There was an interesting article in the Korea Times indicating that Korea’s premier high tech manufacturer LG Electronics has concerns relative to supply chain vulnerability.  The article points out that risks relative to supply chain fraud tend to rise as corporate supply chains become more extended as well as complex.  Companies increasingly have become the target of simple theft, misrepresentation of inventory, counterfeiting and piracy.  According to this article, LG who has 85 percent of sales originating from overseas markets.  is now placing more emphasis on “intensified supply chain management”  LG’s efforts include the 3P’s- Best Process, People, and Partners, along with improved information technology tools.

While better access to information through advanced technology can certainly pay dividends, I would suggest that LG Electronics and other internationally focused companies continue to place more emphasis on business process control, supply chain partner collaboration and monitoring processes.  There is ample evidence that initiatives that address the simultaneous improvement of management practices and information technology pay far higher dividends in the long run.  Supply chain vulnerability does not just concern members of the internal supply chain organization, but should also include a broad cross-functional and cross-company effort.

 Bob Ferrari

Chip maker Advanced Micro Devices has been in the news of late, and not of a positive note.  After suffering losses of more than $5 billion for seven quarters, Hector Ruiz the CEO was forced to step down earlier this month.  Ruiz remains in the role of Chairmen, and according to an article in SiliconValley.com, promises to devote much of his new time to completing a new manufacturing strategy for the company.  While many blogs have commented on the merits of Ruiz staying on, I would like to provide some comments relative to this pending transformation for AMD.

The needs for transformation at AMD go well beyond the outsourcing of manufacturing.  While AMD has prided itself on its manufacturing efficiencies, members of its supply chain organization have had increasing concerns relative to growing inventory and the need for more efficient processes. A benchmarking comparison relative to supply chain best practices conducted in May of last year led to the awareness of a number of supply chain transformation needs.  An understanding of the relationship between inventory vs. service levels, and the optimization of inventory was acknowledged as lacking across overall planning levels. Investment funds and senior management sponsorship was also lacking.

The article points out that AMD’s transformation to a fabless manufacturing model while difficult may payoff benefits.  In my view, benefits would be shortchanged without also investing time and resources into achieving associated supply chain business transformation needs, and a good place to start would be in supply-chain wide inventory management and partner collaboration. Mr. Ruiz and AMD management are advised to broaden their vision perspective, and take note that supply chain does matter.

Bob Ferrari