Managing Automation - October 2007 - (Page 41)

the product off the shelves one year and doubling it the next according to our volume.” A grower cooperative, Sunsweet is the world’s largest producer of dried fruit, processing more than 50,000 tons of prunes every year, along with apricots and cranberries. Sunsweet faced two years of disastrously low yields, in 2004 and 2005, immediately following on the heels of the highest-ever surplus in 2003. Management had already decided in 2000 to invest in Supply Chain Consultants’ Zemeter supply chain planning suite, which included a sales and operations planning (S&OP) tool. Zemeter allows Upton to model a variety of “what-if” scenarios and plan accordingly. The ability to quantify and mitigate the risk associated with crop yield has helped Sunsweet weather the back-toback years of low harvests. “We can quickly see the impact as we gain market and crop intelligence, and we can quickly decide what to do,” Upton says. The Zemeter S&OP tool is one type of supply chain risk management (SCRM) software package, according to Kevin O’Marah of AMR Research, which sponsored a conference on global risk management this summer. Other types of SCRM software include supply network modeling and business intelligence tools. SCRM has been getting more attention of late for a variety of reasons, he says. The proliferation of global sourcing and manufacturing has heightened the risk level for every party in the supply chain. Previously, the chief risk was supplier interruption. Now, whole new classes of risk have spr ung up, seemingly overnight: geopolitical, regulatory, logistical, currency-related, natural disaster, as well as the most basic risk: not having the right product in the right place at the right time. “The old manufacturing world was about big factories in American cities putting out goods. Then the amount of risk was very visible, but limited,” O’Marah says. “The geopolitical risks we face today are very different. The risk level is dramatically higher. It’s a matter of the much wider dependencies that are outside your immediate control.” Also, lean initiatives have reduced the size of the buffer stock that manufacturers hold, ever narrowing the margin for error. Manufacturers are turning to a variety of software products to insulate themselves from the new risks (see charts, at right and on p. 42). That is the only hope manufacturers have of keeping all the variables straight and adjusting their plans accordingly, O’Marah says. Not surprisingly, no one vendor covers all of SCRM, though the large enterprise vendors, such as SAP AG and Oracle, are moving closer to being able to make that claim. For the most part, only the larger manufacturers will be able to justify investment in those high-end SCRM tools, as implementations can easily run into seven figures. “Smaller companies don’t have enough complexity to justify a project like this,” O’Marah says. RISK TO REVENUE For $1.5 billion ON Semiconductor Corp., risk to revenue is the most compelling of all risks. “Semiconductor lifecycles are shorter, and getting shorter,” says Ravi Vancheeswaran, director of strategy and continuous improvement for the global supply chain for ON Semi. “There are risks around supply, but for us, the biggest risk is around demand.” The high-tech supply chain is particularly fragmented, with a host of new players, so demand comes through multiple channels. To better understand incoming forecasts, ON Semi asks its suppliers to “triangulate” the expected demand by giving numbers for the most likely scenario, the best-case scenario, and the worst-case scenario, so it can plan for different outcomes. The company also leverages forecast data from as many sources as possible to get the most complete view of demand. ON Semi has been using i2 Technologies Inc.’s scenario planner and demand planner for about a year, Vancheeswaran says. ON Semi spent years developing robust de- risky business Strategic risk 17% Natural disaster 15% SUPPLY CHAIN RISK FACTORS Survey respondents were asked to specify the major types of risks their businesses face: Supplier failure 28% Other 1% Intellectual property infringement 7% Geopolitical event 11% Logistics failure 10% Regulatory risk 11% Source: AMR Research 41 October 2007

Table of Contents Feed for the Digital Edition of Managing Automation - October 2007

Contents Take 1 Mailbox New Selling and Fulfillment Product Leads Plan to Transform Sterling Commerce Comtrol Closes Bizarre Chapter Involving Founder New Omron COO Outlines Four-Part Growth Agenda New Mfg. ‘Czar’ Will Have a Full Plate of Issues Lawson Embraces The Trend of Fewer Upgrades Notes Wanted: A Unified Infrastructure Needed: Greater Reliability Special Report: Innovation: Why Are So Many Coming Up Short? Transforamation: Beating the Odds in Global Supply Industries: Metals: Tracking Carbon Footprints Product Scan Advertiser Index Next

Managing Automation - October 2007

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