MANAGING SUPPLY CHAIN RISK IN AN OUTSOURCED RELATIONSHIP

Today's companies increasingly use outsourcing to enhance financial performance. Managing the process effectively, however, can be challenging. Original equipment manufacturer (OEM) expectations often exceed the terms and conditions of a typical outsourcing contract, and the contract manufacturers (CMs) they work with have widely varying support capabilities.

Andrew Gort is the former executive vice president of global supply chain management for Celestica and has more than 30 years of experience in material sourcing, procurement, production planning and control, inventory management, logistics, and order fulfillment in both the OEM and CM manufacturing environments.
Contact Andrew at Andrew@andrewgort.com.

OEMs who outsource manufacturing must continue to respond quickly to customer requests and new product launches. And because only OEMs have global visibility to demand, supply, and order fulfillment, they typically must still coordinate key segments of the supply chain—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 complicate 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 gaining core competency in Response Management—a new solution category that helps manufacturers effectively manage change within all their outsourcing activities. Response Management technologies provide visibility across the extended supply chain, enable manufacturers to anticipate problems and conduct real-time review of multiple action alternatives ("what-ifs") in terms of how well they meet corporate goals, and facilitate fast and intelligent response to changes that arise within the broader user community.

Response Management resolves many outsourcing-related challenges, allowing OEMs to:

Ensure adequate, timely material coverage 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.

Efficiently manage inventory liability via comprehensive tracking of all demand changes and lead times throughout the production process.

Enhance cut-in timing of lower-priced material by accurately monitoring and modeling live CM inventory data and production plans.

Optimize execution of product introductions or end-of-life, engineering changes, and sales promotions through instant, collaborative evaluation and scoring of multiple "what-if" action alternatives.

As the use of outsourcing expands, Response Management offers a promising new resource to help forward-thinking manufacturers gain competitive advantage in this crucial area.