Supply chain lessons
By Kevin R. Fitzgerald -- Purchasing, 2/10/2000
High-technology manufacturing often serves as an early indicator of trends that will at some point affect other manufacturing supply chains. These markets hold additional interest for industrial analysts because everything happens faster in high-tech markets. Trends that take years to develop in traditional supply chains sometimes mature in months in high-tech manufacturing, and much can be learned by closely examining electronics manufacturing trends.In the article on page 50, Senior Electronics Editor Jim Carbone dissects how buyers at electronics contract manufacturers depend on distributors to manage their supply chains. These distributors research suppliers, manage inventory, control parts flow, manage logistics, and perform a variety of other supply-chain-related tasks.
A close examination of supply trends in electronics reveals a continuing shift of responsibilities as companies determine what work should be outsourced. Years ago, many high-tech manufacturers realized that contract manufacturers could make certain products better than they could themselves, and they outsourced that work to the contract manufacturers. Now, contract manufacturers in turn have determined that electronics distributors are better positioned to manage their supply chains than they are, so they've outsourced supply chain management work to distributors. Essentially, the evolution of the electronics supply chain has involved a series of shifting responsibilities between different links in the chain, and the emergence of new links that can perform very specific work at a higher level.
This shifting of responsibilities is not unique to electronics manufacturing. Automotive manufacturers years ago determined that building of sub-assemblies and modular elements of cars was better done by their tier-one (direct) suppliers, and certain manufacturing steps were outsourced. More recently, pharmaceutical producers saw their core competencies as drug development and marketing; an avalanche of outsourcing drug manufacturing followed and continues today.
The challenge for purchasing professionals in any industry is to determine activities that are handled best by various links of their supply chain, then outsource that work to the suppliers that do it best. But it doesn't stop there. Many suppliers, especially small "specialists," need help from their major customers in order to manage their own supply.
The decision to outsource work is always difficult and often painful, but it's absolutely critical to success in today's quickly changing global marketplace. And studying what's happening in electronics supply chains can provide all buyers with a glimpse of what might be coming down the road.
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