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Supply Chain
Three Ways Supply Chain Affects Time-to-Market
By John Caltabiano, VP of Global Supply Chain, Jabil T
he impact of time-to-market on profitability is a given. A report published by McKinsey claimed
that on average, businesses lose 33 percent of profit by launching a proj- ect on-budget, but behind schedule by six months. In comparison, the study found that launching a product on-time, but 50 percent over budget, only resulted in a 3.5 percent loss in profitability. Now, due to the rise of the digi-
tal economy, the relationship be- tween profitability and time-to-mar- ket is becoming more powerful every day. Supply chains play three major roles in determining who gets to mar- ket the fastest.
Network Optimization. Imagine two opposing supply chain networks. The first is centralized, with all as-
pects of production confined to one lo- cation with easy access to affordable labor and global logistics networks. Upon completion, new products are shipped across the world to different end-markets where they are ulti- mately consumed. This option is per- ceived as having the lowest risk, complexity and bill of materials (BOM) cost. A distributed supply chain mod-
el, on the other hand, leverages mul- tiple manufacturing centers located much closer to end-markets. Tighter proximity means faster time-to-mar- ket, as well as enhanced flexibility to scale production based on local de- mand. Conventional wisdom states that the distributed model results in higher cost, but that perception is typically associated with BOM cost (cost before freight, duty and ship-
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ping time), not landed cost (cost in- cluding freight, duty, and shipping time). The difference is all too often ignored when designing a supply chain network. The cost of inventory, for example, sits inside shipping time, which is not factored into the BOM cost of a product. By financing idle inventory sitting on a cargo ship in the middle of the Pacific Ocean, you’re losing money.
Design for Supply Chain. When brands create a new product, there is a heavy focus on industrial engineer- ing and product management. Throughout the new product intro- duction (NPI) period engineers focus on form-fit, form-function and form- factor, while product line managers zero in on sales strategies and mar- ket trends. However, one of the big blind spots in many NPI periods is a curious lack of attention given to the sourcing, production and distribution of the product. Unfortunately, this omission can create major issues when the item reaches volume pro- duction.
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it is vital to get an early understand- ing of which parts within a product do and do not have long lead times. This allows supply chain specialists to ensure that every part is always available when the production line requires it. To reduce lead times, a brand could introduce additional suppliers, swap suppliers or even re- place parts with functional equiva- lents with higher availability. After performing an initial net-
work optimization exercise to enable faster time-to-market and lowest landed cost, supply chain teams then engage suppliers that can meet the agreed upon variables. For example, building a large part of the integra- tion in Mexico (rather than China) may require establishing new rela- tionships with sheet metal, plastics or packaging suppliers in Mexico. The domain expertise of manufactur- ing partners as well as design for supply chain tools make this process much easier. Whether it’s a prototype bill of
materials or just the back of a nap- kin, make sure to get it in front of your supply chain team as soon as possible so they can start analyzing the data and building an under- standing of which suppliers are available. The ability to work toward a
common interest is what allows teams to bring a product to market on time, before the competition, without shut- down and out-of-stock situations.
Demand-Driven Supply Chain. A traditional forecast is essentially a prediction of how many products a company thinks it will sell at specific time intervals in the future. Howev- er, since it’s impossible to predict the future with 100 percent certainty, the idea of an accurate forecast is,
By financing idle inventory sitting on a
cargo ship in the middle of the Pacific Ocean, you’re losing money.
unfortunately, a fallacy. For exam- ple, a brand may predict that they will sell 1,000 units over the coming year (which may ultimately turn out to be very accurate), but might not have an understanding of how many products they will move on March 3rd of a given year, much less what feature customization requirements the product may have on that specif- ic date.
This creates a problem because
the available product to be sold on March 3rd is determined by a num- ber that could have been loaded into the production schedule five or six months earlier. In order to compen- sate for this uncertainty, companies over-plan, hold large buffer invento- ries and continually push and pull on the supply chain. In order to drive production
schedules and product availability, many brands and their manufactur- ing partners are turning to the de- mand-driven supply chain (DDSC), an advanced planning methodology. The first characteristic of the
DDSC is that it responds to con- sumer demand in a way that is di- rectly linked to the end-consumer. Rather than relying on a traditional forecast, a DDSC can see exactly what is being consumed and respond to it. A DDSC also uses advanced an- alytics, statistics and historical data to define the levels of inventory that are required to meet a defined serv- ice level. The goal of a DDSC is to hit a service level, not to drive an accu- rate forecast. This allows product brands to move with enhanced speed and flexibility. In today’s competitive marketplace, eliminating redundan- cies, bottlenecks and waste in the supply chain can mean the difference
between winning and losing. Contact: Jabil Circuit, Inc.,
10560 Dr. Martin Luther King Jr. Street N, St. Petersburg, FL 33716 % 727-577-9749 Web:
www.jabil.com r
September, 2017
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