mart manufacturers have long recognized thatcustomer input drives product innovation.

From the overall product concept to thetiming of the launch to packaging anddelivery, customers demand innova-tion from electronics manufacturers.

The supply chain plays a crucialrole in supporting the emerging world

of customer demand. A value-drivensupply chain that responds directly to cus-

tomer needs may look quite different from supply

chains of the past. The new supply chain maintains aclose relationship with product life cycle, which is cru-cial in an industry known for short product lifetimes.A value-driven supply chain strategy helps sustain theproduct’s success in the marketplace and maximizesthe bottom line.

What are value-driven relationships within the con-text of an electronics manufacturer’s supply chain? Thekey goal of a supply chain is to transport productsthrough complex processes smoothly and without in-terruption. It requires the continuous cost-efficient flow

SA value-driven supply chain goes beyond OEM-EMS provider-supplier collabora-

tion to determine and rate success based on customer satisfaction

SUPPLY CHAIN

a key measure ofSUCCESS

BY LINDA M. TAYLOR

June 2006

VOLUME 3 • NO. 3

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of goods and information, with an emphasis on creat-ing value within each link of the process. The sharedvision is to meet or exceed customer expectations.Therefore, the chain must be resilient, and it must beable to respond directly to continually shifting demandand reduce lead times to the bare minimum.

Beyond collaborationValue-driven supply chains are a step beyond collab-oration. Each link in the supply chain must add value.And that value must be in the eyes of the customer.Companies within the supply chain infrastructure needto understand customers’ needs, then design, developand deliver the right products so they are in the rightplaces at the right time.

The role of the supply chain manager is to facili-tate and guide demand-driven processes and createpartner relationships with all supply chain members.The role is challenging, given the complexity of sourc-ing, manufacturing and distribution.

Relentless reduction of lead times is one of the mostimportant benefits a supply chain can produce for itscustomers. Equally important, the supply chain isaligned with the inventory objectives for each supplychain partner. Each link in the supply chain is a part-ner in meeting customer goals while satisfying its owngoals. The more closely these goals are aligned, themore effective the supply chain. Therefore, it takes ahigh level of commitment and collaboration to keepthe links strong and interconnected.

Progressive supply chains are lean, efficientprocesses focused on long-term success. At the coreof a value-driven supply chain’s strategy is building andmanaging highly effective relationships. This requiresconstant communication of mutual goals and frequentassessments of progress. Value-driven supply chainstrategies should embrace the following components:

1SSttrraatteeggiicc aalliiggnnmmeenntt ooff ssuuppppllyy cchhaaiinn ppaarrttnneerrss..Business goals and objectives must be consistentacross all supply chain members. When strate-

gies are aligned, each member recognizes that a bene-fit or advantage to the other participants is also a ben-efit or advantage (although indirect) to itself. Thisalignment necessitates an honest evaluation and theelimination of objectives contrary to the group’s col-lective best interest. Alignment takes the form of acommon objective of meeting the end goal of cus-tomer satisfaction.

When evaluating supply chain members, assess-ing their strategic alignment is critical.

Deciding which companies to include in the sup-ply chain is often a core decision that can lead to suc-

cess or failure in meeting supply chain objectives.Members of the supply chain should have similar

business strategies regarding inventory, quality, growth,cost containment and collaboration. There must be awillingness to share business information with those upand down the supply chain.

The partners must recognize and accept that ben-efiting the supply chain might require internal changesto support the long-term strategy of the supply chain.However, these changes should be modifications only,not major strategy changes.

Building an effective supplier management systemrequires that companies include all partners within thesupply chain that will impact its overall effectiveness.In this sense, the transportation provider should be anintegral member, since it provides the means to moveproduct among supply chain partners.

Look for carriers that understand the objectives ofthe supply chain, but that can also offer creative solu-tions in support of those objectives. Selection of astrategic transportation partner that is aligned with thesupply chain objectives is a crucial step for OEMs andEMS providers.

2AAnn eeffffeeccttiivvee mmooddeell ffoorr wwoorrkkiinngg ttooggeetthheerr..Define key players from all companies andtheir role in the supply chain. Key members

from many functions of the organization, includingprocurement, manufacturing, logistics and productdevelopment, should be involved as businesschanges and evolves.

Determine when these players will be involved, thetype of information to be shared and when informationshould be communicated. Policies and proceduresshould be developed for the relationships. Clearly out-line a standard agreement with detailed terms and con-ditions that minimize assumptions.

Define processes for planning and forecasting.Consider scenario planning to gain deeper under-standing of how processes should work. Outliningthe steps in advance of implementing the supplychain model may unearth underlying considerationsthat need to be addressed.

3CCoonnnneeccttiivviittyy aanndd vviissiibbiilliittyy aammoonngg mmeemm--bbeerrss.. Decide on a frequency and mode ofcommunication that support the objectives of

the supply chain. Access to real-time information isnecessary for time-sensitive data such as shipmentand delivery status of critical components for produc-tion or stock replenishment.

Supply chain incidents that negatively affect theflow of materials need to be communicated quickly and

SUPPLY CHAIN MEASURE OF SUCCESS

efficiently. At the same time, bogging down the sup-ply chain with too much information may be just asineffective as not communicating enough informationat critical points.

Visibility into the supply chain is just as important asconnectivity. Knowledge of all inventory locations, rela-tive to forecasts or known demand, is valuable to all sup-ply chain partners. The ability to track the precise loca-tion of products can create a marketplace advantage byutilizing a system that can easily adapt to changing cus-tomer demands. This allows faster reaction to spikes ordrops in demand. Connectivity should be driven by thedynamics of the market and the supply chain.

4CCoonnttiinnggeennccyy ppllaannss.. Add value by defining aprocess for addressing disruptions in the sup-ply chain. Invariably things go wrong, even

within the best-planned strategies. Having a plan toreact quickly and efficiently will go a long waytoward preventing an unplanned hurdle in the supplychain from becoming a problem that affects the cus-tomer.

Creating contingency plans for potential foreseeable

problems, such as stock outage, should allow for a quickresolution and prevent a significant disruption of the sup-ply chain. This may also help anticipate likely events thatcould impact the supply chain, such as material short-ages, spikes in demand, port congestion or labor strikes,and should help determine in advance how businesswould continue.

Contingency plans should allow for immediate re-action to unplanned events, minimizing the overall im-pact to the supply chain and, ultimately, to the customer.Having transportation resources planned for unexpect-ed delays in manufacturing, sudden spikes in demandor other common variables in the supply chain will al-low for quick reaction and prevent negative customer im-pact. The goal within any disruption is to make the prob-lem transparent to the customer.

5Asssseessssmmeenntt//mmeeaassuurreemmeenntt ttoooollss.. Each companyin the supply chain should determine what asuccessful relationship means in its business,

then mutually develop a program that evaluates suc-cess for itself and the supply chain. Typical measure-ments would be meeting agreed-upon standards for

due dates, quality metrics, operating costs and respon-siveness.

Different companies use different performance met-rics. Therefore, give consideration to metrics that applyacross processes, not just goals. Such metrics are thebridge for managing collaborative processes. Shared met-rics should not negate company-specific ones; the latterare valid for internal process measurement and improve-ment.

Ultimately, companies maximize the achievement oftheir own metrics through alignment and achievementof the total supply chain’s metrics. This program needsto be a continuous process that is frequently reevaluat-ed and modified to meet changing business demands.The right metrics should reinforce strategic alignmentof the entire supply chain.

The above steps create a road map to value-driv-en business relationships. A willingness to share rele-vant information at each step with a value-driven fo-cus will lead to meeting the end goal of the supplychain. It includes the sharing of ideas and informationacross the platform, recognizing that each member ofthe supply chain must be involved.

A missing, weak or broken link will result in dimin-ished effectiveness. Recognizing the value each mem-ber contributes and interfacing supply chain partnersis a dynamic and continuous process. Understandingand applying the above five steps is a challenging butworthwhile journey to maximizing the return on invest-ment in your supply chain. n

Linda M. Taylor is with the industry market-ing team at FedEx Services. She can bereached at linda.taylor2@fedex.com. Learnmore about how FedEx helps the electronicsindustry at www.electronics.fedex.com.

SUPPLY CHAIN MEASURE OF SUCCESS

At the core of a value-driven supplychain strategy is managinghighly effective relationships—withconstant communication.

Copyright© 2006 by CCMMPP MMeeddiiaa LLLLCC,, 600 Community Drive, Manhasset, NY 11030. Reprinted from ELECTRONICS SUPPLY & MANUFACTURING with permission. 6757