Let’s face it — if you were to ask a group of design engineers what makes a new high-tech product or service successful, most would likely refer to the underlying technologies that differentiate it. Digging into the choices, such as which components to include, board placement, optimizing packaging for target performance goals around processing speed, battery life, size, weight, durability, ease of use, etc., is what design teams spend so much of their valuable time on.
And rightly so. An optimized design is critical to achieving performance goals and deliver a compelling user experience. Still, a design or prototype is all potential at the design change. The product’s journey to market has only just begun and the next challenge is to capitalize on its potential by implementing a successful supply chain strategy. After all, the design and execution of a product’s supply chain can be the critical catalyst for successfully setting new standards for performance, price, customer experience, market penetration, and revenue generation — or it can riddle it with cost overruns, missed time-to-market windows, and disappointing returns.
The difference between these two dramatically different outcomes is largely dependent on the design and execution of the extended supply chain. The challenge is that companies who excel in product development and technology innovation often do not have an equally robust proficiency in the process and operational side of the product journey. To quote Elon Musk, “This supply chain stuff is tricky.”
Tricky is, of course, an understatement. Throughout the end-to-end lifecycle of a product, organizations must rely on tens or even hundreds of trading partners for various parts and services. Not only are these enterprises most often geographically dispersed, but also they likely have dramatically different levels of business experience, technological sophistication, and financial wherewithal. As a result, the risks inherent in today’s supply chains are varied and volatile. Supply chains can be disrupted by anything from simple human error and global economic volatility to natural disasters to shifting industry demand for active social and environmental stewardship and — as we have all experienced most powerfully these past two years — the occasional “Black Swan” event.
Long story short? The incredible complexity of modern, multi-tier, multi-region supply chains should be readily apparent.
Finding Value Beneath the Surface
Many organizations still tend to underestimate their strategic value. Most often, though, it’s a case of not knowing what you don’t know. One way to better appreciate supply chain complexity is to think of it like an iceberg. There is actually a lot more to it than meets the eye.
For example, above the water line, you can clearly see orders being placed, product pulled from shelves, packed and shipped to a production facility. But below the surface, there are innumerable logistical, physical, digital, and financial elements that must be managed to ensure the optimal flow of product, data, and capital.
These tactical and strategic variables include things like value-add programming and kitting, master data management, trade compliance, warranty service, working capital management, multitier visibility, supply chain finance, production planning, alternate source selection, and physical and cyber security. When these elements are not expertly managed and coordinated, the risk of disruption and your total cost of ownership will increase exponentially.
A Sea of Partners
Recognizing their need for greater agility and resilience, an increasing number of enterprises are turning to external partners to help them navigate this diverse network of product and service providers. Many third-party companies offer an array of useful enabling technologies, platforms, consulting services, and more, all of which address various elements of the supply chain process, from BOM assessment and planning to forecasting, risk mapping, and logistics services.
The challenge here is avoiding the trap of even more added complexity, which could come by assembling a piecemeal assortment of providers, each with their own focus (a focus that may or may not ultimately align with the organization’s strategic and financial goals).
With time-to-market pressures, budget constraints, and customer expectations on the rise, there’s no time for trial and error.
So, here are some tips to consider as you look to engage with a strategic supply chain partner:
Seek end-to-end expertise. The supply chain extends throughout the end-to-end product lifecycle, so it is critical to find a partner who has a deep understanding of market dynamics that influence supply and demand and expertise that runs from the earliest stages of new product ideation all the way through end of life.
Address the need for advanced technologies. As digital technologies like IoT, cloud, machine learning, and AI further integrate into operational technologies, a strong supply chain partner should be able to skillfully incorporate these advanced technologies and complex physical supply networks to ensure the needed visibility to sense and respond to changes in market conditions. Fluency and expertise in the implementation of intelligent automation technologies like robotic process automation and process mining are a must have.
Focus on total cost of ownership. Like many brand owners and OEMs, component suppliers are generally all about technology innovation and new product or service development. Supply chain agility and responsiveness are rarely a core competency. So, while it may be tempting to pursue preferential pricing by buying direct from a component manufacturer, don’t forget that your calculation of the “total cost” of acquisition should include possible added expense from expedites, payment term penalties, missed production windows, and other fulfilment disruptions.
Supply chain management is definitely a team sport. It’s critical to have a partner who can help break down strategic and technological barriers between external trading partners as well as internal silos among key stakeholders like your engineering and sourcing teams. Better collaboration and coordination throughout the design-to-supply chain journey can ensure component choices will satisfy critical brand objectives around time to market, user experience, and factors like environmental sustainability, ethical sourcing, and recyclability.
Partners should act as an extension of the organization. This means facilitating the flow of products and information between the company and various trading partners. If a partner feels more like a roadblock between you and your supplier network, it’s time to move on.
There is no one-size-fits-all supply chain model. In the end, it’s about finding a partner that will take the time to understand the organization’s specific challenges and priorities and has the range of capabilities required to build a model that best meets its needs — from standard fulfilment and inventory management programs to sophisticated supply chain-as-a-service solutions.
Trust as a Cornerstone in Supply Chain Excellence
Finally, organizations need a partner they can trust. Trust can be a pretty nebulous concept, so let’s examine what trust can look like in the supply chain.
The ongoing shortages of key technologies in the high-tech sector have spurred a lot of conversation around shifting from “just-in-time” to “just-in-case” inventory strategies. Most component distributors should be able to establish a buffer inventory program for customers but inventory for inventory’s sake can tie up precious capital resources and may add potential obsolescence risk if buffer stock ultimately goes unused.
In addition, assurance of supply is just one element of an effective supply chain resilience plan. Agility and visibility are also critical. A strategic distributor works closely with customers and suppliers to facilitate a more open exchange of capabilities and requirements, ensuring resources are best aligned to achieve the common goal of meeting market demand on time and at the right price. With techniques like scenario planning, value at risk calculations, deep-tier supply chain mapping and alternate source identification, distributors should work alongside their customers and supply chain partners to outmaneuver disruptions more quickly and cost-effectively.
As the commoditization of technologies makes it increasingly more difficult for companies to differentiate themselves, supply chain and operations have become a new frontier for competitive advantage. Companies today cannot, and should not, rely solely on the technical superiority of their product or a marked price advantage. As mentioned at the start, it goes beyond just the product design. Sustainable growth and profitability are the result of delivering a differentiated, value-rich customer experience throughout the entire product lifecycle. This requires both leading-edge technical and best-in-class supply chain execution.
This article was written by David Paulson, Global Vice President, Avnet United and Avnet Velocity® (Phoenix, AZ). For more information, visit here .