Consider Your Customer When Selecting Your Supplier
Establishing the delivery point is a great starting point for good supply chain design. Don’t forget that your current consumer and your future consumer may be different.
We have seen instances where supply chains have been developed for the domestic market supported by launch marketing, only to find that demand has been strong in another region and that the supply chain does not easily support fulfilment in multiple regions or even the other region.
Think big, but take a pragmatic approach. Your supply chain needs to work now, rather than depend on aggressive sales and demand predictions. Most people tend to fail to plan for huge success, whereas they often have fall-back plans in place.
There are different factors that have an impact beyond where the end user of the product is located. Will you be fulfilling directly from the vendor to the customer, or will you be staging, customizing or finishing the good locally? Some products may require localization due to regulations, like NAFTA. Mass customization is a growing consumer demand and this might require the design to be built upon a single platform with a limited number of configurations and with final configure to order taking place near the end customer.
What is the form factor of the product and what are the complexities of its transportation? If a product is large and costly to transport, manufacturing it too far away from the end user can negate any savings from lower cost manufacturing geographies.
The cost of inventory in transit will also have to be considered. Six weeks worth of stock at sea can be costly, particularly if the product is fast moving and versions change in that time.
Dynamic, agile supply chains need to be short. And don’t forget your inland logistics either.
Don’t underestimate the cost of upgrades or reverse logistics or even recalls, should they be required. This is particularly likely in the early stages of a start up or a product that is using bleeding edge technology. The financial and brand image cost of a recall can be damaging to a business, but if the supply chain doesn’t have the agility to deal with this, it can be disastrous or even terminal.
Supply chain design is complicated, but good design will make a huge difference to your ability to service your market both successfully and profitably. Defining both ends of the supply chain accurately, the customer and the lead vendor, is a great start.
Charles Cox is managing director, Riverwood Solutions China. He has over 18 years of leadership experience in R&D engineering, manufacturing, and operations. Based in China, where he lives with his family, Cox works directly with suppliers and customers on a daily basis.
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