Shifting supply chain risks from unknown to known early in the product lifecycle
Today’s leading brands recognize that supply chains are only becoming more complex, with a myriad of risks ranging from geopolitical tensions, tariffs, component shortages, and more. To support thousands of customers worldwide, Flex has built supply chain networks, solutions, and technologies that bolster supply chain intelligence and resilience.
Flex operates a large and diversified global supply chain with over 16,000 trusted suppliers. To keep production on track for over 1,000 customer supply chains, we leverage our digital supply chain visualization tool, Flex Pulse. And to help make better decisions for supply chain pricing, design, and risk we are empowered with our real-time data and analytics solution, IT-Right.
Analytics building blocks powered by AI/ML
Over the years, we have developed and deployed several real-time data and analytics applications in the It-Right platform powered by AI/ML to give our customers more confidence in their supply chains. Some of these solutions include:
- A pricing application deployed in 2016, which leverages internal and external data to ensure that quotes for components are competitive and accurate.
- A design application launched in 2017, including the company’s largest engineering parts database with over 5 million components, was developed to identify alternative parts. This supports multi-sourcing, as well as design and engineering activities.
- An application to provide insight and visibility into the electronics components market that was implemented in 2020. The tool shows key metrics including pricing, lead times, and stock availability. Flex tracks over 340,000 unique parts week-over-week, which has resulted in faster and better decision-making to act on market trends to create value for Flex and our customers.
The need to identify risks earlier in the product lifecycle
Despite the fact that a significant portion of supply chain risks manifest in the design and product testing phases, these risks are often hidden to many brands until they are already at the planning and build phase. At this more mature stage, the product lifecycle is likely to be negatively impacted, with sourcing challenges resulting in major cost implications, project delays, and other financial repercussions. Once in the planning phase, single-sourced costs can increase significantly, and in the build phase, the higher risks like parts shortages can lead to factory line shutdowns and significant loss of revenue.
In identifying and addressing risk in the quote and design phase, brands no longer must accept that a part of their supply chain risk is simply “designed-in” and should be endured. The implementation of the mitigation steps like multi-sourcing and changing out risky parts are much easier to implement in the early product life cycle phases.
A risk-assessment checkpoint at the quote phase
In 2022, Flex launched a new IT-Right automated analytics application called Joint Risk Management that provides insights into the part-level to identify supply chain risks for a product bill of materials (BOM) at an early lifecycle stage. The solution automatically assesses quotes and generates a report that shows potential risks and recommended solutions for risk mitigation.
The powerful insights generated by the solution come from leveraging a combination of both internal and external data sources. In addition to pulling information from Flex- owned databases of ~5 million components, the joint risk management solution is in real-time to more than a dozen external data sources and uses that information to assess risks and recommend solutions.
Stakeholders receive an intuitive report that contains:
- Part characteristic risks (e.g., compliance and end-of-life risks) and supply chain risks (e.g., lead time, stock out, availability, and escalation) so that they can easily understand potential supply chain disruptions
- An overall average supply chain risk score for the BOM, which compares the BOM risks to other products within the same business units, as well as product-specific comparisons
- Suggested risk mitigation strategies and an assessment of the number of hours of engineering resources needed to improve the overall risk score
Since the solution was launched, Flex has used it to review hundreds of quotes and identified lower risk alternatives for an average of 46 parts per project (~18% of BOM), while shifting an average of 20 parts per project (~8% of BOM) from a single-sourced to multi-sourced position. Overall, the program alleviates the barriers to early lifecycle supply chain risk mitigation, implementing mitigation solutions for Flex customers at an average risk reduction of 14% for a product BOM.
Early detection = early resolution
By addressing risk at an early lifecycle phase, Flex redefines the traditional process of identifying and reacting to supply chain risks. According to a McKinsey and Company survey, multi-sourcing is one of the most common strategies employed by brands to de-risk their supply chains. With the JRM solution, we are able to reduce higher costs that can surface in later phases which means that our customers can have more confidence as we build resiliency into their product supply chains.
In the future, as we combine and build on existing analytics solutions, our customers will continue to benefit from clear, quantifiable, and actionable insights into their supply chains. The JRM solution is planned to be extended to products in planning and building phase at Flex in mid-2023. With this plan, Flex will enable the capability to monitor and address the supply chain risk position of the manufactured products on a continuous basis across lifecycle stages to our customers.
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