Returning to the Roots of World-Class Manufacturing and Distribution Operations
Manufacturing and distribution operations are coming home in 2017. After a couple decades of outsourcing supply chains in locations like India and China, the trend is to take a more balanced approach that includes local operations. This trend is discussed In an article entitled The Case for Supplier Development. Here, top manufacturing consultant Paul Ericksen called for a return to the roots of good manufacturing through the development of a world-class supply chain.
Ericksen, who started in the world of manufacturing and supply chain development 20 years ago, remembers how, when he began his professional career, companies cultivated and nurtured relationships with their suppliers. These relationships led to long-term contracts, good prices, and quality materials. However, starting in the 1990s, upper management pushed for outsourcing supply chains to India and China, where cheaper prices and salaries meant lower prices and increased profits for manufacturers. If you can get the costs down in your supply chain, you can increase profits.
The pendulum has swung again in the opposite direction, according to Ericksen. Problems inherent in the overseas model include lengthy MCTs (manufacturing critical-path times) which can lead to delays in receiving goods. The “90-day” firm delivery date is laughable when many overseas companies deliver in six months plus six weeks of shipping time. Building up inventory is one solution, but that can be costly, both to build and house.
Enter the Role of Supplier-Developer
Ericksen suggests the role of supplier-developer added to manufacturing and distribution businesses. The supplier-developer finds both global and national suppliers who can provide products at the lowest cost but potentially long lead time, as well as local suppliers, who may be able to turn around an order quickly but must charge higher rates. Cultivating relationships with both can ensure uninterrupted delivery of materials, albeit with some price variations. If the price variations aren’t too extreme, they can be smoothed out and averaged without too much of a hit to profits.
Benefits of Supplier-Developer Networks
Price is just one aspect of the supplier-developer network. World-class supply chain management also ensures that the quality of the finished products is superior to those produced by competitors. When the best components are added into the manufacturing of a product, the end result can be better results. Timely delivery also means a lot to customers. Customers who are kept waiting for weeks or months because you are still waiting for a shipment from China may take their business elsewhere. Having a local supplier, willing to work with you on timelines, may help you meet unexpected demand.
Returning to Supply Chain Management’s Roots May Be the Future
We often look to the future as if the success of a business relies upon the next, best, greatest invention. Sometimes, however, returning to the roots of manufacturing and distribution may be the answer. Within those roots is the role of supply chain development, of cultivating long-lasting relationships with trusted partners. The benefits of such relationships extend to your own customers, who can then rely on you to fill orders promptly and accurately. There’s still a place for low prices, and companies worldwide who can provide both continue adding value to the supply chain. But for the best model, a return to the mixed model of both local and global suppliers, with the help of a supply chain development person, may be a smart choice.
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