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Supply Chain in the 21st Century

The shift away from vertical integration has pushed the topic of supply chain management to the forefront of strategic planning for many manufacturers. Having a supply chain that provides a competitive advantage will be the differentiator in today's business environment.

What is a supply chain?

Defining terms is always a good point to start, and I have chosen to use the definitions supplied by James B. Ayers in his paper, "A Primer on Supply Chain Management":

Supply chain: Life cycle processes supporting physical, information, financial, and knowledge flows for moving products and services from suppliers to end-users. Supply chain management: Design, maintenance, and operation of supply chain processes for satisfaction of end user needs.

Printed circuit board manufacturers have always expected their OEM and EMS customers to actively manage them; however, many still have not filtered that expectation down to their sub-suppliers. Customer audits are a way of life for printed circuit fabricators, but it is surprising to see how many of them have never visited, much less audited, their own key strategic suppliers. I think it is reasonable to expect that a supplier actually visit, audit and collaborate with their key sub-suppliers on a regular basis.

When asked to discuss supply chain strategy, we are often greeted with the response "Yes of course, we have a purchasing department." Supply chain management has progressed far beyond the old-school purchasing mentality to become a key component of the modern business organization. We are all just pieces in the supply chain puzzle, and it is the supply chain that is responsible for getting the final product to market.

The fundamental concept of supply chain management is based on two core principles. The first principle is that virtually every product delivered to an end customer has gone through a number of touches in a number of manufacturing and/or service organizations. These organizations are referred to collectively as that product's supply chain. The second principle is that while supply chains have been around for thousands of years, most companies have only been concerned with what was happening in their own sandbox, so to speak. Few businesses took the time to understand, much less manage, the entire “chain” of suppliers and activities that were required to transform raw materials into finished, delivered product to the end customer. This lack of understanding often led to extremely dysfunctional supply chains, and of course, unacceptable delivery and quality performance.

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Editor's Note: This article originally appeared in the July 2015 issue of The PCB Magazine.