SCRM in the electronic industry – an industry recommendation

A few days ago, the ZVEI, the German Electrical and Electronic Manufacturers’ Association, published an industry recommendation how to set-up and run Supply Chain Management in the electronic industry. The recommendation ‘Guideline Supply Chain Management in Electronics Manufacturing’ is the result of an initiative started by two divisions of ZVEI – the Electronic Components and Systems Division and PCB and Electronics Systems Division. The reason that these two division started the initiative is simple: The members of those two division are located upstream in electronic supply chains – and therefore they face stronger consequences of the well-know bull-whip effect (volatility of demand, out of stock situations etc.). Thus, these companies are highly interested in establishing SCM in their supply chains to reduce the bullwhip effect and to decrease the level of risk.

The document addresses different topics of SCM: It starts with a general introduction into Supply Chain Management, then discusses robust supply chains, focuses on external framework conditions, and gives recommendations for education and training in SCM. From an SCRM perspective, chapter 2 (‘Robust Supply Chains with High Responsiveness and Flexibility’) is of special importance.

Figure 1: List of possible risks for different process types. Source: ZVEI - German Electrical and Electronic Manufacturers’ Association: Guideline Supply Chain Management in Electronics Manufacturing, Frankfurt/Main 2014.

The ZVEI starts with defining robustness in supply chains: “This means that a robust supply chain must be as reliable and immune as possible to external influences and risks, possibly intercepting errors when they occur to minimise their impact on downstream processes.” The document then lists different risks that might occur in various areas of the supply chain. The underlying concept is the well-established SCOR model, the ‘Supply Chain Operations Reference’ model, which is a set of standard processes on different levels, which can be used to model, document, and analyze supply chains. Following the SCOR approach is one of the strengths of the document. By applying SCOR to the SCRM process means to build a solid structure for risk management. Figure 1 shows the result of the generic risk identification using SCOR model – a table with potential risks, that are assigned to the 5 different types of processes used in the SCOR approach. (The ‘return’ process was omitted intentionally, since the group found it played a minor role.)

After identifying and listing various risks in the electronic supply chain, the document focuses on measures to safeguard against risks. Again, when suggesting and discussing different approaches, the document follows the SCOR model. Those measure contain suggestions that are typical to SCM, such as supplier management and the use of SCM IT applications. On the other hand, risk management specific approaches are suggested, such as FMEA and the simulation of supply chain scenarios. It also recommends the use of a risk classification matrix.

Figure 2: Questionnaire. Source: ZVEI - German Electrical and Electronic Manufacturers’ Association: Guideline Supply Chain Management in Electronics Manufacturing, Frankfurt/Main 2014.

The paper not only lists risks and possible counteractions, but also addresses the organizational implementation of risk management. Within a few pages, the paper gives valuable hints for setting up a risk management in supply chains, and also focuses on communication in risk management. Additionally, the document provides a questionnaire that helps to ask the right questions in SCRM in the electronic industry (see Figure 2).


We Germans would probably ask: Aren't there any weaknesses of the paper? And then we would answer: Yes, there are some. But: I don't want to focus them - because I would like to look at the recommendations' strengths. So: Is the paper helpful? Definitely! One of the strengths is to give an overview over SCM and SCRM in a specific industry. Of course, this leads to some general suggestions and recommendations (as mentioned above), but those recommendations still focus on the electronic industry. (And if you ever worked on industry standards, you for sure know how difficult it is to find a compromise even for definging single termns.) Another strength is to link SCRM activities to an existing, structured approach – the SCOR model. The SCOR approach thus builds the framework for identifying, evaluating and managing supply chain risks. By following SCOR the paper shows a strong methodic structure, that can be followed easily!

The document ‘Guideline Supply Chain Management in Electronics Manufacturing’ can be downloaded from the ZVEI’s homepage: http://www.zvei.org/en/association/publications/Pages/Guideline-Supply-Chain-Management.aspx.