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March 26, 2015

5 Tips to Diversify Your Supply Chain

Diversification of your Supply Chain is the process of removing as much risk as possible.  Yes, cost has its place but if you cannot get product to keep your production line moving than the pennies you saved are now costing you dollars.  Lots of dollars.  Oh, and your boss is really ticked off as well.  Not to mention your customers too!

Diversify_Your_Supply_Chain

What does a Strategic Sourcing Genius do? Easy: Diversify your current supply chain!  Here are a few ways to accomplish that goal:

1. Onshore What Makes Sense: 

Seriously?!?  Yes!  As a company that exists to answer the question, “Where is the best place to manufacture?” we honestly evaluate each opportunity.  Sometimes we have to tell a customer that they are best served by keeping their production here in the US or consider moving the parts back that make the most financial sense.

2. Offshore What Makes Sense: 

See Above.  While your current supplier has been loyal for years (yes, loyalty is good in today’s world) if you are losing your competitive advantage in the market place and you need to reduce cost (or improve quality) to regain your edge, you might want to look offshore.  There’s been enough written to justify that some global contract manufacturing categories are a great fit for manufacturing outside the US.

3. Two Ports Are Better Than One: 

If your supply chain is 12,000 miles long because you leverage the efficiencies of a global manufacturing community, chances are you ship to the same port every time.  During some peak seasons and during the near cataclysmic congestion events that we are facing at the US West Coast ports you may face delays; sometimes significant delays.  What to do?  Consider a strategy where you move some of your containers through East Coast ports (or Southern Ports like Houston) to diversify your supply chain

4. Three Suppliers Are Better Than One:

For years “Diversifying your supply chain” meant dual sourcing.  Split the volume between a couple of suppliers prevents disruptions in your supply chain and gives you enough volume to leverage both.  If you have the volume, What about a plan C?  Keeping your production lines running sometimes requires a little “out of the box thinking.”  So if two suppliers are better than one, maybe, just maybe, three suppliers are better than two.

5. Four Countries Are Better Than…:

If you are a domestic manufacturer you may have already moved some production offshore.  For many years China was called the world’s factory – not sure who gets the credit for that, but it wasn’t me.  So much has been written about rising Chinese Labor costs.  While true for many manufacturing disciplines (Electronics, SMT, High Precision Die Cast, to name a few) the reality is that it still is more competitive to manufacture in China for some items.  But, as costs rise other global manufacturing centers emerge to compete.  Countries like Vietnam and India are routinely producing world class critical to function engineered products.  So now instead of just the US and China, you can add Vietnam and India to the list of global contract manufacturing centers.

Managing a complex supply chain successfully takes a continuous improvement approach.  There are so many variable in play that sometimes it makes sense to ask for a little help to make sure you have your eyes on all the moving parts.

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Filed Under: Supply Chain Management, Strategic Sourcing