For DCs that handle electronic products, it's not enough just to deliver the goods at warp speed. They also have to add value and oversee a mysterious process called distributed order fulfillment.
As any manager working in the electronics industry knows, the supply chain loop offers all too many opportunities for short circuits. Whether they deal with tiny electronic components like computer chips that go into other products or finished products for consumers,like PCs and peripherals,manufacturers and distributors in this field face daily reminders that even a minor slipup can translate into a major hit to their company's profitability.
There are several reasons for their edginess. To begin with, they have to keep the inventory moving. Nowhere is profitability so closely tied to the rapid movement of inventory than it is in electronics manufacturing and distribution.
Next, they're expected to add value, lots of value. Conditioned by the likes of Dell, consumers have come to expect highly customized products for delivery within days of the order. That means assembly at the 11th hour—most likely somewhere in the distribution process.
Then there's the challenge of coordinating the deliveries of components from multiple suppliers. The greater the number of players involved, of course, the greater the chances for disaster. And with complex electronic equipment, there are bound to be a lot of players.
Distribution at warp speed
With their notoriously short shelf life, electronic products are almost as perishable as food products. The latest models can command a premium price, but usually not for long.As soon as competitors catch up, prices plummet. Clearly, the pressure's on to get products out the door as quickly as possible.
Rapid technological advance also means rapid obsolescence. DCs that don't move electronic products right out may find themselves sitting on a pile of nearly worthless inventory. Many an electronics manufacturer has been stuck with millions of dollars in inventory that can only be written off. Some never recover.
"Inventory has become the hot potato of the electronics industry," says Rob Cushman, a senior manager with Accenture, a consulting firm whose clients include semiconductor manufacturers, PC manufacturers and wireless communications providers. To keep from being caught with that hot potato, managers like Bill Apel, director of distribution for computer manufacturer Systemax Inc., are substituting information for inventory. "With real-time information, we can cut our safety stock levels," he says. "This reduces our investment in inventory and improves our delivery service to customers at the same time."
The ability to "see" inventory in the supply chain lets companies shift products or components to where they're most needed. It's not at all unusual in the electronics industry for routing changes to be made while inventory is intransit. The greater the visibility, the easier it is for DCs and other supply chain players to adjust inventory flow for maximum profitability.
The push to add value
Distribution of electronic products is much more than storing and moving boxes. In this industry, DCs routinely handle some assembly and manufacturing. "In electronics distribution, the ability to perform value-added services is very important," confirms John Davies, co-founder and vice president of marketing for Optum, a provider of supply chain execution (SCE) software."
"People look to us [for] customization," reports Jim Smith, senior vice president of operations at Avnet, an electronic component distributor."They are looking for us to perform very specific services." These run the gamut from straightforward inventory management and parts "kitting" for assembly operations to more complex steps such as build-to-order manufacturing and programming. At Avnet's DC in Chandler, Ari z., for example, electronic chips are often diverted to special areas where they will be custom programmed to meet individual customers' specifications.
Accenture's Cushman does not expect the trend to slow anytime soon. In fact, he expects the opposite. "We see the need for value-added services increasing in coming years," he says.
A matter of coordination
Then there's the coordination challenge: Pressed by demands to cut costs without sacrificing service, more electronics companies today are outsourcing various tasks to supply chain partners that can do it for less. That has the effect of spreading responsibility for order fulfillment through the supply chain—a trend known as distributed order fulfillment.
But somebody still needs to manage the process, says Cushman. "As more functions get outsourced in an effort to reduce costs, the ability to execute involves multiple partners and multiple systems." Most companies look to software as the answer. "The ability to make this model work depends on having a distributed order management and transactions management system that can sit on top of this model and provide visibility and execution coordination for all parties involved."
Keys to success
Though the challenges may vary somewhat from company to company, most electronics industry players agree that success depends largely on the following:
Advanced technologies that can enhance supply chain management. Leading-edge supply chain execution systems, warehouse management systems (WMS), software that provides full supply chain visibility and other technology tools can be very valuable for DCs in electronics distribution.
Flexibility in inventory handling. This often requires special material handling equipment and product identification and tracking technologies that are used to identify individual components or products automatically, and divert them to locations as needed.
Highly trained employees. At least part of the work force should have a high degree of technical competence, which is often required to perform value-added services of increasing technical complexity.
The ability to cope with continuous change. The electronics industry is so fast-paced that leading companies undergo nearly constant change to keep up with new technologies and new business processes.
modify processes, not software
Jim Smith knows now that it was a big mistake. When his company, electronic component distributor Avnet, installed data-transfer technology in its Chandler, Ariz., DC several years ago, it opted to take standard software (in this case a package from Optum) and modify it to fit the facility's existing processes.
He would do things differently today. "After we implemented the new system, changes in our business forced us to go back and change the software," says Smith, the company's senior vice president of operations. "Modifying custom software is very time-consuming and often costs more than you'd expect. If we were doing it all over again, we would modify our existing business processes to fit the software, instead of the other way around."
Another disadvantage of customizing software is that you then have to customize the training manuals and support documentation, making it tougher to train multiple users, Smith continues. Then there's the dependency issue: Using custom solutions can make a user company too reliant on one individual who knows the solution well. "The more you depend on that individual," he says, "the more problems you will have if he or she leaves the company or is reassigned to another internal position."
To others about to embark on a digital adventure, Smith recommends working closely with the software vendor. Many times, vendors will upgrade their standard software offerings to meet the customer's needs, he reports. "Software that requires customization today may be the vendor's standard offering tomorrow," he says. "Software vendors are very receptive to hearing about a customer's future needs. In a sense, users are the vendor's research and development center."
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.