The LIVING Supply Chain

The Evolving Imperative of Operating in Real Time

Robert Handfield, Tom Linton

• Publisher: Wiley
• Year: 2017
• ISBN:
  9781119307228
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Gestión de la cadena de suministros

Creates a managerial compass for entering into the LIVING (Live, Intelligent, Velocity, Interactive, Networked, and Good) era of supply chain management and defines the imperative for creating Velocity and Visibility as the focal point for exploiting new digital, mobile, and cloud-based technologies

Written by well-known researchers in the field, this book addresses the changes that have occurred and are still unfolding at various organizations that are involved in building real-time supply chains. The authors draw on their experiences with multiple companies, along with references to the natural evolution of ecosystems throughout to help identify the "new rules of supply chain management." The LIVING principles associated with the rapid digitization and technology changes occurring in the global economy are discussed, along with the push to become more sustainable and responsive to customer needs.

" Handfield and Linton reveal the "secret ingredient" to leveraging the power of a well managed supply chain….will revolutionize the way companies approach supply chain management."

Frank Crespo, Vice President, Global Supply Network Division (CPO/Logistics/IoT Analytics), Caterpillar Inc.

" The LIVING supply chain is a wake up call to any enterprise that depends on suppliers and contractors. Be fast, be nimble and make supply chain transparency the nucleus of your operations or become endangered."

Paul Massih, Vice President, BP PSCM

" …a fascinating journey through the future of supply chain management … a must read for every supplychain professional."

Yossi Sheffi, Professor, MIT Center for Transportation and Logistics

" … a great "living" reading on how to bring supply chains to a powerful living state. The idea of Live-Interactive-Velocity–Intelligent–Networked-Good is the foundation of how supply chains can be agile, adaptive and aligned. …of value to every supply chain executive and practitioner."

Hau Lee, Professor, Stanford University

" Successful businesses are those that support the success of their customers. This book captures the essence of our volatile, uncertain world and the opportunities that exist for the commercially astute, organizationally integrated business. More important, it offers insight to the recipe for 21st century operations and the management of complex supply ecosystems."

Tim Cummins, CEO, International Association of Commercial and Contract Management

" A LIVING supply chain requires a living company. The authors make a great case for how Flex is creating a living company to thrive in the living supply chain."

Tom Choi, Harold E. Fear on Eminent Scholar Chair of Purchasing Management, Arizona State University, Executive Director, CAPS Research

" To survive we need to have an adaptive supply chain and capability to both optimize and adapt simultaneously. This book begins to describe the ability to shift from functional silos to E2E Frictionless flow with the maturity to make E2E tradeoff decisions as a key enabler for success."

Wayne Rothman, Vice President, Enterprise Supply Chain Planning, Johnson & Johnson

"A fantastic read and excellent stories from Dr. Handfield and Tom."

Joanne E. Wright, Vice President, IBM Supply Chain

ROBERT HANDFIELD, PhD, is Bank of America University Distinguished Professor of Supply Chain Management and Director of the Supply Chain Resource Cooperative at North Carolina State University. The author of four books and over 150 journal articles, Dr. Handfield received his PhD in Operations Management from The University of North Carolina in 1990.

TOM LINTON is Chief Procurement and Supply Chain Officer at Flex. A recognized industry and functional expert, he has 30 years of international industrial experience in procurement and supply chain management. Tom Linton is also the recipient of the Procurement Leaders Lifetime Achievement Award in May, 2017.

1
The LIVING Supply Chain

New Rules for the New Normal

It was raining hard in San Jose the morning I walked from the A-Loft Hotel to meet Tom Linton at the Flex offices.

“We don't usually get this much rain,” several locals had informed me, “but we are sure glad, because we need it. Four or five years of droughts have really depleted our water supply.”

I had driven by the site of the 2016 Super Bowl the night before – a site where the favored Carolina Panthers offense would be decimated by an attacking Denver Broncos defense, a reminder that a great defense can beat a good offense.

Our meeting began with a broad overview of Flex. The name change from Flextronics to Flex had occurred in July 2015, in response to the fact that the company was no longer a “contract manufacturer” in the traditional sense of the word.¹ Contract manufacturing was Flextronics’ original business, during the boom years of the 1990s and the Internet boom, when the company largely manufactured PCs for big names like HP, Dell, and others. Contract manufacturing was a volume business, with razor-thin margins, and it relied on a company's ability to scale up a new product assembly line anywhere in the world. I had written about Flextronics in one of the first-ever supply chain books, Introduction to Supply Chain Management, published in 1999.

“We are no longer a contract manufacturer,” Tom emphasized, “but we are in full transition to become a company that, when I think about it, hasn't ever existed before. In each of the organizations I've worked in, I like to experiment with organizational models. This is the biggest experiment of them all, and I believe we are achieving an essential alignment of procurement and the supply chain organization that is unique. We are influencing and shaping Flex's corporate strategy, but we are also totally supporting it.

“We are a capability supply chain company,” Tom said. “Supply chain is our business, but it is supply chain on steroids. We have over 200,000 employees and over 1000 customers in 18 different industries, and produce $1 billion or more in at least 12 of these verticals”, referring me to a chart showing all of Flex's business verticals (Figure 1.1). “I'm involved in the downstream supply and manufacturing side, as well as the upstream, quoting to our customers when they come to us for a new product. We call it ‘Sketch-to-Scale™’ to represent what we do from design through manufacturing. We incubate startups and drive scale for large original equipment manufacturers. We don't just make PCs anymore – but produce just about every electronic product you can think of that's out there. We make cell phones, Nike footwear, industrial products, Wink networks for the connected home, Bose speakers, Apple servers, Microsoft X-boxes, Fit-Bits, drones, and dozens of devices for the emerging connected world. We produce medical products for J&J, Cisco products, and automotive products for Ford. We're a significant player in everything from floor care (Dyson, Bissell) to industrial test equipment and solar energy and are running billion dollar businesses in each of these sectors. But you won't ever see our name or our brand on these products. We are one of the biggest companies nobody has ever heard of, and we are continuing to expand in other areas.” In late 2016, Flex announced that they are partnering with a company Rib Software to form a joint venture, YTwo Formative, to digitize the acquisition of building materials in a revolutionary set of solutions for the $9 trillion housing industry.²

Figure 1.1 Flex's Business Divisions. Source: Reproduced with permission of Flex

Droughts and Super Bowl outcomes are just two of the many uncertainties facing the population in our global ecosystem. One-in-a-thousand-years rain like the one that hit South Carolina in October 2015, the Tianjin explosion, the Bangkok monsoon flooding, and the Japanese earthquake/tsunami and resulting devastation are just a few of the natural disasters to hit global supply chains in the last few years. These disasters create disruptions, but nothing like the disruptions brought about by global terrorist events, political foment and civil unrest, worker strikes, increased challenges in border crossing, and labor issues that are part and parcel of the global supply chain. As any student of business history knows, globalization has brought about a huge number of discontinuities and disruptions. These disruptions are no longer unique and rare; they are ubiquitous, and the time between disruptions seems to be shrinking. In fact, it is a rare day when no disruptions of any kind occur.

Managing volatility would be an acceptable strategy if the return on this level of risk were high. But that doesn't seem to be the case. The press continues to talk about stock market volatility, with pundits predicting that the economic downturn in China will impact the global market. Low oil prices, low commodity prices, and low food prices had everyone worried, as this indicated that demand was also low. Growth rates were predicted to be anemic. A collection of CEOs in Davos, Switzerland, predicted doom and gloom,³ as validated by a Deloitte survey of 1700 executives who all felt that there would be negative growth in the year ahead. Britain's 2016 vote to enact Article 50 and exit the European Union (“Brexit”) has caused panic and uncertainty for Europe and the UK, with UK officials running around frantically and interest rates reaching new lows. Indeed, there seems to be no upside. Worse, experts noted that volatility “is the new normal,” and that there isn't much hope for stability.

In January 2016, economists predicted that United States and global GDP growth would hover between 1.9% and 2.4% based on slowing growth in China. The outlook in January 2017 also hovers around 2% in the face of a Trump presidency, while global GDP is predicted to be at 2.9–3.4%.⁴ Lower investment, unfavorable demographics, and weak productivity growth are the hallmarks of the global economy⁵ – certainly nothing that anyone is looking forward to. Business confidence is lower, manufacturing is “quiet,” and rapid changes in this environment are causing many supply chain executives to scratch their heads and wonder how to deal with an economy that is at best subdued. Hopes that the Trans-Pacific Partnership might boost production due to removal of the more than 18,000 taxes on American exports were dashed when President Trump withdrew from the agreement. There are increasing signs that the once-popular trend toward open borders and globalization is moving toward regionalization and protectionism (Table 1.1).⁶

Table 1.1 Real GDP Growth (%)

Country Groups	2013	2014	2015	2016	2017	2018
Aggregates
Advanced economies	1.1	1.7	1.8	1.7	1.9	1.9
High-income economies	1.2	1.7	1.6	1.5	1.9	1.9
Developing economies	5.3	4.9	4.3	4.3	4.9	5.1
Low-income economies	6.5	6.1	4.5	5.3	6.3	6.6
BRICS	5.7	5.1	3.8	4.2	5.1	5.3
Emerging market and developing economies (EMDEs)	4.7	4.2	3.4	3.5	4.4	4.7
World	2.4	2.6	2.4	2.4	2.8	3
Regions/Economies
Europe and Central Asia	2.3	1.8	−0.1	1.2	2.5	2.8
Latin America and the Caribbean	2.9	1	−0.7	−1.3	1.2	2.1
Middle East and North Africa	2	2.9	2.6	2.9	3.5	3.6
Sub-Saharan Africa	4.8	4.5	3	2.5	3.9	4.4
East Asia and Pacific	7.1	6.8	6.5	6.3	6.2	6.1
South Asia	6.1	6.8	7	7.1	7.2	7.3

Source: Reproduced with permission of World Bank

Increased complexity in the global economy is adding another layer of malaise to supply chain executives. As customers are increasingly demanding “customized” solutions, companies are forced to produce in smaller quantities, leading to what is known as “mass customization.” Increased regionalization of product regulations and even localization requirements are driving increased scrutiny of shipments across borders, as well as new packaging and traceability requirements. The move toward e-commerce and shipments to end consumers via Amazon and Ali Baba is driving smaller packages, increasing cong...