickly resolve issues.
The most effective way to plan around assets and processes that brands no longer own and control within their four walls is to orchestrate outsourced manufacturing on a more granular level. With the shift of PLM as part of all critical supply chain activity, brands will be better prepared to bring high-quality products to market as quickly and cost effectively as possible.
About the Author
Hari Menon is the CEO of Serus, an innovator in precision solutions for multi-tiered supply chain management and execution. Hari regularly consults with executives at today’s leading-edge electronics and semiconductor firms who need a better way to orchestrate activities — even at a very granular level — across a network of outsourced manufacturing and supply partners. No stranger to the high-tech world, he has founded several start-ups, including Tumri, Inc. (acquired by Collective Media), Accordia (acquired by Bristlecone) and Sixth Dimension (acquired by Comverge, Inc.) Hari’s supply chain experience spans product development, product management, product marketing and management consulting at companies like i2 Technologies, Consilium and Andersen Consulting (Accenture.) He holds an MBA from Carnegie Mellon University and an M.S. in industrial engineering from Oklahoma State University.