I had an opportunity to spend a couple of days earlier this week at the inaugural SCM World Leaders Forum in Dublin.   While the event was conducted under a Chatham House Rule, I am at liberty to share some statistics from the content that we co-presented with Lloyd Kaplan from the market research firm iSuppli in a breakout session to explore what the supply chain industry can learn from the recent earthquake and tsunami in Japan.

Beyond the human tragedy, the impact to the global supply chain was significant due to the scale of the disruption and the concentration of key supply chain activities near the epicentre. The response and recovery time was further complicated since many of the component suppliers affected were multiple tiers removed from final product manufacturing. Unfortunately, many companies did not have visibility to this level of detail.

Lloyd led us through a fact-based discussion on some of these challenges in Japan and highlighted some additional geographic exposure that exists in other Asian geographies. I have summarized some of these statistics from iSuppli around the percentage concentration of global product supply to provide some context for readers of Value Unchained.

Japan

  • 21% of Semiconductor Supply
  • 49% of Optical Components
  • 57% of Image Sensors
  • 40% of Microcontrollers
  • 33% of Display Drivers
  • 60% of Silicon Wafers Key Materials and Chemicals

South Korea

  • 59% of DRAM
  • 49% of Data Flash Memory
  • 27% of Display Drivers
  • 18% of Small/Medium LCD Panels
  • 51% of Large LCD Panels

  Taiwan

  • 67% of Pure Play Foundry (Globally: 150 FablessSemiconductor Firms > $30M)
  • 24% of Semiconductor Supply
  • 37% of Display Drivers
  • 58% of Small/Medium LCD Panels
  • 34% of Large LCD Panels

  China (Shanghai)

  • 80% of Mobile PCs

  China (Shenzhen)

  • 25% of Mobile Handsets

A disruption to supply from any of these locations – whether by natural disaster, geo-political instability or other cause – would have an enormous impact on the $1.77 trillion global electronic equipment market that manufactures 56% of its product in Asia.  

This is not just a conversation about Asia, or just an electronics equipment conversation.   Other industries have similar supply concentrations and many also have a large electronics component in their final product – automotive being a prime example.

So what can companies do to protect themselves from this exposure?

  • Understand the level of exposure on a revenue basis, not just for a supplier, but also within geographic regions. 
  •  
  • Maintain a formal risk management plan that highlights these risks, addresses the actions to mitigate the risks and defines the process in case of a risk event.
  •  
  • Recognize that in the event of a disruption, those that act most quickly are likely to secure most of the available contingent supply.   
  •  
  • Work proactively with key suppliers to ensure that you are seen as a priority partner in the case of a disruption.
  • Look at the business case to understand the cost vs. risk trade off of maintaining an alternate supply source in a different geographic region.

Ultimately we may see some of the larger global customers of these products apply their own pressure to diversify some of this geographic concentration, but this is more likely to be a mitigation rather than a solution to the problem.  

What additional best practices would you share in this area?



Originally posted by Lorcan Sheehan at http://blog.moduslink.com/bid/55912/What-Should-We-Learn-From-the-Tragic-Events-in-Japan-Where-are-the-Other-Areas-of-Geographic-Supply-Chain-Risk

You have made the decision to outsource your supply chain operations. Now you need to find the right partner to bring your vision to reality. As you search for the right partner — and as outsource providers pitch you — it is important to keep in mind that the proposal process is a critical first step between you and a potential partner. This is your opportunity to lay the groundwork for an outsource provider to understand your business, supply chain, goals and expectations. Here are six tips for selecting the right supply chain outsourcing partner:

TIP 1: Understand Your Business! An outsource provider can’t effectively improve your supply chain in isolation. Form a team within your organization that has a solid understanding of your supply chain, and who truly knows how to run this part of your business. This goes hand-in-hand with the next tip. …

TIP 2: Provide a Realistic View of Your Supply Chain An open and honest relationship between you and an outsource provider will lead to faster processes, more effective results and cost savings. Lack of information during the proposal stage is a major obstacle that forces outsource providers to make assumptions about your supply chain, the issues at hand, and the right solution. Be upfront about the pain points in your supply chain: If your partner truly knows what you need to solve for,  it can be more efficient and cost effective from the start.

TIP 3: Know Why You are Outsourcing To ensure a successful outsource experience, you must understand what you want to achieve and why you want to outsource in the first place. This is a crucial tip because in some cases, the cost to outsource may be higher than the solution you currently have in place. If this is the case, you have to weigh your current costs and what you will potentially lose in the long-run against the cost of an outsource solution. It is likely that you will save more money over time with a more streamlined and flexible supply chain infrastructure.

TIP 4: Collaboration is Key Always involve the outsource provider in the proposal development process, and work directly with your partner to create the business requirement document. You will benefit from a more accurate and effective proposal, and the outsource provider will be able to see which processes you have already established that are working well, and move on to identify the core problems in your supply chain faster.

TIP 5: Inquire About Your Partner’s Team Find an outsource provider that has consistency within its organization, and don’t be afraid to ask questions. From technical support and information technology to project management, manufacturing, logistics and planning, alignment across an outsource provider’s major functional groups is critical to the success of your supply chain.

TIP 6: Consider Solution Advice from Your Prospective Partner Many outsource providers have a team that is involved in solution design and delivery. They will evaluate your unique performance, service and cost challenges then map its capabilities to best meet your supply chain needs. In order for this process to work, you must collaboratively design the solution and drive support internally on your partner’s behalf.

The above is an excerpt from the white paper Discovering the Value of Supply Chain Outsourcing. Check out ModusLink’s Supply Chain Outsourcing Tool Kit to download the full white paper.



Originally posted by Bill McLennan at http://blog.moduslink.com/bid/55521/Six-Tips-for-Selecting-the-Right-Supply-Chain-Outsourcing-Partner

Matt Dattilo, Chief Information Officer for ModusLink, discusses various aspects of IT in the value chain in this brief four-part video series.

 

 

 

  1. The Role of IT in the Value Chain   (run time 0:43)
  2. IT Fundamentals for the Value Chain (run time 1:29)
  3. Role of IT in Value Chain Outsourcing (run time 1:04)
  4. Future of IT in the Value Chain (run time 1:09)

 

 

 

 

Originally posted by Contributing Blogger at http://blog.moduslink.com/bid/55254/Information-Technology-in-the-Value-Chain

To some, outsourcing may be a dirty word. However, with a firm understanding of your goals and what you want your supply chain to accomplish, an outsource partner should become a seamless extension of your business. The right partner should be able to understand your goals and configure a solution that aligns with your interests and needs.

It is natural to think that managing your supply chain in-house will save you money and keep you in control, but the truth is, you may be missing out on major opportunities for improvement. There is nothing dirty about outsourcing, you just need a squeaky-clean vision of what you want to accomplish and how you want to get there. Here are some common outsourcing misconceptions, demystified:

Misconception 1:  I will lose control of my supply chain.

The truth: Working with an outsource partner should be a collaborative effort. A successful and mutual relationship relies on a clear understanding of your needs from the start. Be upfront about your goals, and define expectations such as activity levels, process details and responsibilities. Partner with an outsource provider that has experience working with clients to define these expectations.

Remember: Outsourcing is not about relinquishing control; it’s about defining your supply chain needs, and creating the right solution.

Misconception 2: An outsource partner should adopt my internal processes.

The truth: A common trap is when a company tries to “overprescribe” what an outsource provider should do. Transferring your internal processes to an outsource environment is not effective. Outsourcing constraints could interfere with your partner’s ability to use infrastructure, processes and structure to deliver value and drive improvements.

Communicate your needs, expectations and goals, and your outsource provider will make the translation to efficient and cost-effective processes.

Misconception 3: I won’t have visibility to my supply chain.

The truth: Much like defining goals and expectations, it is critical to state your success criteria upfront. Establish the key analytics you want to track, as well as a timeframe for reporting results. Gartner estimates that better demand analytics, planning and management can increase revenue two percent to 10 percent, while better analysis of the sourcing and supply process can yield 10 percent to 25 percent reductions in total material acquisitions cost. Further, companies can reduce inventories 10 percent to 30 percent through better analysis and planning.4

Even in an outsource environment, you can still have a handle on what is happening in the process at any point in time.

Misconception 4: Offshoring is the same as outsourcing.

The truth: Offshoring happens when business processes are executed in low-cost countries. Some companies use an outsource provider to enable an offshore strategy, but many outsourcing activities are best performed close to key markets such as the U.S. and Western Europe. Outsourcing will not take away your ability to influence where supply chain activities should be performed. For example, it may be more cost-effective to set up a contact center in the Philippines, and a procurement team in China.

The above is an excerpt from the white paper Discovering the Value of Supply Chain Outsourcing. Check out ModusLink’s Supply Chain Outsourcing Tool Kit to download the full white paper.



Originally posted by Bill McLennan at http://blog.moduslink.com/bid/55282/Four-Outsourcing-Misconceptions-Demystified

At a European supply chain conference last week, I came across a phenomenon that I have seen a number of times before, but has always puzzled me. A supply chain executive from a large consumer brand was speaking not about their own supply chain success but was essentially pitching the supply chain services that they were now providing for other companies in the region. Earlier this year, I was intrigued to see another OEM with one of the largest booths at a reverse logistics conference pitching its repair capabilities to third parties.

I can understand and applaud the positive intent behind tactical local efforts to leverage excess capacity. I also fully appreciate companies such as IBM that have refocused its global supply chain expertise as part of its transition from a product to a services-centric company.

Beyond that, I struggle with the logic behind internal supply chain organizations that essentially become a ‘rogue’ service business outside of a corporate direction. 

  • How do these businesses justify the incremental capital and systems requirements associated with supporting a multi-client service business?

  • Without incremental resources, does this take away from the focus on the core supply chain activities for the company?

  • How do you allocate costs between the services business and the core supply chain activities of the company?

  • What happens to the services clients when the core supply chain business needs to change? 

  • What happens when you need to make your next capital plan or lease expansion:  Do you factor in the service business?

  • Is there a danger that the services business becomes an impediment to the difficult decisions that sometimes need to be made in the core supply chain business?

  • Is this a legitimate alternative to outsourcing in an effort to create a variable cost structure?

  • If you looked at the benefits of this versus an outsourced business model which would deliver greater company value? 

I am sure that these are highly capable supply chain organizations and I do not want to dismiss their capabilities. Maybe I am just missing something on the business logic and you, our readers, can help me understand.



Originally posted by Lorcan Sheehan at http://blog.moduslink.com/bid/55251/Has-Your-Internal-Supply-Chain-Organization-Gone-into-Business-for-Themselves-Should-You-be-Concerned

Whether you have a specific problem that needs solving or simply desire to grow your business, chances are, making the in-source to outsource transition may benefit your supply chain — and your bottom line — in many ways. Here are the top five benefits of supply chain outsourcing:
 

  1. Flexible infrastructure - By leveraging technology and process management infrastructures all over the world, you have the flexibility to use only the pieces of the supply chain you need, on a variable cost basis. Infrastructure is an outsource provider’s core capability, so you benefit from expert supply chain planning and logistics.
  2. Cost reduction - Outsourcing leads to more efficient processes. The start of the engagement typically includes a supply chain redesign, transportation optimization, a sustainable packaging review, and inventory optimization. These analyses streamline processes and result in cost savings. An outsource partner will design and execute the most effective supply chain for your needs.
  3. Global expansion - Expanding into new global markets comes down to a build versus buy decision. Outsourcing can be an effective way to test new markets on a variable cost basis where you would otherwise not justify making the investment in infrastructure.
  4. Access to new channels - Supplementing your business with new capabilities — such as rapidly deployed e-commerce solutions in multiple regions, contact center support and subscription management — can provide you with access to new channels and revenue streams.
  5. Risk management - Some outsource providers have contingency plans in place, and facilities all over the world. If one facility is affected by a natural disaster, they can shift production or redirect fulfillment to another to prevent disruption of workflow and productivity. You also benefit from your partner’s experience managing risk across multiple suppliers.


The above is an excerpt from the white paper Discovering the Value of Supply Chain Outsourcing. Check out ModusLink’s Supply Chain Outsourcing Tool Kit to download the full white paper.
 



Originally posted by Bill McLennan at http://blog.moduslink.com/bid/55160/Top-Five-Benefits-of-Supply-Chain-Outsourcing

With much fanfare Gartner announced their annual top 25 Supply Chains in Phoenix last week. We are happy to add our congratulations to those companies recognized – including 11 of our own clients. You can access the full list here.

For those of you who did not make the cut we have taken the trouble to outline some reasons for you to provide to your executive team as to why your company does not appear on the list.

We do not qualify for the list!

  • It is restricted to Global Fortune 500 companies.  Banks, energy and insurance companies are excluded to limit the list to 293 companies that can qualify.

We are restricted by our growth performance!

  • The financial metrics used include return on assets (ROA) (3 year weighted average), inventory turns and revenue growth (3 year weighted average). While supply chain can have an impact on all of these the use of revenue growth as a proxy for innovation could be seen as a stretch. That said this only accounts for 10% of the total ranking.

The ROA metric is biased towards companies that outsource their operations!

  • While this may be the case – does this raise the question from a shareholder value perspective on whether you should consider a higher level of outsourcing?

The system is geographically biased!

  • 50% of the score relates to a combination of peer and analyst votes – split 25% each. Although the U.S. share of the peer community has dropped to 59% there is still a clear advantage in recognition terms for U.S. branded companies. 

We do not talk publically about our supply chain successes!

  • Considering that Apple, who has been positioned as number 1 for the last couple of years, is among the most guarded about its supply chain success you can expect some friendly push back here. That said, there are a number of companies with an excellent financial performance that could benefit from sharing more with the analyst and peer communities.

We can all debate the merits or otherwise of the ranking system and acknowledge the potential for improvement.   What is very helpful, however, is that it is a transparent system with high visibility that generates the conversation among the C-suite about the effectiveness of supply chain.

The real question will become – what are you doing to ensure that your supply chain is among the best in class?   You could always talk to ModusLink :).



Originally posted by Lorcan Sheehan at http://blog.moduslink.com/bid/54966/Wondering-Why-Your-Company-Does-Not-Appear-in-the-Gartner-Supply-Chain-Top-25-Read-On

The following post was written by Glenn Grube, Global Director, Sales & Marketing e-Business for ModusLink.

Monetizing Access to Digital ContentToday’s installment of the Value Chain Exchange webinar series delivered an expert lineup of speakers who shared their insights on the booming realm of digital content. Specifically, the webinar focused on the migration from physical media to digital delivery, and how this transition allows companies to identify and generate new revenue streams.

David Sidebottom of Futuresource Consulting illustrated that consumer entertainment spend is on the rise with a projected compound annual growth rate of 3.7% between 2010 and 2014. David also shared research showing that the percentage of people who pay for downloadable content is on the rise. A survey issued in February 2010 and then again in December 2010 showed that the percentage of people who pay for new movie downloads jumped from 13% to 21%.

Jason Thibeault of Limelight Networks and Bill Routt of MobiTV rounded out the panel of industry experts. A key message delivered by all is that demand for digital content is increasing and end users want the ability to stream content on multiple devices seamlessly.  The growing number of multimedia devices is creating opportunity for companies to deliver digital content efficiently to these multiple platforms. The concepts of universal adaptability and multi-bit rate formats were also discussed. And while flash is still king, the speakers agree that adaptive HTTP streaming is the way of the future. 

During the question and answer portion of the event, the audience posed some great questions regarding the protection of digital content. One concept discussed that is increasing in popularity is watermarking. This technology puts an identifying mark on digital files that can be used to track the source of illegally posted content.

describe the imageThe recording of this webinar will be available in ModusLink’s resource center within a few days if you would like to hear firsthand from these industry experts. A copy of the slide deck is available now.

Is your company prepared to manage the sale and distribution of digital content? If you need guidance in this area, contact ModusLink today to learn how we can help you control and monetize access to valuable digital and multimedia content, product features and services that are delivered electronically, physically or both.

 



Originally posted by Contributing Blogger at http://blog.moduslink.com/bid/54831/Monetizing-Access-to-Digital-Content

Business MeetingSupplier reduction has been a significant trend in recent years with many companies going to single and dual source strategies, by having slimmed down supplier strategies this opens up potential risks in the supply chain...

Recently we have seen an upsurge in mergers and acquisitions (M&A) that may influence your value chain. For example, what if one of your key suppliers has been acquired by a competitor? If a supplier loses one of its major customers could this affect its future viability?

There are a number of ways companies can monitor their suppliers, including:

  • Market Intelligence:  by investing in market intelligence a company can monitor the M&A activity of competitors and the activities of suppliers. Market intelligence can either be carried out in-house or through external specialized companies.
  • Quarterly Business Reports (QBR): By setting up a structured QBR, all relevant questions can be addressed in the formal reporting process with suppliers.
  • Frequent Requests for Quotes (RFQs): By having fixed period RFQs, each company must validate all of their qualification criteria on a regular basis. 
  • Simple Credit Checks:  Perform credit checks as part of the tendering process to mitigate the risk of future problems.

Supplier rating should be an integral part of your business and all information should be maintained centrally, so that supplier rating forms can be updated easily. Supplier rating forms should include the following information:

  • Price
  • Capacity
  • Expertise
  • Percent of current spend of vendors total revenues
  • Profitability of the vendor
  • Ownership of suppliers
  • Top 5 customers
  • Future strategy

After evaluating the vendors, what actions need to be taken? If risk is identified with a vendor, a dual source strategy might be implemented where a new vendor is given a portion of the business, to reduce the risk.  In some cases a larger proportion of the business could be given to a vendor to increase its financial stability or a stake in the vendor could be purchased.

Do you see these sorts of tools and strategies used in your supply chain planning? Are there any further value chain risks on the horizon?



Originally posted by Eoghan Dillon at http://blog.moduslink.com/bid/54814/Supply-Chain-Risks-How-Well-Do-You-Know-Your-Suppliers

Value Chain Exchange Webinar The Value Chain Exchange webinar series continues tomorrow with: Monetizing Access to Digital Content.

Consumption of content is rapidly transitioning to the digital realm. The migration from physical media to digital delivery is allowing many companies to identify and generate new revenue streams – a market trend known as “monetizing digital content.” This trend is also fueled by the booming popularity of smart phones and mobile devices. This has spawned an on-demand attitude in consumers, who expect fast and easy access to news, video, music, games and more – and they are willing to pay. According to Futuresource, the rise of digital content delivery through mobile and online will continue to drive revenues, with 2009-2014 CAGR forecast at 16 percent and 24 percent respectively.

This webinar will explore key strategies to help you monetize and control access to digital content and services, including:

  • Register Today End-to-end subscription management
  • System administration and back-office provisioning
  • Piracy prevention
  • Digital lifecycle management

Featuring:

  • David Sidebottom, Senior Consultant - Digital Media, Futuresource Consulting
  • Jason Thibeault, Senior Director, Product Management, Limelight Networks
  • Bill Routt, VP Technical Operations, MobiTV

Register today



Originally posted by Jennifer Silva at http://blog.moduslink.com/bid/54749/Webinar-Alert-Monetizing-Access-to-Digital-Content

Who is responsible for customer experience in your company? Some companies answer this question by pointing to the head of Sales and Marketing.  Others describe a more distributed model of managing customer experience with Operations, Sales, Marketing, and other functions all sharing ownership.  Increasingly, however, companies are naming a dedicated C-level leader: the Chief Customer Officer  (CCO).  Over the last two-plus years, a number of companies (e.g. Philips, FedEx, SAP, Oracle, Panasonic) have decided that appointing a CCO is the most effective way to drive customer acquisition, satisfaction, retention, and profitability.

Paul Hagan of Forrester Research recently wrote articles for the Harvard Business Review and Forbes on the recent increase in companies appointing CCOs.  This trend is clearly a recent one.  Based on the research from Forrester, more than 80% of CCOs have held the job for less than two years and 55% had held the job for less than one year.  The CCO Council also makes the point that the role is new to many organizations and, as a result, poorly understood.

Everything I’ve read on this topic seems to be consistent in one point: irrespective of what title is used, companies will be most successful when someone is empowered and responsible for:

  • Creating a driving a customer strategy
  • Driving customer-centric culture and balancing the traditional focus of the C-suite on cutting costs and increasing revenue
  • Interpreting customer feedback and driving change the closes the gap between customer expectations and actual experience
  • Driving long-term customer profitability

It is my view that this is especially important in the BPO space, where the service provider’s customers have outsourced business functions critical to the success of the customers’ business and where relationships with customers tend to last for years. 

How has your company addressed these issues? Please share your thoughts and experiences in the comments.



Originally posted by Jeremiah Benge at http://blog.moduslink.com/bid/54638/Giving-Your-Customers-a-Seat-at-the-Table

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