New trend puts the squeeze on supply chain

The idea of 'collaborative manufacturing' could cause real disruption to the channel, but it also promises rewards, argues Guy Matthews.

Remember fuzzy logic? In the 1980s it was touted as something that would change the world. It was the technology that meant trains could be driverless, your car would tell a joke in the morning and your blender could tell the difference between carrots and eggs.

I was reminded of fuzzy logic when reading about collaborative manufacturing in a piece written by Accenture partner Allen Delattre, who leads the company's high-tech group in supply chain services.

"Collaborative manufacturing is quickly emerging as an important approach to creating a more competitive business operation," he wrote.

"Your company may be in a position to exploit the changes in manufacturing processes, supply chain efficiencies and enabling technologies. The incentive is there to ask whether collaborative manufacturing is right for your company."

Collaborative manufacturing is a new term for outsourced manufacturing, which itself was the new term for contract manufacturing. Plenty of people are doing it and it will have a long-term impact on the channel.

Now, hands up who has heard of Flextronics? No, it's not the IT successor to the Bullworker, but a $15bn company that employs at least 70,000 people. It is a contract manufacturer. It makes phones, calculators and other things with rubber feet, and it has designs on the PC market.

At first glance the PC sector looks ripe for collaborative manufacturing. It is a commodity market based on components where all the money comes from attached services. So if you make PCs, why not move out of manufacturing altogether?

Of course, what companies such as Flextronics want to do is to manufacture and distribute. In short, it wants to squeeze the supply chain. It manufactures and ships through its distribution centres direct to the customer; you get lower production costs and vastly reduced costs of sale.

So are traditional IT manufacturers talking to firms such as Flextronics?

The answer is yes. Delattre makes it clear that collaborative manufacturing raises many questions, not least about disrupting existing supply chains, sharing technology and loss of control over suppliers. These are big risks, but the idea offers big rewards, if done properly.

So are traditional broadline distributors at risk from this new trend, and is there any way to avoid being bypassed? There is certainly logic in having a single manufacturing and distribution solution. What broadline distributors must hope is that the logic is fuzzy, and stays that way.