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In 1996, a consortium of small companies called the Virtual Enterprise Inc. (a "virtual prime contractor" and 45 associated affiliates) barnstormed major A&D suppliers with a truly interesting concept - Virtual Manufacturing. Their focus was on reverse engineering and manufacturing out-of-production and low-quantity parts in support of the U.S. Department of Defense, and their OEMs. This "on-demand manufacturing" model required a combination of rapid prototyping, machining, composites production, and other electronics, mechanical and structural manufacturing facilities. All of these were independent companies, associated by virtue of the (at that time fledgling) internet. While Virtual Enterprise Inc. of Oklahoma disappeared from the scene over the intervening years, the concept of a virtually linked enterprise has surfaced again, and - enabled by incredibly effective IT applications and networks - it seems to be back with a vengeance.
Recently, the National Council for Advanced Manufacturing has been sponsoring a series of annual forums on network-centric manufacturing, or NCM. In its new incarnation, NCM has a substantially broader scope, and is defined as "a distributed (even global) enterprise that provides the capability for manufacturing that is customer focused and information based. It builds from the best available capabilities and embraces innovation; it also promotes competitiveness and is resistant to disruptions. The NCM enterprise consists of all the various entities that are required to yield the intended and desired outcomes--including the customers, prime integrators, OEMs and suppliers, both large and small."
From their second forum in October 2008, the thought leaders behind this initiative determined that network-centric manufacturing is a distributed (even global) enterprise capability for manufacturing that is being driven by the globalization of markets, new information systems, diverse technology profusion, and the need for market reach and rapid innovation. The council believes that the primary advantage of NCM over its predecessor--hierarchical structures and serial supplier chains--is that networks have the potential for greater speed, robustness, and innovation.
There is indeed a burgeoning level of information exchange that is widening and strengthening the information highways of our modern day supply chains. The virtual linkages of supply and demand information promulgated by ERP systems among hierarchical supply chain entities are rapidly expanding, especially with the advent of interest in predictive supply chain metrics. Beyond supply and demand information, a dramatic escalation of design information sharing activity has appeared resulting from collaborative design. Supported by integrated PLM applications, the ramping volumes of design information are driven by the data-intense nature of 3-D solids models containing all of the associated dimensions, tolerances and material characteristics.
Supply chain managers - prepared or not - now face five major challenges associated with the new network-centric manufacturing environment:
Constellation-based operating models. When going after new market segments in the consumer goods industries, or competing for a new DOD contract in the A&D realm, today's suppliers are tomorrows competitors and the day after tomorrow's prime contractors (and thereby your customers). The continual reconfiguration of customers, suppliers and competitors makes the modern supply chain a constellation, with revenue flow the rough equivalent of gravitational pull in this business model. Supply chain managers are required to share information at unprecedented volumes with the other "planets" in this constellation, and in many ways they will be moving targets. The skills required in this environment are far broader than just negotiating for price, delivery and quality. They require the ability to step back from any individual PO or contract, and grasp the best overall business case for the total supply chain cost enabling each deal. The supply chain manager must be constantly evaluating what configuration of relationships will provide the best overall and long-term business results for the company.
Security. In the NCM model, security of information and intellectual property becomes a very complex challenge. In long-range partnerships between business entities in a collaborative supply chain, critical data such as cost build-up information and pricing structures is often shared. However, in this new constellation-based operating environment, supply chain partnerships are usually more temporal, and it is difficult to share these types of information without impairing competitive advantage in other future deals. The second half of this problem is that most A&D programs and many high-tech commercial product lines are subject to International Trade in Arms Regulations (ITAR), Export Administration Regulations (EARS), and other regulations that make the effective containment of manufacturing information and other data a hard-and-fast requirement. This means that supply chain managers, most of whom are certainly not cyber-security experts, need to understand with precision what data management is willing to share -- when, and with which suppliers -- as well as the regulatory constraints applicable to the areas within which they are working. They will need to be able to validate compliance with those policies and regulations throughout the course of their work.
Technological advances. NCM necessarily includes a broad array of systems applications and infrastructure elements that are each periodically upgraded or replaced. There are a number of different approaches to maintaining the availability and fidelity of data across the constellation of supply chain participants as this occurs, including middleware, systems oriented architecture (SOA) and cloud computing structures. Whichever strategy is employed, the maintenance of a vital system in this environment is analogous to keeping a living organism healthy as it grows. Supply chain managers in this world must be closely supported by IT experts who are members of the supplier management team, and faithfully nurture the ever-evolving network of systems and data. Moreover, to some degree supply chain managers must understand the technology themselves, at least to the extent that they are able to represent the general approach to suppliers and other parties participating in the supply chain.
The evolving nature of products and services contracts. In both the commercial and public sectors, the nature of product and service contracts is morphing. Many years ago, Bill Gates pointed to a future of information appliances that merely delivered content - a merging of all of the types of the telecommunications and computing devices that have been traditional parts of our lives - telephones, televisions, cameras, personal computers, and so on. In our current world of cell phones that play videos, surf the internet, and capture-and-send multi-megapixel images, it is clear that Gates's vision is well on its way to being a reality. Whether it is automobiles with longer and longer warranties or cell phones with service contracts based on monthly usage that is irrespective of whether the actual handset is swapped out, our buyer/seller relationship model is moving toward a model of usage and service that places less and less emphasis on the actual product sold by the OEM. One of the clearest examples of this is the most recent push by the U.S. Department of Defense, which is moving more and more of its contracts to a Performance-Based Logistics (PBL) footing. Rooted in an approach often referred to as "Power by the Hour," these contracts cannot be satisfied by merely selling an aircraft or a tank - they require the provision of spare parts and support through maintenance, upgrades, overhauls, etc. It is hours of service time that the customer requires; not just ownership of hardware. In this environment, the network requirements are much more substantial, since satisfying the terms of contracts like these involves the capture and communication of performance data, supply data for service parts and service labor, and in the most advanced scenarios, predicting component failure and provisioning for replacement in time to avoid lost hours of service. In this truly network-centric environment, supply chain professionals are intimately involved throughout the life cycle of the product.
Planned innovation. In the case of many new product lines and service lines, initial investors and supporters are banking on the development of some key technological breakthrough or innovation that lies just over the temporal horizon. This puts one or two suppliers in a pivotal position for the entire development program. When a substantial mutual investment underlies the new product line or program, success or failure of the entire supply chain hinges on bringing that single innovation in on time and at or near budget. As products and services become increasingly rich in technology, this type of planned innovation is becoming more the rule than the exception. Supply chain managers in these situations are best equipped to effectively monitor and oversee suppliers involved in these activities when they are experienced with new product introductions and development program management. In network-centric manufacturing, the network carries information that enables the collaboration of multiple suppliers as they compare data, respond to changing conditions (such as required changes in the size of the electronic "envelope" within which components must fit in next assembly structures) and progress made (or not made) in the innovation / development process. For this reason, supply chain managers who understand at least at a conceptual level the types of design and performance data required for this multi-partner collaboration will fare best.
Network-centric manufacturing is neither the cause nor the effect of the transformation occurring in supply chain management today. It is simply one descriptive term for the environment as we perceive its evolution. But it is a useful term, because in understanding its attributes using this common lexicon, we are able to communicate about what we are experiencing, adjust where needed, and continue to grow with the changes in the supply chain business model.
Duncan, a partner in the Strategic Services Practice of CSC, can be contacted at email@example.com.
Source: Computer Sciences Corp.
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