Looking to the Past to Find the Future of Your Supply Chain
As we move into 2017, it might be time to take a peek at your warehouse management system. The trend of the past few decades was to outsource supply chains to locations like India and China, but this seems to be changing. The new trend is taking a more balanced approach that includes both outsourcing and local operations.
We found an interesting op-ed piece featured in Industry Week. In the article entitled The Case for Supplier Development, Paul Ericksen, a top-manufacturing consultant, has called for a return to the roots of your warehouse management system by developing 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.
Bring in the Role of Supplier-Developer
Ericksen suggests the role of supplier-developer is added to your warehouse management system. 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.
Supplier Network Benefits
Price is just one aspect of the supplier-developer network. Building a world-class supply chain 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’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 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.
We aren’t telling you to let all of your worldwide suppliers go. If they can offer a great price and deliver on a schedule that meets your needs, then they still add value to your supply chain. We believe that the best model is a return to the mixed model, which includes both local and global suppliers, along with the help of a supply chain development person.
Let Accounting Systems Inc. help get your warehouse management system up to speed in 2017
If you are ready to save time and money in your supply chain let ASI help you achieve this. ASI can help you find the right software management software, like Sage 100 or Acumatica. Contact us to get 2017 started off right.