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New products squeeze supply chain sourcing process

Without a team of supply chain managers and executives from manufacturing and product development departments, a New Product Introduction (NPI) project can have severe ramifications on the supply chain.

Supply chain managers who do not plan for change will be forced to deal with expensive inventory write-offs, shortages of critical components and disruptions with their key suppliers. However, changes to the supply chain are inevitable, particularly in the form of New Product Introduction (NPI) projects.

Accommodating NPI projects puts tremendous pressure on the sourcing process. Sourcing professionals overseeing this process must then react to business requirements while delivering the proper supply chain replenishment model.

According to Michael Burkett, vice president of research for product lifecycle management at Boston-based supply chain research and advisory firm AMR Research, the first step in incorporating NPI into the supply chain planning process is to create a cross-functional NPI team. Such a team would include supply chain managers as well as representatives from the manufacturing, product development and marketing departments.

Once that team is in place, one of its first tasks should be to set up demand planning for the new product, Burkett said. This task should be performed largely by the supply chain and marketing team members, who can forecast that demand based on their evaluation of the new product's capabilities. They can then discuss their findings with the rest of the team.

"If you can take that business process and automate it with technology, you can institutionalize it," Burkett said.

Supply chain representatives should be prepared to counterbalance possibly conflicting requests from the other departments by pointing out how such plans might needlessly create obsolete inventory by requiring the purchase of new parts from outside suppliers. According to Burkett, an imperative for the supply chain team is to clearly present the business value of its supply chain-centric approach.

Streamlining the sourcing process

Anil Gupta, vice president of marketing at Bristlecone, a supply chain consulting firm in Milpitas, Calif., recommends applying collaboration technologies to the sourcing plan that supports NPI. The idea is to expedite sourcing by optimizing the communications processes with suppliers.

For Gupta, this means replacing email, telephone and fax collaborations that he says "fall through the cracks" with a collaboration portal or supplier collaboration network. This upgrade will allow manufacturers to publish demand changes, which in turn are instantly transmitted to suppliers. The suppliers can then immediately confirm them or propose an amendment to the requested demand -- e.g., instead of shipping 20 parts on Wednesday, the supplier might propose shipping 15 on Tuesday and five on Wednesday.

"As the manufacturer and supplier go back and forth on the portal and confirm shipping plans, the transaction can trigger and update the manufacturer's ERP system," Gupta said. "Essentially, collaboration and centralization become a lot easier, and because the manufacturer's procurement schedule is more predictable, the company can be more responsive and flexible."

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Integrated approach to supply chain management

SAP's SCM module is part of the vendor's SAP Business Suite. SAP's modular approach gives it an advantage over best-of-breed supply chain software vendors, according to Gupta, because it gives customers a fully integrated solution.

SAP's integrated approach ensures that information flows at the right velocity with the right amount of detail, Gupta said. This makes it easier for the supply chain planning system to make the appropriate recommendations to the SAP supply chain execution system. SAP's integrated SCM system has "matured substantially," he noted, and it is now as good as any best-of-breed solution on the market.

"As a result of this approach, the cost of ownership for customers has come down because people have the flexibility to choose how much supply chain planning they want to bite off at any given time," Gupta said. "Plus, the solution is modular enough for you to pick and choose how you want to roll it out to the marketplace."

About the author: Freelance writer Bruce Hoard covers computer and communications technology.

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