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LSI
says supply chain complexity isn't always
worth it  |
November
1, 2007
By Malcolm Wheatley, senior contributing
editor
-- Manufacturing Business Technology
As companies globalize, their supply chains
gain complexity—especially when globalization
warrants greater reliance on manufacturing
outsourcing partners. It's a problem that's
more than familiar to Ashok Santhanam, chief
executive of Bristlecone, a technology and
business process consulting services provider.
Conventional enterprise applications aren't
best-positioned to minimize that complexity,
Santhanam asserts. “Transactional tools
deal with the supply network that they've
been given,” he says. “Their task
is managing at the micro level. What they
don't do is shape the decision about what
that network should look like, and how much
complexity is permissible.”
While specialist modeling tools exist—among
them offerings from i2 Technologies and Oracle—the
ultimate decision, says Santhanam, is a strategic
one, ideally made at an appropriate level
within the organization.
“With a global supply chain, the decision
about how much complexity to live with is
essentially a policy one, supplemented by
spreadsheet-type analysis. It's a trade-off
between economies of scale and lower costs
on the one hand, and shrinking the distance
between the demand point and the supply point
on the other,” he says.
Once that trade-off has been made, Bristlecone
works with clients such as Milpitas, Calif.-based
semiconductor manufacturer LSI Corp. and Toronto-based
contract electronics manufacturer Celestica
to “operationalize” the resulting
supply network, often using SAP's advanced
planning and optimization module (APO) as
the transaction and optimization engine.
At LSI, says Diana White, senior manager of
supply chain solutions, the challenge is optimizing
a fab-less network, where end-customer demands
can be met by capacity at any one of a number
of semiconductor fabrication plants and their
respective supply chains.
“When fabs aren't highly loaded, and
people aren't fighting for every wafer, it
isn't an issue. But as spare capacity shrinks,
we need to be able to plan and source across
multiple paths, and update those plans more
frequently,” explains White.
While still relying on SAP's APO—again
fine-tuned with Bristlecone's help—Celestica
is pursuing a different strategy. “Increasingly,
we were dealing with a more complex network,
with more nodes, and greater distances between
those nodes,” says Harvinder Sembhi,
VP of supply chain strategy and planning.
“We faced a choice: We could continue
to model that complexity, or simplify it.”
Simplification won out. Today, notes Sembhi,
a growing proportion of Celestica's manufacturing
takes place in eight mega-plants.
“Our objective is fewer, but larger,
plants, with suppliers co-located—or
located very close by—making just-in-time
deliveries as required,” he says. “It's
a strategy we think has put us two to three
years ahead of the competition.” |
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