COORDINATING RESPONSE ACROSS THE VIRTUAL ENTERPRISE

Today's brand owners face daunting challenges in managing the virtual enterprises they now have. Gone are the days of vertical integration. The trend towards outsourcing key operations to specialists who can provide unique value and drive down costs shows no signs of abating. But longer-distance contract manufacturing relationships are making the supply network less responsive to volatile demand.

In December 2005, the Electronics Supply Chain Association (ESCA) surveyed 121 leading brand owners and reported that "69 percent of brand owners say they now have less control over at least five key supply chain processes, including order promising, analyzing and managing risk, inventory liability, and forecast sharing." It's difficult to feel in control of these processes without the right information and the ability to respond quickly to changes that directly impact your business.

Randy Littleson serves as vice president at Kinaxis and has more than 17 years of management experience, having held executive-level positions at Interface Software, Spyglass, and Palindrome Corporation (a Seagate company). To discuss this topic further, join him online at blog.kinaxis.com.

Before outsourcing, if something went wrong, management could walk down the hall and ask people to work overtime to get a critical order out to a key customer. Now that manufacturing has been outsourced to plants across the globe, this isn't a viable option. Nor can companies throw things over the wall with an attitude of "We've outsourced that; it's not our problem anymore." The reality is, brand owners are still ultimately accountable for their brand, quality, compliance, and every other aspect of their performance.

What's needed is a balance where operations are managed by contract manufacturers (CMs) and suppliers, but brand owners actively coordinate activities across the virtual enterprise to ensure the desired outcome. With constant demand changes, new product introductions, and engineering revisions, the brand owner must play an active role in orchestrating the supply network.

Greater collaboration with brand owner customers benefits CMs as well, counteracting the "bullwhip effect" that many CMs face when frequent changes are propagated through the system. CMs are better at providing a responsive and efficient supply network when more information is shared and brand owners are equally focused on responding to changes.

The complexity of today's manufacturing environment—and the need to respond rapidly and effectively to changes throughout the virtual enterprise—make it crucial for both parties to stay laser-focused on their specific roles while working together to coordinate activities. Response Management solutions are designed specifically to help brand owners and CMs achieve these goals, enabling them to improve customer service while managing supply chain risk.