Global Sourcing and Supply Chains: Beyond Logistics

When it comes to global sourcing and managing regional supply chains, it turns out that most companies only think about transportation and logistics related challenges and delays when it comes to lead time. This is particularly true in the case of China. I recently came across an article in Industry Week which highlights this problem (hat-tip:Purchasing). According to the article, "when most consider lead times from and within China their expectations are based almost solely on transportation." However, this is a myopic perspective considering that it assumes "finished product[s]must already be produced" for this to be the case. But in a global environment, "lead time must include both manufacturing and transportation lead time ... due to the mismanagement of work-in-process, in-transit and safety stock inventory ... If the supplier does not have adequate inventory, downstream supplier's production lead time can be added as well."

From a global sourcing perspective, there's an even greater chance that your suppliers have underinvested in safety stock and the right set of manufacturing processes because of a lack of availability to capital. And in China, specifically, this is magnified by the fact that by 2010, according to Industry Week, "400,000" logistics professionals "will be required to service ... [an industry that graduates] roughly 10,000 students per year ... Supply chain management in relation is even further underdeveloped. This means education and knowledge sharing must come from within the supply chain." If you ask me, this sounds a bit ominous. But even more importantly, it highlights the need to look beyond labor costs and sourcing / negotiation to achieve total landed cost savings for both export and local consumption when working with suppliers in development markets like China where the biggest constrain to supply chain success is a lack of talent -- not a lack of roads or infrastructure.

Jason Busch

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