Every manufacturing executive dreams about it – how to develop a frictionless supply chain in both internal and external operations. This challenge has been on the table since the outsourcing boom started in the 1990s. By outsourcing the actual manufacturing to the supplier network, corporations achieved many advantages but also faced new challenges.
Why did companies start to outsource operations and focus on their core competencies? There are many reasons but maybe the most obvious explanation was to make company flexible by lightening the assets. The flexibility enabled to innovate faster. Ideas were not dumped because of limited own manufacturing capability. The production could be purchased from a supplier, which had this special capability and capacity. Lighter assets allowed big corporations a better shape to face economic downturn as well. This was a huge benefit in the late 2000s.
But what did the corporations need to give away by reaching a flexible and not so capital-intensive manufacturing model? Not much – but the control of information was gone. The crucial information that was needed to manufacture a product was no longer found solely inside the company. While the assets were shifted to the supplier companies, also the information and knowledge were transferred to the suppliers. This phenomenon established the networked ecosystem economy.
During the last 20 years, the executives and managers have tried to solve the challenge of operational friction between customer and supplier. Outsourcing brought along asymmetric information, problems in information visibility, and lack of information transparency. These challenges made headache with longer lead-times, increased costs of poor quality and poor throughput of products.
Because of the value creation model in the manufacturing industry has changed, it’s obvious that we need new governance models too, right?
Luckily the cloud revolution and innovative digital solutions help manufacturing professionals in this complex area. We have had a privilege to witness many success stories in manufacturing industry where companies jumped into the digital transformation journey and erased the mythical friction between them and their suppliers.
Does your company want to continue dreaming? Or are you ready to move your supply chain from ground to cloud, utilize modern information governance and enjoy the unfair advantage?