Jan 4, 2010

Bull Whip Effect 2009 - el error clásico

Not to say that showing off my Spanish skills helps the cause, but at least one person has recognized the Bull Whip Effect that occurred as a result of the economic downturn. Check out what Avnet’s CEO had to say about how companies reacted to the downturn. And in case you haven’t heard about Avnet, hit the jump here.
Avnet CEO Roy Vallee, quoted in a Barron’s article,  says that "the supply chain was in reasonably good condition" heading into the downturn, with high inventory turns and capacity-utilization rates in the 80 percent to 90 percent range. As demand slowed, "there was a dramatic reaction by all participants to cut inventories and manufacturing capacity." In hindsight, he adds, "the whole supply chain overreacted...and is now trying to get caught up."
This, dear friends, is the classic example of the Bull Whip Effect – Basic Supply Chain 101. This is something that we are advised to avoid (albeit only in books and classrooms). The point I’m trying to put forward here, is that despite the amount of research we have done in Supply Chains, companies Bullwhip Effectcontinue to make the same mistakes they have always made. I think I can safely say that despite all the advances we’ve made in Supply Chains, we still do not have a system that enables effective sharing of information and trust.
I am afraid this trend will continue. I agree to the fact that people work within the system and that the system must be the chief enabler. But the folks devising the system must understand that Supply Chains are follow a pattern more related to human behavior than any other function in modern businesses. The perfect supply chain is not the organization that is the most automated or that has the most technology. The perfect supply chain is not the organization that has the most information visibility. The perfect supply chain is the one with the most like-minded people, well-trained and working towards a common goal. I say this because, even though the system is the chief enabler, the bottom line in supply chains is execution – and that, depends on the people you have.
Here’s a few more forecasts that cast some light on what we can expect in 2010. This is apart from what you read on SCM Blog sometime back.
Now, there are promising signs that underlying demand is improving. "The strength of our Asian business would cause me to say digital consumer demand broadly is pretty good," Vallee says, adding that "industrial demand also is improving." Meanwhile, IT business remains strong in Asia and is improving in the Americas (though Europe lags behind those markets).
Research firm Gartner recently said that global chip revenue will be down 11 percent this year, marking the second consecutive down year in semis, an historic first. Vallee thinks that the extended downturn sets up the sector for an impressive rebound; he sees double-digit gains in 2010, which is consistent with Gartner's forecast for 13-percent growth.

Jan 4, 2010

Bull Whip Effect 2009 - el error clásico

Not to say that showing off my Spanish skills helps the cause, but at least one person has recognized the Bull Whip Effect that occurred as a result of the economic downturn. Check out what Avnet’s CEO had to say about how companies reacted to the downturn. And in case you haven’t heard about Avnet, hit the jump here.
Avnet CEO Roy Vallee, quoted in a Barron’s article,  says that "the supply chain was in reasonably good condition" heading into the downturn, with high inventory turns and capacity-utilization rates in the 80 percent to 90 percent range. As demand slowed, "there was a dramatic reaction by all participants to cut inventories and manufacturing capacity." In hindsight, he adds, "the whole supply chain overreacted...and is now trying to get caught up."
This, dear friends, is the classic example of the Bull Whip Effect – Basic Supply Chain 101. This is something that we are advised to avoid (albeit only in books and classrooms). The point I’m trying to put forward here, is that despite the amount of research we have done in Supply Chains, companies Bullwhip Effectcontinue to make the same mistakes they have always made. I think I can safely say that despite all the advances we’ve made in Supply Chains, we still do not have a system that enables effective sharing of information and trust.
I am afraid this trend will continue. I agree to the fact that people work within the system and that the system must be the chief enabler. But the folks devising the system must understand that Supply Chains are follow a pattern more related to human behavior than any other function in modern businesses. The perfect supply chain is not the organization that is the most automated or that has the most technology. The perfect supply chain is not the organization that has the most information visibility. The perfect supply chain is the one with the most like-minded people, well-trained and working towards a common goal. I say this because, even though the system is the chief enabler, the bottom line in supply chains is execution – and that, depends on the people you have.
Here’s a few more forecasts that cast some light on what we can expect in 2010. This is apart from what you read on SCM Blog sometime back.
Now, there are promising signs that underlying demand is improving. "The strength of our Asian business would cause me to say digital consumer demand broadly is pretty good," Vallee says, adding that "industrial demand also is improving." Meanwhile, IT business remains strong in Asia and is improving in the Americas (though Europe lags behind those markets).
Research firm Gartner recently said that global chip revenue will be down 11 percent this year, marking the second consecutive down year in semis, an historic first. Vallee thinks that the extended downturn sets up the sector for an impressive rebound; he sees double-digit gains in 2010, which is consistent with Gartner's forecast for 13-percent growth.