What is in this article?:
- Move: A Supply Chain Shouldnâ€™t Suffer from Your Growing Pains
- Monitor Key Indicators
As your supply chain grows, learn how to better manage manufacturing costs and more complex inventories.
For businesses, growth is both a goal and a challenge. Getting bigger means more customers, more employees and more supply chain links to get a product to market. Each link added offers potential to better manage manufacturing cost—and fulfill the imperative for just-in-time production—but it also exposes the business to more possibilities for disruption. It’s easy, then, for fast growth to jettison the best-laid plans.
Consider the plight of one Texas company, a large multinational corporation that made various electronic products for the home appliance sector. It had grown to the point it was sourcing from 37 different factories in Mainland China. The parts were shipped to a Mexico factory for assembly. We were called in to evaluate their supply chain and squeeze efficiencies into it wherever possible.
To monitor and manage the inventory in this relatively complex supply chain, the company had acquired a multimillion-dollar inventory system from SAP AG. An entire yard on their leased Mexican property was filled with containers that had been shipped from the Chinese suppliers. It seemed like a foolproof system, except for one oversight: no one knew what was inside the containers that had accumulated on the site. Without that knowledge, the SAP software was worthless and the client was vulnerable to a supply chain breakdown due to unidentified inventory overload.
Called in on this project, we set it up so our client could “see" all the moving parts of its supply chain, starting from the factory in China, and identify which parts—and how many—were en route.
On-Site Customs Clearance
Tackling the issue on the other side of the Pacific, we asked our client company to buy the building they had been renting. It was available for a small investment because there were so many vacant commercial properties at the time.
The building needed to be bonded by the Mexican government. This step put Mexican customs officers in the facility so that when shipments were emptied, inspections were handled at the source—only 200 yards from the factory. Now, when shipments are delivered, containers are opened and warehoused. The SAP inventory system has the information it needs to track, anticipate changes and make recommendations.
With a more visible and efficient supply chain, and the fact that no duty was required on the shipments until they were used, this company’s cash flow increased by more than $250,000 a month. The total overall reduction of cost was close to 12%—which amounted to millions of dollars for this particular company.