A courageous supply strategy

All of a sudden, the minister looked shocked.  In the two years since he joined the government, he had never been so worried.  Of course taking decisions was part of his job.  Some had been difficult.  Some had been rushed.  Some had been drastic.  But for the first time, his decision had been called ‘courageous’.  The minister and everyone else in the cabinet office knew exactly the meaning of this word.  Regardless of whether it was the right decision, ‘courageous’ meant that it was extremely unpopular.  He had just signed the death warrant for his career in government.   That is why politicians tend to avoid ‘courageous’ ideas.  But how brave are we in the business world? 

The difficult market conditions are still here, yet many companies are running out of inspiration to adapt and rebalance the flow of money.  The quick wins achieved by cutting projects, stocks and staff, were only a short term solution.  The pressure from increasing raw material costs and thinner margins is continuing. 

At the start of the economic downturn, there was a glimpse that businesses might finally understand the true approach behind lean thinking.  Today, I am not so sure.  Recent conversations with Purchasing, Finance and Supply Chain Directors indicate that they are going back to what they know rather than be brave.  Increased sourcing from the Far East is still the strategy for many Western companies, because it’s ‘cheaper’.  Except that it is not.

The cost of goods is just a fraction of what is hurting industries today.  Long lead-times, which are the result of sourcing far from your market, hurt you in many more ways.  You drive up your stock holding through replenishment constraints and reduce your responsiveness – which does not make sense in such uncertain market conditions.

Thankfully, I have seen companies – including those in the electronic components industry – sourcing more cheaply from local suppliers because they had worked with them hand-in-hand on quality and lean manufacturing.  So take a look at your overall supply chain.  Maybe it is time to re-think its shape and be courageous…

Alain Vix is Account Director at Supply Chain Planning specialist Hughenden Consulting.  www.HughendenConsulting.com