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Clouds on the Electronics Supply Chain Horizon

Dec. 16, 2015
The global electronics supply chain hasn’t kept pace with the breathtaking innovations in the devices themselves. There have been significant improvements, sure, but much more remains to be done.

The evolution of consumer and commercial electronics the past several decades has transformed the world. The power and sophistication of today’s electronic devices, from smartphones to sensor-based equipment in manufacturing plants, to Internet and telecommunications backbone technology, is a quantum leap beyond the electronics of 20 years ago.

The global electronics supply chain has not kept pace with the breathtaking innovations in devices themselves. While significant improvements have been made, stakeholders across the electronics supply chain recognize that much more remains to be done to make electronics manufacturing and distribution more agile, transparent, collaborative and cost-efficient.

The stakes are high. Customers and partners increasingly expect speed and precision in how electronics orders and production are executed and fulfilled. They expect visibility into history and status across the full supply chain lifecycle. They want to collaborate more closely with manufacturing and distribution partners. The goal, in a sense, is the consumerization of the electronics supply chain.

“Today’s consumer-based apps and cloud-based software, for example, are updateable, affordable for the masses, and intuitive to use,” McKinsey & Company wrote in a March 2015 report, Digitizing the Value Chain. “Manufacturing leaders yearn for design and manufacturing software solutions, and for an app-store ecosystem that can reach the same bar.”

Roadblocks to Flexibility

Yet electronics companies find themselves roadblocked on the journey to a next-generation supply chain. For instance, they are uniquely positioned to leverage Internet of Things (IoT) data to drive new traceability and efficiency across the supply chain, yet are limited by legacy IT infrastructure already in place, often for a decade or more. Outdated on-premise systems are notoriously inflexible and difficult to customize to changing demands in production, inventory, distribution, supplier and partner management, and purchasing.

As a result, it can take an electronics company months of costly effort by a development team to introduce a supply chain innovation, from better forecasting to integrated IoT data. That glacial pace is distinctly at odds with the need for greater agility and efficiency in the face of increasingly complex global networks that can involve thousands of customers, partners and transactions. These weaknesses limit a company’s capacity to scale and grow — even as innovative competitors are doing exactly that.

For a growing number of electronics companies, cloud technology is proving to be a breakthrough catalyst that enables far-reaching improvements across the supply chain. Akustica, a Bosch Group subsidiary that manufactures microphones used in laptops, smartphones, tablets, wearables and other devices, is a good example.

Supply Chain Transformation

Using disparate legacy systems, Akustica faced challenges in managing production, inventory and distribution in an outsourced global supply chain spanning eight internal and partner locations in North America, Asia and Europe. With business growth and complexity on the rise, Akustica opted to replace its siloed on-premise environment with a cloud ERP solution in July 2014.

“Our legacy systems couldn’t scale to keep up with our growth," said Bryan Bishop, Akustica director of supply chain and export control officer. “Cloud ERP has been instrumental in our supply chain transformation by giving us visibility, control and automation that wasn’t possible in our previous environment. We’ve been able to grow and scale and operate much more efficiently across the business.”

The results have been remarkable. The Pittsburgh-based company has increased operational efficiency by 50% while improving inventory turns by 10 to 15%. Cloud automation enabled the avoidance of five full-time employees otherwise needed, while Akustica now has real-time transparency into production, inventory and distribution.

A Cloud Competitive Advantage

Akustica is not alone. Vertical Communications, a provider of unified communications and IP telephony solutions, and Epec Engineered Technologies, a maker of custom-printed circuit boards and other components, are two other electronic equipment manufacturers that are reaping the rewards of transitioning to cloud ERP.

Based in Massachusetts, Epec replaced an outdated, inflexible on-premise ERP application with cloud ERP in 2007. With it, personnel at headquarters in Massachusetts and facilities in Colorado, Florida, the United Kingdom and China have 24/7 access to design and production workflows. Epec has streamlined production at its Asian contract manufacturing partners, granting them direct use of the cloud ERP solution and saving four full-time personnel as a result.

Taking advantage of inherent cloud flexibility, Epec augmented its cloud ERP environment with a complementary cloud product lifecycle management (PLM) to better manage complex build-to-order work. Revenue is up 233% since cloud ERP went live, while Epec has expanded its global customer base to more than 5,000, including GE, Philips, Siemens, Raytheon, Tesla, Dolby, Honeywell and Lockheed Martin.

“We run our entire business through cloud ERP, from design to manufacturing to managing vendors in Asia,” Epec CEO Edward McMahon said. “It gives us a competitive advantage over competitors who still do things the old way with spreadsheets and disparate applications.” For its accomplishments, Epec won the 2015 Manufacturing Leadership Award in Innovation Process Leadership from the Manufacturing Leadership Council.

Agility for Global Growth

Vertical Communications, based in Santa Clara, Calif., eliminated problems of inflexibility and data inconsistency across its legacy silos by embracing cloud ERP. With cloud ERP supporting materials requirements planning (MRP), inventory management, purchase orders, shipping, global financials, CRM and customer support, the company has gained new supply chain efficiency and greater agility to compete in global markets.

“Cloud ERP has allowed us to customize processes related to supply chain, purchasing, finance and customers and bring them all together in a single solution, and that helps us better manage complexity,” Vertical IT director Ryan Smith said. “Our visibility to track and see things has increased, and our customers are getting products in a more timely manner.”

Perhaps more so than other industries, change is a constant for electronics companies. The global disruption that has unfolded in recent history is likely to continue with innovative and unexpected twists and turns. Leading electronics companies are taking a hard look at the sustainability of their IT and business systems amid ceaseless change and fierce competition, and many are charting a course to a modernized and future-proof supply chain that lives and thrives in the cloud.

Ranga Bodla, wholesale distribution industry lead, has almost 20 years of combined product management and marketing experience, with expertise in the software technology industry. In his current role, Bodla is charged with driving the overall strategy for NetSuite for the wholesale distribution industry. He previously led a global team focused on the successful go-to-market of SAP’s governance risk and compliance solutions,and product management and marketing at Pilot Software; and held product roles at Hyperion Solutions and IBM-WebSphere. He received a B.S. in Engineering from Trinity University in San Antonio. 

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