It would be difficult, if not impossible today to find a manufacturing company that produces 100% of its products internally. Across many industries, OEMs and Product Companies have steadily shifted their organizations and resources towards design and final assembly, rather than manufacture production parts internally. Instead, they have focused their attention on activities that competitively differentiate their products and services in the market and as a result have outsourced many non-core activities to external suppliers. Outsourcing has become so widely adopted that it can no longer be considered a trend, but a strategy that each manufacturing company must consider in competing successfully in the market place.
This has led to a significant transformation of the traditional linear supply chain structure that is seen with many vertically integrated manufacturing companies. Responsibility and control of a large portion of production parts, components, and assemblies has been delegated to contract manufactures and their extended supply chains. As a consequence, OEMs and Product Companies no longer maintain the same degree of visibility or control that they once had over cost drivers that directly affect the price and delivery of their production parts and finished goods—exposing them to new set of operational and financial risks.
Successfully navigating this complex supply chain environment and managing the inherent financial and operational risks is difficult for OEMs and their supply networks. Supported by enterprise-centric systems and processes that were not designed to manage the complexities of operating across multiple enterprises, geographies, and through n-tiers of supply has proved ineffective in combating:
- Variability of supply & demand
- Commodity & raw material volatility.
- Sharp price performance swings of standard parts/components.
- Unforeseen capacity constraints or bottlenecks at critical points throughout the supply network.
- Widespread financial instability throughout the supply base.
This has led to resource intensive and costly fire-fighting activities that directly affect earnings certainty. It has also highlighted the changing role of purchasing and supply chain organizations, not only in function, but in overall importance to the competitiveness and performance of the company.
Tackling the problem
It begins by developing a model that reconnects your assembly and part schedules to a detailed breakdown of the components and raw materials that go into them.
Illustration of Distributed Manufacturing Environment challenges