Supply Chain Management
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June 10, 2010
MANAGEMENT
Driving value through the supply chain
SUPPLY CHAIN
“may be doing their first production
run a long way from home, but their
top-up runs much closer to home,
mainly in Eastern Europe”.
“There are a lot of issues around de-
OVERVIEW Achieving competitive advantage is now
a delicate balance between seeking best value
and managing complex risks within the supply
chain. Nick Allen reports
of low-cost goods. Stretching supply
chains across the globe to lowwage
economies, such as China
and India, has brought an influx
of cheap goods. But the complexity
of distant sourcing has dramati-
T
he quest to deliver greater
value to the customer has
sent Western companies to
distant locations in search
cally increased supply-chain risk.
Longer lead-times require greater
investment in inventory and corporate
brands are now exposed to
increased risks from their suppliers.
The recession has highlighted
a number of these risks and has
caused many to re-evaluate the way
they run their supply chains. Flexibility
to respond quickly to market
demand is now seen by many to be
more valuable than price alone.
One significant development that
has occurred over recent months is
the move by shipping lines to mothball
fast but fuel-hungry container
vessels – built for rushing Chinese
goods to the United States – utilising
instead slower moving, larger and
more economic container ships. The
net result is an extra few days on the
lead-time for goods arriving from the
Far East. This may not sound a great
deal, but holding inventory for even
a few days more can add to costs and
impact responsiveness.
In uncertain times procurement
professionals want greater flexibility,
not longer lead-times. There is rising
anecdotal evidence of companies
reconsidering their sourcing strategies,
with some moving manufacturing
back closer to Western markets.
“Buyers are looking for shorter production
runs and they are looking
for flexibility,” says Stephen Rinsler
of Bisham Consulting. “The problem
with long supply chains is that they
are not flexible. A retailer of electrical
units may have one technology in
store, another on the water and yet
another technology in production.
What happens if the first technology
doesn’t sell too well?”
According to Mr Rinsler, there is
some evidence that a growing number
mand planning, production planning,
timing of acceptance of stock, getting
it into the store and selling it through,”
he says. “There are signs that some
companies have found that the costs
of getting it wrong are too high and
they are starting to outweigh the benefits
of lower manufacturing costs. If
you want smaller quantities, because
you want to change your stores much
more frequently, you need to be much
closer to home. Only then are you able
to cope with the change in design, pattern,
colour, and specifications needed
for fast-changing markets, such as
with technology goods.”
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