The ebb and flow of business and the impact on your supply chain!

March 13th, 2013

Have you ever noticed how members of our media often only start to form consensus on current events when it is too late to do anything about them?

Today’s  guest post is from Steve Schwerin and account manager at SafeSourcing

Have you ever noticed how members of our media often only start to form consensus on current events when it is too late to do anything about them?  You will see an article here or there about a topic until all of the sudden the topic is everywhere.   The fact is that the chattering class is not forecasting or managing risk for your business; you are.  The burden of forming a coherent picture out of fragmented information falls on you and your team including your procurement professional.

I came across a few articles recently that caused my mind to wander onto how sourcing strategy continues to evolve.  While the subjects of the articles in question varied, they spoke to the need of forward thinking in business.

One article from the New York Times contrasted just-in-case vs. just-in-time supply chains, another from the Economist was about how growth in India is heavily government subsidized, while Bloomberg reported that Ford is reshoring some of its engine work to a plant near Cleveland, Ohio.  All spoke to reasons why business is constantly in flux.

Labor costs approaching threshold:  Low-cost labor in China and India has been the rage for at least two decades now.  Will this continue indefinitely?  If you merely take what you read at face value, you might be led to believe this.  That being said, as over-seas labor costs rise, what is the threshold where labor savings no longer offset the extra hassle and overhead?

Uncertain growth:  Sure, China and India have grown rapidly.  Does this mean they will continue to grow at the same pace indefinitely?  Again, if you take much of the news over the past few years at face value, this is what you might think.  One risk is that the economies of China and India are heavily subsidized; this certainly cannot last forever.  No one wants to be left holding the bag when this ride comes to an end with no manufacturing or vendor footprint in the U.S.

Turnaround Time:  Manufacturing overseas means slower turnaround time.  For some products, this does not matter.  For many, though, time sensitivity is a very competitive issue.  Will this apply to more and more products in the future?

Transportation costs and time:  Transportation does not just include fuel costs, though fuel costs do continue to rise.  Transportation costs also include labor, machinery, taxes, fees and time.

The time has come where businesses like Ford are responding to these changing costs and risks.  Of course, Ford is not making its facilities or procurement department available to you.  There are other resources available to you these days, however.  Why not work with procurement professionals to negotiate better service or lower prices from suppliers here in North America?  The nominal price might not be quite as low as something from India or China, but what is the overall value?  I’m sure you already believe that any successful procurement strategy is not built on media consensus.  We can help you act on that belief.

If you’d like help with your sourcing needs, please contact a SafeSourcing customer services representative.

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