Supply chain blind spots

Companies are increasingly extending their operations overseas, looking for new markets, lower labor costs and better access to raw materials. Such expansion can bring advantages, but it can also introduce critical blind spots into supply chains as business and IT managers try to monitor activities thousands of miles away.

This lack of visibility can take many forms: Will we receive that shipment of repair parts in time to keep the U.K. plant running? Why hasn't that Italian customer received his order? Why do we seem to have too little inventory in our Ukraine warehouse? Why is the latest EDI transmission from Mexico missing data? How can we be sure that our Malaysian subcontractor is meeting our quality standards?

Companies attempt to enhance global supply chain visibility by a variety of means -- integrating stovepiped systems, employing technical tools such as dashboards and alerts, outsourcing some supply functions and even resorting to manual systems. Technology is important, they say, but often what's needed is just better management.

AMI Semiconductor in recent years has subcontracted out an increasing amount of manufacturing and assembly work, mostly in Asia. The resulting partnerships, some 60 of them, have helped it cut costs and cycle times but have hindered supply chain visibility, says Roland Smith, director of information services at the U.S.-based chip maker. As the company has outsourced more of its manufacturing operations, its customers have demanded more and more detailed information on quality and tests, he says.

"The need for data from subcontractors has grown dramatically," Smith says. "We have our own data formats, and very seldom do they match up with the formats in our subcontractors' systems," especially systems in less-developed countries.

However, China, where AMI's business is growing fastest, presents unique standards issues, Smith says. "They are on the leading edge of technology. They are really heavy into XML, for example, but most of our other suppliers couldn't care less about XML. As far as China is concerned, EDI doesn't exist. We have found we have to accommodate some of this in our systems," he says.

To help with the interfaces, AMI turned to Trading Grid services from GXS in the U.S. GXS scrubs and harmonizes intercompany data flows, automates the production of advanced shipping notices and other transactions between AMI and its subcontractors, and provides status information on shipments in transit. Still, getting quality data and test results from some of AMI's overseas subcontractors can be "problematic and unreliable," Smith says. "We want them to FTP it to us, but some want to e-mail it to us or do other kinds of funny things."

"Funny things" can include not being completely truthful about the results of the quality testing the subcontractor has done, Smith says. "In some parts of the world, folks get pretty inventive," he says. "It's partly a matter of making sure we collect the right kinds of data in order to highlight where there may be a compliance issue."

Smith says his staff has developed a set of IT standards and criteria for evaluating potential overseas subcontractors, but it hasn't always been easy to get business unit managers who negotiate with suppliers to apply them faithfully. "There have been some horror stories when price has become the only objective," he says.

Even the most basic communications can be problematic. E-mail worked just fine for AMI in the U.S., but time zone differences meant that a message to an Asian supplier could sit unread for hours overnight, and the reply might go unread for hours more. "We could go three or four days having a very simple conversation before we got to the real question," Smith says. AMI put in a BlackBerry infrastructure so that key engineers could be reached off-hours when technical problems arose on the other side of the globe.

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