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Leveraging Centers of Excellence within the Supply Chain

Author(s):

Thomas Brunell
Thomas Brunell, Vice President, Materials Management, Avnet IMS, Phoenix, AZ 85034, 480-643-4109, tom.brunell@ims.avnet.com
Robert J. DeFusco
Robert J. DeFusco, Group Commodity Manager, EMC Corporation, Hopkinton, MA 01748 508-435-1000, defusco_robert@emc.com

85th Annual International Conference Proceedings - 2000 

Abstract: How does a supply chain leader maximize the benefits of a supply chain? How do individual corporate entities come together, define the total scope of services and agree on who will perform the specific services necessary to the supply chain's success, while keeping redundancy to a minimum? This paper will outline how leveraging centers of excellence within the supply chain can overcome some of the barriers to the single enterprise model of supply chain integration.

All of us, in whatever business we find ourselves are balancing our corporate interests with those of our supply chain. On the one hand we find it necessary to create wealth for our shareholders, for without them our companies would not exist. This truth applies to every company whether it is a small business or a vast corporation. On the other hand, we must provide a value to our customers, in the form of products or services. Without this value we will have no customers and no business. Maintaining a balance between these two interests creates challenges for us as managers. Should we get too far out of balance we will fail - in fact we will go out of business.

We are challenged to continually find new and better ways to satisfy these two drivers. In the past, we would look at our individual companies and find ways of improving or reengineering our processes and pass the benefits on to both customers and shareholders. Today, we must look beyond our corporate borders, even knock those barriers down entirely, to achieve the necessary improvements. How can we make corporate boundaries disappear while protecting the interests of our individual companies?

A first step may lie in identifying "core competencies". How often do we hear about "leveraging" core competencies? But how do we leverage them until we are sure exactly what they are? This has the potential to be a very difficult exercise because it may cause us to question activities once considered an integral part of our corporate identity. The value in forcing ourselves to confront this issue is immense. Once done, with challenges identified and resolved, we are able to view activities objectively for their inherent value, and discern where those activities can best be performed.

In the case we are discussing, EMC and Avnet Integrated Material Services analyzed the various actions required to manage supply chains. By objectively looking at where specific duties could best be performed, a new operating paradigm was created. EMC relegated the day to day management of the supply chain to Avnet Integrated Material Services. This paradigm shift allowed EMC managers to in fact manage - and to focus on adding real value to their corporation by leveraging their competencies in working with component suppliers to discover improved pricing. Avnet IMS focused on streamlining the day to day supply chain activities and working with the contract manufacturers employed by EMC to manufacture their printed circuit boards.

This was not an easy process for either company. It is ongoing even now, several years into the process. However, a commitment to the use of centers of excellence as a vehicle for cross-company communications and implementation was a key factor in the ability of the enterprise to "learn." By continuously questioning the value of activities, by continuously redefining core competencies there is a perpetual reinvention process in play that challenges participants and forces corporate boundaries to blur and even disappear when it comes to process improvements. But don't be misled by rhetoric. This activity requires skill, dedication and supply chain leadership that believes in the venture and also recognizes that many answers will need to be created from scratch. In order to accomplish this, the supply chain leader must question a number of paradigms and even their most closely held values.

Under the concept of Centers of Excellence, suppliers are no longer independent islands within the supply chain, but start to become an integrated unit. If the OEM, as the supply chain leader, is not successful, the whole chain fails. To get processes to be sufficiently fluid and efficient across company borders, companies have to understand and agree about core competencies, and allocate the value of each entity contributes to the enterprise.

The use of centers of excellence can be an important tool if used to enable these key factors. The rewards for working together in such a fashion can be substantial. For example, it becomes possible to view inventory across several corporations as a single entity. This in turn allows the removal of separate buffers and unlinked plans and suddenly the velocity of the supply chain increases. Further exploration allows plans to be linked, and creates methods of pre-servicing inventory at the lowest possible value while in the supply chain.

In summation, the keys to the center of excellence are at once simple and sophisticated:

  • It is critical that a unified vision be created and maintained across the virtual enterprise, over time.
  • There must be an awareness of and focus on the collective needs of the enterprise, vs. those of individual members.
  • All supply chain elements must be managed to the quality level demanded by the end customer.
  • Key leaders must be identified and learn to work together. Top management must take an active role in establishing and supporting the vision over time.
  • Intellectual properties must be identified and protected.

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