Video

Supply Chain Brain at SummerCon – Ruud Somers – TE Connectivity

Video Transcription

Jean Murphy:
Today I’m speaking with Ruud Somers director of Supply Chain Network Design at TE Connectivity. Welcome Ruud.

Ruud Somers:
Thanks.

Jean Murphy:
Well tell us a little bit about what TE Connectivity does and what your supply chain and your network looks like.

Ruud Somers:
TE Connectivity is a global leader in all kinds of different products that transmit energy and data. Everybody’s touching our products on a daily basis. The wiring harness in your car has a lot of our connectors on it but also your refrigerator, your phone. We also supply data centers with all kinds of connectivity products. We’re a 14 billion, close to 14 billion dollar company and we have some 100 plants worldwide and 70 distribution centers.

Jean Murphy:
The design for that vast a network must be quite challenging?

Ruud Somers:
That’s absolutely correct. One of our biggest challenges is to fight complexity. Not only do we have a lot of different SKUs that we sell to our customers but we also make many of them ourselves. We have 500,000 active SKUs and more than 1.4 million different components. You can imagine there is a lot of parts going back and forth between plants and customers. That’s our biggest challenge that we face. Fighting the complexity, making sure that we have the right products at the right place and that we operate a lean supply chain. That’s one of our biggest challenges.

Jean Murphy:
Tell me how you do that. What kinds of procedures and technology you use?

Ruud Somers:
With the network design group that we have established a couple of years back we’re able to provide much more insight in what the transparency and what the logistics look like like. To some of us it was somewhat as a black box as to how products exactly move along the supply chain in order to arrive at the customer from the early supplier through different stages of manufacturing and multiple plans across the globe to the final delivery to the customer. First of all being able to provide that transparency, that visibility is an eye opener as to how products physical route throughout the globe.

The next thing is working with that visibility, that transparency, trying to optimize that. The vast amount of date, the different complexity that we have can only be solved properly by having strong tools in place or having a strong methodology in place to reduce the complexity and optimize that network.

Jean Murphy:
Do you use a modeling technique or can you give me a little specificity.

Ruud Somers:
Basically what we do is that we use tools to do network optimization. We load our actual demand data. With that we create a base line of the current flow of products and hold that against possible other opportunities, other scenarios and see how these different scenarios work out in terms of cost, in terms of lead to time to customer et cetera. That gives us an idea as to how we can improve our network.

Jean Murphy:
Give me your view in general of the biggest challenges facing global supply chains today.

Ruud Somers:
In our specific situation I think it has to do with that complexity. Separately in this specific domain where we’re in, we’re in business to business. This industry is not necessarily best in class when it comes to delivering quick and fast to consumers, to companies, to our customers. We need to bring the speed of the internet, the expectations that people have when they buy something off of the internet we need to bring that to the business to business domain. That’s one of the challenges that we’re faced with. Being able to have the products quicker to our customers and lining with the expectation that they have in ordering. Not necessarily business to business.

One of the ways how we do that and this is catching on in TE Connectivity, is by optimizing our inventory. Trying to understand better as to where we need to position our inventory to be able to respond quicker to the demand of our customers.

Jean Murphy:
We hear a lot of people talking about multi echelon inventory management. Do you use that and tell me what that means in your operation?

Ruud Somers:
Absolutely. That’s critical. As I told you earlier we not only sell a lot of products but we happen to make many of those ourselves as well. That means bills of materials and that we have a choice. We can choose to have the finished products at our distribution centers close to the customer, which has all the added value until the customer calls it off. We can also choose to have components that are half way to the stage of manufacturing where less value has been added to the product. Then decide if we get a customer request to then make the final product and send that final product to the customer.

We can decide where we should position what kind of inventory. Is it finished goods? Or is work in process? Or is it even raw materials? There is different options as to different possibilities as to what to store what, where to store what. That’s one of the things we’re looking at. Absolutely.

Jean Murphy:
Is one of the treads to do a lot more, I guess it used to be called postponement where you’re doing the actual finishing touches that differentiate products at the last minute?

Ruud Somers:
It’s a challenge for us. As I told you we have a lot of different products. What it really requires, it starts with the engineering of new products to try to make common product families that draw upon the same components. So that in a certain stage during the final production process we ca decide to wait with the final process step because up to that point they are generic. If you don’t have that situation, if you don’t have commonality amongst products, you have to make the finished product right away. It really starts with making sure that the engineers who develop our products also understand what the added value is of being able to work on things like platforming. Having generic components that make multiple variations of finished products.

Jean Murphy:
Right. We used to think of supply chain networks as being rather static and only changed maybe every couple of years. I gather that they’re becoming much more dynamic. Can you talk to me a little bit about that?

Ruud Somers:
Absolutely. I think change is the only constant that we’re facing. If you look at where we’re active, the markets that we serve, our customers are moving our products, their production locations. We see for instance that in Northern Africa is becoming a larger area where automotive harness makers are making their products to supply to European markets. We have to follow them. We have to do that quickly. We’re basically moving along where our customers are going and the speed at which we’re moving has increased tremendously over the past years.

Jean Murphy:
In terms of initiating a supply chain optimization project what have you learned? What kind of lessons or advise would give companies that are starting to look at that?

Ruud Somers:
The tendency is always that if you decide to do network optimization and supply chain networks in the way that we do, the tendency is to try to deliver as quickly as possible many different projects and share what the benefits of the tool and what your approach is. One of the things that I would recommend companies who are thinking about it is perhaps take a small step back and not devote all of your attention to deliver all of those projects. Also take out specific time to develop a robust process to develop a good expectation of what your internal or external customers can expect. Try to not be tempted to only try to develop, to deliver quickly on those projects but have a robust process as of day one.

Jean Murphy:
Excellent. Great information. Thank you so much for being with us today.

Ruud Somers:
Okay, thank you.

Jean Murphy:
I’ve been speaking with Ruud Somers of TE Connectivity. Thank you for watching.

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