Deloitte A&D Alert: Optimize supply chain or be left behind
By Manufacturing Business Technology Staff -- Manufacturing Business Technology, 1/21/2008 6:00:00 AM
New information from the Aerospace and Defense (A&D) industry group of Deloitte Consulting indicates the risk of failure for A&D companies is "real and significant" if companies don't implement changes now to ensure the longevity and success of their supply chains.
"The risks are imminent," says Jim Schwendinger, vice chairman of global aerospace & defense for Deloitte. "Costs and inventories are growing, service levels are lagging, and products are not making it to customers on time or on budget. Significantly optimizing the supply for high-speed performance is an effective way to deliver what the market expects."
Achieving supply chain success likely will involve enterprisewide changes. As programs become larger and more global, the complexity of managing the supply chain grows tremendously. Aligning supply chain capabilities with the company's corporate strategy and growth objectives is key to building a sustainable, integrated model.
"Over the past year the A&D industry has suffered numerous service issues, many as a direct result of inefficient supply chains," says John Coykendall, principal, Deloitte Consulting. "These difficulties resulted in enormous cost overruns, delayed new product rollouts, and missed delivery dates. They also forced companies to make serious adjustments in production which, in turn, affected supplier networks."
These major setbacks, Coykendall says, are many times the result of supply chain breakdowns. While companies frequently attempt to improve supply chain performance, too often the approach to solving one challenge creates disruption elsewhere in the supply chain. By taking an integrated supply chain view, companies can drive improvements in performance while reducing costs.
"Supply chains have traditionally been depicted as linear streams, and this narrow view can lead to missed opportunities for improved integration of supply chain capabilities," explains Schwendinger.
Deloitte offers these five techniques to boost (A&D) supply chain performance:
1. Align supply chain and business strategy: Critical product
decisions are made early in the life cycle. Careful thinking about
aligning supply chain network strategy with business strategy early can
drive performance down the road.
2. Integrate multiple supply networks: Knowing when and where to
integrate supply chain networks is critical. Single supply chains that
serve all businesses will typically underperform on both cost and
service objectives.
3. Align and integrate supply chain planning: Poorly integrated
planning activities can be detrimental. Companies need tight
coordination and integration of demand plans, inventory plans, and
production schedules.
4. Strategically manage the supply network: Aligning the supply chain
organization to facilitate better decision-making is imperative.
Businesses must manage multiple linkages and dependencies within the
network to gain flexibility and competitive advantage.
5. Mitigate tiered risks: Companies must provide a consolidated view of
demand through multiple supply chain levels. As visibility has shifted
away from OEMs to Tier 1, supply chain managers must increase their
focus on Tier 2 and Tier 3 players that have dropped below the
radar.
