Managing Outsourced Supply Chain Risk

With complex supply chains, multiple partners, varying support capabilities and restrictive outsourcing contract terms, it s not difficult to understand the level of variability and risk that needs to be effectively managed

Today, outsourcing is an integral part of an original equipment manufacturer s OEM- business model and while there are clear financial benefits, there are also significant operational challenges for both the OEM and contract manufacturers CM- involved. With complex supply chains, multiple CM partners, varying support capabilities and restrictive outsourcing contract terms and conditions, it s not difficult to understand the level of variability and risk that needs to be effectively managed. OEMs that outsource manufacturing remain accountable to the customer and are ultimately responsible for responding quickly to their requests. And because only OEMs have global visibility to demand, supply, and order fulfillment, they typically must still coordinate key segments of the supply network -- a daunting task with an outsourcing equation that involves hundreds of products and thousands of parts. Constant unplanned changes in demand, supply and product configuration further complicates matters -- resulting in missed shipments, low factory productivity, unnecessary inventory liability, and higher material costs. ERP and planning tools are no solution, since they tend to be batch-driven and model the enterprise rather than the extended supply chain. The answer lies in improving visibility and control across the extended supply chain through Response Management. Response Management technologies provides the real-time insight manufacturers need to anticipate potential problems, instantly review multiple action alternatives, and quickly and intelligently respond to change. These solutions provide the flexibility to model multiple extended supply chains within a single integrated system. As a result, they help OEMs respond to changes quickly and communicate the impact of those changes to their customers, outsourcing partners, and suppliers. Specifically, Response Management resolves many outsourcing related challenges, allowing OEMs to: Ensure adequate, timely material availability throughout the supply chain -- including the ability to respond to demand flexibility programs -- through immediate access to data from multiple legacy systems and real-time modeling of proposed change impacts. Simultaneously represent demand, supply, product and production capacity at all levels of the extended enterprise Support multiple layers of the supply chain simultaneously to facilitate parallel access to changing end market conditions for all supply network participants--thus eliminating the painful/costly time lags inherent with the serial ERP approach. Enhance cut-in timing of lower-priced material by accurately monitoring and modeling live CM inventory data and production plans. Facilitate OEM processes that have become extremely difficult with outsourcing such as Sales and Operations Planning, Inventory Management, New Product Introductions NPI-, End-of-Life EOL- optimization, product profit management- as well as new processes introduced with outsourcing such as contract and inventory liability management- Given the prominence of outsourcing in today s manufacturing markets, Response Management is a critical element in minimizing and managing supply chain risk in an outsourced relationship, offering a company crucial competitive advantages within an aggressive industry. Source: line56.coma>

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