Global Logistics and Supply Chain Strategies - March 2008 - (Page 14)

Globally Integrated Supply Chains? Sounds Good on Paper. But Reality Suggests Otherwise, IBMer Says Global integration is the ultimate goal of consumer electronics supply chains. But for many companies, it remains just that—a goal. So believes George Bailey, general manager for the electronics industry with IBM Global Business Services. Speaking at the recent Consumer Electronics Supply Chain Academy in Las Vegas, he said consumer electronics companies have a long way to go before truly integrating their operations around the world. One problem is a growing lack of predictability—“There has never been less of it in chips from IBM in New York and builds product in China. The Holy Grail of globalization, however, won’t be achieved through small steps. Bailey sees a shift away from the Japanese practice of “kaizen”—meaning continuous, incremental improvement—to sweeping corporate transformation. Companies must rethink their supply chains in line with global production and global sales. (Sony, for one, is “equalizing revenue sources around the world.”) It’s time for another period of major change in the consumer electronics industry, Bailey said. “Otherwise the business goes away.” Visit www.ibm.com. So You’re Finally Getting POS Data From Your Retailer Partners. Now, What Are You Going to Do With It? Every supplier craves access to point-of-sale data from retailers. But simply achieving that goal isn’t enough. It’s what you do with the information that counts. The ability to make proper use of POS data can mean the difference between profit and loss, according to Michael Aguilar, president of the newly formed Intrepid Consulting Group LLC. “Market dynamics are constantly changing,” he said at the Consumer Electronics Supply Chain Academy. “You need to watch your demand signals.” Real information is preferable to the best internal forecast, which often is skewed according to the department that generated it. Buying teams, for example, are rewarded for having more product on hand, leading to higher inventories. “You always have to start with [asking], what is the end consumer buying every single day, and in which stores?” said Aguilar. Buying patterns should be reviewed no less than weekly, and probably twice that often. Performance scorecards, with their results fed into executive dashboards, are essential tools for achieving the desired level of visibility. POS-based planning allows for the alignment of inventory with what’s really needed on the store floor. Of equal importance, said Aguilar, is the proper management of product lifecycles. The phaseout of one item should be closely coordinated with the beginning of another. “The single biggest drain on profit is the end-of-life expense,” he said. Proper monitoring of POS data can bring that number close to zero. For new-product launches, however, such information must be supplemented by in-depth market intelligence that identifies competitive threats and opportunities. Finally, suppliers must decide who will handle the job of data gathering, cleaning, analysis and reporting. Qualified staff is a must, but it doesn’t have to come from within. Often it’s wiser to outsource the work to experts in low-cost countries, Aguilar said. Suppliers who get it right will be trusted by retailers to make key decisions on quantity and frequency of replenishment. “You become the buyer, forecaster and expert handling the entire back end,” he said. E-mail Michael Aguilar at maguilar20@mac.com. the supply chain,” Bailey said—brought on by increased outsourcing and the dispersal of staff around the world. Technology is also a barrier; many companies have multiple instances of enterprise resource planning software at their various locations. Meanwhile, the rush is on to place back-office functions in low-cost countries. That’s why India accounted for 66 percent of new jobs at IBM in 2007. Yet growth in the market value of consumer electronics companies is slowing, with return on invested capital hovering in the 3to 4-percent range. The industry, Bailey said, is becoming “a net value destroyer of shareholder wealth.” Companies might be multinational, Bailey said, but they aren’t global. Their operations are fragmented, and information moves too slowly across the chain. Still, globalization doesn’t mean centralizing the management of all operations to achieve supply chain harmony. On the contrary, it requires distributed decision-making, on the part of individuals who are close to customers. At the same time, data centers need to be shifted to where they can operate most cheaply. Even Japan is waking up to the need for a globally distributed workforce, Bailey said, noting that Nintendo gets its 14 MARCH 2008 http://www.ibm.com

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Global Logistics and Supply Chain Strategies - March 2008 Editorial GL & SCS Exclusive FastForward Up Front The Green in Green Think Inside the Box Have a Second Look Can't Happen Here Opinion: Stay in the Black as Your Workforce Fades to Gray Opinion: Four Critical Steps to Managing Change in the Supply Chain Industry Voices

Global Logistics and Supply Chain Strategies - March 2008

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