Meanwhile, strategic sourcing initiatives have rationalized their supply base by significantly reducing the number of direct suppliers. These two trends are replacing traditional, linear supply chains with complex, global, multitier, nonlinear value networks. This ecosystem is also known as the extended enterprise, or simply, the interprise. Dynamic interprises come with unique challenges. Since OEMs can no longer retain full control over their supply chains, they face greater supply uncertainty and stock-out risks.
Volatile demand causes last-minute plan changes.
Unintegrated design, source, and plan processes lead to designs that use custom parts instead of standard parts, and companies may miss out on an opportunity to deplete excess inventory. Outsourcing to multiple suppliers leads to a loss of purchasing leverage, and when special discount prices are negotiated, masking them from others may prove tricky. As the number of partners in an interprise increases, so does systemwide buffer inventory. No wonder that when the economy slowed rapidly, EMS providers got stuck holding inventory that had no clear owner, despite their long-term contracts with OEMs. As businesses tackle interprise challenges, they are quickly finding that traditional ERP, supply chain management, and advanced planning systems applications can't do the job.