Chain of Thought

How Information Can Keep or Kill Business

Recently I blogged about the challenges of protecting sensitive production information communicated via wireless devices in today's manufacturing plants. Strategies to block an outsider from plucking the data out of thin air can be as simple as planting a lot of trees around your facility.

Unfortunately, no tree is big enough to block a big mouth. As supply chains grow more complex and manufacturing depends on partnerships with multiple tiers of suppliers, anyone who really wants to know what you're up to can find out by knowing what to ask and whom to ask. More than ever, that WHOM is not under your roof, and in fact may be in another country. So the new challenge becomes, how do you seal the leaks in your business pipeline?

The Apple pipeline is a perfect example. While AT&T was focusing on promoting its iPhone product, Verizon was also eyeing iPhones. All it took was for a few market analysts to start sniffing around these supply chains to find out that Apple submitted orders for millions of units of the Verizon-specific chipset and people started putting two and two together. People like writers for The Wall Street Journal who rely on “people familiar with the matter” as their sources.

That's the kind of supply chain visibility that gives brand managers migraines. While visibility is key to logistics agility, it's also used as a key to top secret information. So while the material handling industry tempts you with all its warehousing and distribution visibility vehicles, taking the keys to those vehicles comes with responsibilities.

JDA Software recently came out with these recommendations for companies planning to introduce new products to their markets:

1. Achieve better synchronization and alignment between product development and the rest of the organization (sales and supply chain in particular);

2. Limit pre-launch partners to only those necessary to fill launch-time orders, whereas others can be brought online once demand requires it;

3. Keep partners in the dark about the end product or other suppliers; and

4. Have strict confidentiality agreements.

I called Raja Chandrashekar, v.p. of high-tech strategies for JDA, and asked him why high-tech manufacturers are so vulnerable to supply chain information leaks these days.

“Because supply chain software contains more sensitive information than it did five years ago,” he answered. “Somebody who has access to your demand forecast can quickly infer what your financials will look like for the company. Somebody with the right skills to get this off an unencrypted WiFi connection could make a lot of sense of that information.”

So the point is that even high-tech companies can't rely on high-tech solutions to keep their sensitive information secret. It's still a matter of good old fashioned organizational discipline. It's making sure there are much finer levels of authorization and authentication required to see information. It's compartmentalizing information for a select few so if it does leak, at least you know who leaked it.

This kind of supply chain security has to be as much of a priority for smaller companies as it does for the high-tech giants. After all, who have these giants been giving their business to lately in the sourcing and assembly of many components? Contract manufacturers. These companies may not only be small, but they're probably also overseas—which means they may have to be managed by proxy; or at least an iron-clad contract. You do have some direct power in this situation, however.

“If you're a small guy making displays for Verizon, it's very important to keep that information top secret because you have a contract with Verizon and if you breach that contract it will bankrupt you,” Chandrashekar says.

In his position at JDA, he works with many of these outsourced manufacturers—some of which are small shops in Taiwan and China. His work with the OEMs at the other end of that supply chain is a balancing act. It's making sure there's adequate information flow between them so the OEM can ensure there's continuity of supply when required, and at the same time making sure that information is secure so the new-product pipeline and the launch dates are well masked.

But there's another challenge on the horizon. These small contract manufacturers are growing—through organic growth and mergers and acquisitions. Some of them are larger than the OEMs they serve. They want to sustain their growth and that means vying for marketshare. In their work for the OEMs, they've become more agile and nimble and they've learned their customers' businesses. They're starting to talk about bringing to market low end, unbranded products in markets like China and India. How long will it be before they become their customers' competitors?

Sleep on that, supply chain managers. If you can.

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