Managing outsourced manufacturing in an age of disruption
Image credit: Enanuchit/Dreamstime
In today’s era of global supply chains, a single platform that connects all internal and external processes and systems can help minimise unnecessary waste from returned goods.
Too many cooks in the kitchen can spoil the broth. While the goal of global sourcing and outsourced manufacturing is to reduce manufacturing costs, the increased complexity that comes with leveraging internal and external manufacturers introduces significant challenges. Among these are the challenges to managing visibility and control, which can negate financial benefits. For example, when quality issues arise, the disconnected and disparate nature of third-party manufacturing makes them difficult to detect.
At the same time, early detection is critical, particularly in regulated industries such as pharmaceuticals or food and beverage, to avoid the accumulation of additional costs and production time spent on additional units that share the defect. The ability of a brand owner to quickly determine the root cause at any stage of production, track all affected products, and conduct a recall efficiently is critical. The earlier an issue is identified, the less impact it has on the brand, cost and consumer safety.
Tight quality control in globalised manufacturing, on the other hand, has a significant impact on a brand's sustainability footprint. To truly understand their carbon footprint, for example, brands must examine how much carbon is emitted throughout their entire value chain, from sourcing to delivery, and then in the use and disposal of their products. It is critical to consider the entire lifecycle, not just internal operations.
Companies are under increasing pressure to disclose and lessen their footprint. This can be a difficult task, especially if you don't have much visibility outside of your immediate surroundings. What, then, is required to address manufacturing-related challenges?
Returned goods almost always represent a massive waste – both financial and emissions-related. Manufacturers incur return shipping costs, staffing costs to sort, repair, repackage and re-sell the merchandise, or else dispose of it. In certain industries, returned merchandise is routinely disposed of, resulting in pure waste. Sometimes, however, returns are due to a product recall by the manufacturer.
One way companies can help their end-to-end carbon emissions is to ensure that returns aren’t due to a quality issue. This means preventing quality issues entirely or detecting them as early as possible in the product lifecycle – well before they’re shipped to consumers. Processes and technology put in place to help detect potential quality issues – whether inherent to the materials, the assembly process, or some other factor – can have a meaningful and even quantifiable impact on carbon emissions. In this way, investing in visibility and control throughout your third-party manufacturing operations is an important aspect of sustainable business.
Brands should consider outsourced manufacturing as an extension of their internal processes and work to gain the same visibility and control with contract manufacturers.
Therefore, the solutions brands evaluate, or perhaps currently have in place, need to provide visibility and control across the end-to-end manufacturing ecosystems – including internal and external operations – across all production stages and nodes.
They also need to be able to receive shop floor and quality metrics from each facility in the ecosystem to proactively identify nonconformances in processes and quickly address issues before they affect other areas of the supply chain. By proactively collaborating with manufacturing partners to ensure all designs and instructions are clear, and by identifying issues early in the production cycle, companies can reduce costs, delays, poor quality, less-than-optimal production and the overall sustainability footprint per unit.
In many ways, manufacturing visibility and collaboration contribute to a more profitable and efficient business for brand owners by extending control to internal and contracted manufacturing in lockstep.
Brand owners need to be able to continuously monitor production quality and be alerted when quality issues arise. It is essential for customer service and manufacturing operations teams to be able to trace and control inventory by lot or batch across all production and quickly understand the cause of potential defects to pinpoint which goods are affected.
This requires a connected platform and AI-driven solutions that bring together enterprise resource planning, production, quality and other related data from disparate systems. The supporting technology should be able to proactively identify when quality issues arise, or recalls are required, by analysing the entire production process – internal and external – to determine the root cause, track any affected products, and lay the groundwork for efficient, precise recalls that minimise risk and waste.
Although brand owners maintain strict quality standards, the continued rise in outsourcing and the variability of raw materials has led to an increasing number of defective goods. In certain industries, recalls for faulty goods are required and carefully regulated. Companies must be able to rapidly identify the affected products, remove them from the supply chain and issue replacement goods. These activities come at an enormous cost, especially if the company cannot identify which goods are defective and are forced to recall and replace goods that aren’t affected.
It’s important for brands to track the route to market for specific lots and batches – and even serialised components and finished goods – using commonality analysis to pinpoint the affected products. Equally valuable is the ability to use highly flexible and configurable data models to simulate multiple recall scenarios and identify the most efficient one. This can make recalls surgically precise and far less carbon-intensive to conduct. Conducting recalls in this way, however, requires end-to-end visibility across channel, logistics, global trade and supply ecosystems, plus the ability to orchestrate remedial actions across multiple cross-functional and cross-enterprise areas.
This strategy will necessitate the development of new technology. For instance, a single platform that connects all internal and external manufacturing processes and systems and provides decision-grade data for optimal production, reduced risk and recall prevention. It also necessitates the use of integrated, artificial-intelligence-driven applications to orchestrate the entire process and help monitor the results.
Manufacturing becomes a strategic advantage when you use a unified platform with broad and deep capabilities that grow with you as your business needs mature, allowing you to meet today's requirements while equipping the entire organisation for future success.
Lori Harner is AVP product and industry solutions at e2open.
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