As we discussed in the First Thing Monday newsletter (subscribe here), last week we attended E2open’s select customer and guest event in Napa Valley. Most of the customers were from the high-tech industry and represented the whole value chain from computer OEMs to peripheral providers to chipmakers and contract manufacturers. Completing the guest list were executives from the aerospace and defense and medical device industries, as well as four outside members of E2open’s board.
Most of the participants were from the business side rather than IT. In some cases they were responsible for some or all of supply chain IT. Here’s the continuation of our observations:
One executive made the audience laugh by describing how the CEO of one of his top customers once referred to his company as the “cream of the crud,” a back-handed compliment at best. Today, the two companies are engaging in joint summits to look at how both can improve their respective supply chains and reduce costs.
- Need for “transparent demand”
How much demand data to share with suppliers dominated several discussions. Some said that you should give suppliers all demand in order to get more favorable pricing and terms, while others said to show them only demand for their own products.
In all cases, though, it was agreed that it’s best to provide insights on real demand even if it changes frequently. One panelist echoed this and said that “it’s better to be fast than good” in terms of forecast accuracy.
One executive said that 8%-10% forecast error represented the best case for his company, given that there are too many external events beyond their control. Another described these events as “knife edge” as if to suggest that they can slice profitability. The need to plan for or manage knife-edge events also came up in the risk management discussions.
- Inventory visibility and “10+2” compliance
Improving inventory visibility, especially as it pertains to risk and cost management, was a hot topic. One executive described his company’s plans for supporting 10+2, the new U.S. Customs and border protection initiative that requires importers of ocean cargo to supply 10 additional data elements 24 hours before the product is loaded in foreign ports. The ocean carriers need to provide an additional two data elements, too.
The 10+2 discussion was limited to a handful of companies that ship via ocean. They do so for the heaviest goods. Most companies use air. One executive praised UPS’ Air Freight Direct, which enables companies to “clear customs in the air.” He said that this allows his firm to get products to customers in two days, saving four to five days in the cost of cash.
- Taming the “complexity monster”
Taming the “complexity monster” was a top four supply chain priority for one executive’s company. For example, his firm builds different products for two large OEMs, while his primary competitor ships one version to the same two customers. Clearly, there are cost advantages to thinning down the product line.
At the same time, one computer company executive noted that his firm offered 1.3 million different product combinations. He said it would likely get worse as buyers demand more personalized products, especially on the consumer side of his business.
- Green supply chains = good business sense
One E2open board member asked one panel about their plans for “green supply chains.” Several participants noted that there firms had an existing “social environmental responsibility program.” A peripheral company executive said that his company was already selling “green drives” that consumer less power. The general consensus was that adopting green measures (products that consumer less energy, reduced packaging, and the like) made good business sense. No one offered an idea on how to reduce the carbon footprint of all those air shipments from Asia.
- Where’s my chief process officer?
Several members complained that they had at least two different systems to manage the buying and selling processes and they weren’t connected. One executive made the argument for a chief process officer to ensure that the two processes were more uniform. Another described how his firm was working on an opportunity-to-order process that is equally as important as procure-to-pay and order-to-cash.
What do you think? Are any of these resonating? Leave a comment letting us know what you think.
