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Supply Chains in different Industries – Part 3

This blog is third in the Supply Chains in different Industries – Part 1 and focuses on Consumer Electronics Supply Chain. Consumer Electronics are multi-national players with concentrated manufacturing (mostly subcontracting in low cost bases like Asia-Pac countries) and Sales Marketing companies in different countries of the world. Product Development is typically centralised as well. Another aspect of Consumer Electronics industry is short product life-cycle and large multitude of items. While the product codes are different (from year to year and across category) they share the basic electronic units. Different models are essentially with slightly different features (for example digital cameras with different LCD Displays and firmware versions) and/or accesories that go into packaging (example different memory cards with different digital camera models). However there can be a different main component as well (for example different Megapixel CCD sensor in digital cameras). The Supply Chain focus is also on the Demand side with good Demand Planning functionalities like Statistical Forecasting, LifeCycle Planning and Promotion Planning as well as Supply side like Collaborative Planning with Subcontractors and Assemblers. In some ways there are similarities with FMCG industry from a Demand perspective and Auto industry (obviously not so complex) from a Supply perspective.

Unlike previous Industries this time round we shall start from the Demand side. The end-consumers walk in to Retail Outlets (or Web) to make purchase. Depending on the size and nature of retailer the Sales Details at the POS is transferred to the Consumer Electronics company nightly/weekly. If that is not available then the Distributors / Stockists provide Sales data of the items sold to the Retail Outlets. As a result for the Consumer Electronics company there are two Sales numbers namely Sell-In and Sell-Through. Sell-In is the sale happening from Stockist to the Retailers while Sell-Through is actual sale to the end-consumer. The Sell-In is not an accurate picture of the actual sales as not the whole quantity may be sold to end-consumer or may be sold over a period of time (few weeks). Sell-In quantities are normally bucketed say 1000 units bi-weekly / monthly (depending on the Replenishment cycle practiced by the retailer) whereas Sell-Through is a more accurate measure of customer demand (actual sale per day). This data is fairly important for good Statistical Forecast generation especially for short life-cycle products having seasonal fluctuations. Moreover Promotion Planning requires Sell-Through data rather than Sell-In to get customer demand without Promotion effect.

This Sales History is a key input to Sales and Operation Planning process at the country-specific Sales & Marketing company. Typically the Supply is managed centrally with a fixed number of units per model being manufactured at Contract Manufacturing plants and/or company owned Assembly plants. So while Supply is constrained (read fixed) during S&OP the Demand needs to be adjusted across customers suitably. That is where product allocations by customer (Retailers) importance play a vital role. While a Walmart can get any quantity at any time a small retailer has to wait (even face stockout) of some fast moving electronic gadget. The entities like Distribution Centers may not be present as the products are directly shipped from the Assembly plants to either Regional (country-wise) Distribution Centers or to the major Retailer Warehouses and even in some cases directly to Retail Outlets. Cross-docking is also common at the Regional Distribution Centers.

On the Supply side again there will be component and sub-assembly suppliers shipping to the assembly manufacturing plant. The Assembly plant may be owned by the Consumer Electronics parent company or typically Contract Manufacturing plant. Production Planning is normally limited to determining the product flow and sequence as the same assembly line can handle multiple products / models. Once manufactured the finished products need to be shipped to the Distribution Centers or Retailers at the earliest depending on the value of the product. Shipment for most electronic products are done through air freight due to the long distances involved and high value density.

This brings us to the close of this blog. In a Mapping APO Functionalities to Different Supply Chains the different functionalities of APO as used in Consumer Electronics Supply Chain is outlined.

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