Executive Briefings

Coping With Demand Variability in the Electronics Supply Chain

The electronic industry has always been characterized by high variability in supply and demand. With recent natural disasters such as the earthquake and tsunami in Japan, and flooding in the parts of the U.S., the problem has only become more acute. Tackling it requires state-of-the-art systems, strong management commitment, good customer service, well-run business processes, integration among functions and effective inventory-control procedures, says Dave Lentz, director of innovation and solutions marketing with Avnet Electronics Marketing Americas.

Companies must strike a balance between getting the forecast right and being agile enough to respond when it's wrong. Lentz says the industry hasn't seen much improvement on the forecasting side, with companies achieving an average accuracy rate of 40 percent. Through hedging and buffer inventories, a supplier might push that number to 60 or 70 percent, although that level of accuracy has yet to be achieved with many customers. The sales and operation planning (S&OP) process continues to be "disjointed" in a lot of organizations, he says.

As a distributor, Avnet has had somewhat better success than most companies, Lentz says, aided by an S&OP process that's tied to new information-systems technology. The company uses its traditional historical and customer forecasts to manage the mature components within its supply chain. In addition, more sophisticated enterprise resource planning and other execution-based systems have resulted in somewhat better performance in demand forecasting. "There's a better awareness," he says.

"Information is flowing faster and deeper up and down the supply chain."

Benchmarking can be another important tool in improving demand planning. Avnet draws on the Supply Chain Operations Reference (SCOR) model as a basis for establishing performance metrics. Making things more complicated is the trend toward shorter product lifecycles, which tend to shrink during economic downturns.

For the future, Lentz sees the cloud as playing a bigger role in delivering IT systems and helping companies to integrate various data sources. "I'm bullish about the cloud," he says, calling it an opportunity for "getting it right for our customers."

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Keywords: High-Tech/Electronics, Business Intelligence & Analytics, Business Process Management, Collaboration & Integration, Customer Relationship Mgmt., Event Management, Forecasting & Demand Planning, Product Lifecycle Management, Sales and Operations Planning, Supplier Relationship Management, SC Finance & Revenue Mgmt., SC Planning & Optimization, Supply Chain Visibility, Cloud, SaaS & On-Demand Systems, Supply Chain Security & Risk Mgmt, Business Strategy Alignment, Supply Chain Operations Reference model, benchmarking

Companies must strike a balance between getting the forecast right and being agile enough to respond when it's wrong. Lentz says the industry hasn't seen much improvement on the forecasting side, with companies achieving an average accuracy rate of 40 percent. Through hedging and buffer inventories, a supplier might push that number to 60 or 70 percent, although that level of accuracy has yet to be achieved with many customers. The sales and operation planning (S&OP) process continues to be "disjointed" in a lot of organizations, he says.

As a distributor, Avnet has had somewhat better success than most companies, Lentz says, aided by an S&OP process that's tied to new information-systems technology. The company uses its traditional historical and customer forecasts to manage the mature components within its supply chain. In addition, more sophisticated enterprise resource planning and other execution-based systems have resulted in somewhat better performance in demand forecasting. "There's a better awareness," he says.

"Information is flowing faster and deeper up and down the supply chain."

Benchmarking can be another important tool in improving demand planning. Avnet draws on the Supply Chain Operations Reference (SCOR) model as a basis for establishing performance metrics. Making things more complicated is the trend toward shorter product lifecycles, which tend to shrink during economic downturns.

For the future, Lentz sees the cloud as playing a bigger role in delivering IT systems and helping companies to integrate various data sources. "I'm bullish about the cloud," he says, calling it an opportunity for "getting it right for our customers."

To view video in its entirety, click here


Keywords: High-Tech/Electronics, Business Intelligence & Analytics, Business Process Management, Collaboration & Integration, Customer Relationship Mgmt., Event Management, Forecasting & Demand Planning, Product Lifecycle Management, Sales and Operations Planning, Supplier Relationship Management, SC Finance & Revenue Mgmt., SC Planning & Optimization, Supply Chain Visibility, Cloud, SaaS & On-Demand Systems, Supply Chain Security & Risk Mgmt, Business Strategy Alignment, Supply Chain Operations Reference model, benchmarking