Capturing elusive data in extended supply chains calls for cross-functional perspective
By Staff -- Manufacturing Business Technology, 7/1/2006 6:00:00 AM
Outsourced production and more refined procurement practices actually exacerbate an already challenging task: that is, maintaining easy access to critical data. So says the summary judgment of a recent report from New York-based McKinsey & Company.
Facilitated data access is a significant goal because most data is vital to issues of quality, regulatory compliance, and demand/response management.
"Reassembling information flows throughout supply chains won't be easy, given the players' different capabilities and misaligned incentives," state the authors of the report, titled Recapturing Your Supply Chain Data. But because significant value is at stake, analysts believe it is worthwhile for manufacturers to "invest in cooperation."
Examining companies that have made the investment reveals three best practices for accomplishing the task.
1. Tailor information flows according to demand and type of product.
The value of data is dependent on the type of products involved. The McKinsey report delineates four types of supply chains (based on products):
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Fashion: unpredictable demand, rapid change, and steep decline; short life cycles; competitive, multichannel mass markets; and customer-driven design and demand.
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Engineered: unpredictable demand; long life cycles; products that evolve over time through reengineering; configurable design; and make-to-order processes.
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Stable: predictable demand; long life cycles; design configured to product, and not easily substituted.
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Commodity: unpredictable demand; long life cycles; competitive markets driven by price; and industry standards that allow easy substitution.
Information flows for trendy cell phones and portable music devices, for example, must be tailored to promote rapid coordination between designer and suppliers, with visibility of component availability, among others elements.
In contrast, highly engineered products need information flows tailored more toward visibility into supply and capacity across product lines, coupled with effective coordination of change-management information and decisions among designers, assemblers, and component suppliers.
2. Consolidate critical information.
Once managers have identified which type of information is critical, they can determine how to consolidate the relevant data for easy access. Companies must selectively invest to accomplish this. There are two useful strategies to guide investments for the biggest business impact:
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Limited investments aimed at specific business problems—i.e., information from customers and retailers about product failures; and
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Efforts to work from the top down to understand how better supply chain information can help companies meet business goals such as reduced inventory or lower transportation costs.
3. Develop capabilities to monitor information.
Lastly, companies must establish an effective way of monitoring information flows along the supply chain.
Monitoring issues include "policing …[around] capabilities," and "competing agendas," such as those between a high-margin OEM seeking information that low-margin suppliers believe is cost-prohibitive to track.
To be successful at reassembling information flow, McKinsey offers these suggestions:
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Consider the entire supply chain, which may require a radical shift in mind-set about collaboration with partners;
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Develop a cross-functional perspective, including performance metrics aligned with a functional or business unit that rewards managers for meeting group goals; and
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Create a cross-functional scorecard covering a broad range of metrics that not only reflect the needs for achieving larger goals, but also are detailed enough to indicate areas ripe for improved performance.
