Decoupling the Supply Chain
16 December 2008
Senior management in OEM companies increasingly find themselves assigned the role of the rope in a very real tug of war—pulled one way by customers' mounting demands and the opposite way by the company's need for growth and profitability. Many have discovered that they can keep the rope from snapping and, in fact, achieve profitable growth by recognizing supply chain management as the key strategic capability when selecting an EMS provider.
Companies that have outsourced their manufacturing often under estimate the resources and systems required by their EMS provider to ensure that their component supply chain will be properly managed. The supply chain is by far the most critical phase of manufacturing, because this is where almost all errors and delays occur. A typical procurement process can be up to 26 weeks, and needing to culminate in one week of manufacture. Sources of supply need to be managed strategically in order to reduce the total cost of acquiring materials and services. Determined to pay as low a price as possible for materials, manufacturers have not traditionally cultivated warm relationships with suppliers. An approach to supply that essentially places as many players as possible fighting for their piece of the pie and believing it results in the best pricing is less than enlightened.
The traditional view of profitability tends to be two dimensional. (sales less costs) This needs to be replaced with three dimensional thinking that brings time into the equation. In the same way that calculating the most economical batch quantity by unit cost alone ignores the cost of holding and handling inventory, simply reducing costs without regard for agility, flexibility or supplier responsiveness will damage, not help a business.
Agility is of crucial importance in today’s markets, and especially with today’s economic turmoil. Decoupling the supply chain from manufacturing is a significant step towards increasing a business’s ability to respond to change quickly and efficiently. We spoke recently to John Mayes, Managing Director of the Paragon Electronics Ltd Group. Paragon offers just that capability to a wide variety of manufacturers worldwide.
The critical nature of managing the supply chain subsequently led Paragon to adopt a unique approach to contract manufacturing which they call Electronics Manufacturing Management (Paragon EMM).
An OEM seeking out an EMS supplier who can consistently and reliably manage the supply chain has traditionally been required to compromise on their manufacturing options. To address this Paragon has evolved its EMM offering from its inception in 1997 into today’s highly sophisticated model.
It is based around Paragon’s multiple assembly facility solution which utilises a “cluster” of sites including Paragon group companies and accredited contract manufacturing partners.
Each provide ‘best fit’ manufacturing solutions through Paragon, enabling it to manage the entire process and ensure it delivers what they maintain is the ultimate no-compromise EMS solution. “EMM addresses the need for an array of manufacturing capabilities that is not limited by manufacturing technology, capacity or geographical boundaries,” explains Mayes.
With its own engineering and technical personnel managing each project, Paragon’s manufacturing network is able to fulfill a broad array of electronic manufacturing and logistical services from complex, fast turnaround NPI through to sophisticated Kanban driven JIT delivery systems for finished and tested products.
Paragon’s approach offers the opportunity to rapidly mobilise multiple sites because it has complete control of the supply of all components and can ship assembly-ready kits to a new site immediately. Furthermore, its in-house engineering team manages the transition, ensuring that nothing is lost in the transfer to whichever assembly facility is most appropriate to support changes in manufacturing requirements such as increased volumes, new production processes or test requirements etc.
Mayes concluded “By providing a single point of contact for our customers but still giving them the benefits of a centres of excellence type of approach with supply chain specialists managing procurement and logistics, working with the most appropriate, ‘best fit,’ manufacturing facilities, Paragon delivers a unique, best of both worlds, solution.”
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