Top Four Supply Chain Considerations
A successful supply chain entails many things. It includes an innovative idea, a sound business plan, a collaborative effort between all parties involved, and an information exchange system. Finding the right parties and making them a part of your business is key to success.
When it comes to maintaining an efficient supply chain, keeping your sources streamlined is essential. The right sourcing decisions go a long way toward making your supply chain successful.
What are the keys to making strategic sourcing decisions? Here are the top four sourcing decisions that help in creating a better supply chain operation.
1. In-House vs. Outsourcing
For any supply chain function, the most significant decision is whether to outsource a task or perform it in-house. Outsourcing is one of the most pressing concerns facing a firm, and actions across industries tend to be varied. When considering using in-house assets versus outsourcing, keep in mind the costs, efficiency of a process, and the inevitability of change. What risks and costs is your firm willing to take?
2. Enhance the Collaboration
Collaboration can lower the cost of product design, manufacturing, and logistics. Working closely with vendors can speed up product development time drastically. This timing is crucial when designing and bringing a product to market before the competitor offers a considerable advantage.
3. Developing a Sourcing Strategy
When building a vendor portfolio, organizations have many choices about whom to source from and what to source. An organization should decide on whether to outsource or produce in-house. The company must also determine whether the supply source will be cost-effective and responsive. Most companies need to tailor their vendor portfolio based on a variety of product and market characteristics. To efficiently use a customized portfolio, allocate demand between vendors in such a way that it complies with their competence and capabilities. Low-cost providers should receive regular orders of low-value products that do not require significant engineering or design support. Whereas, responsive vendors should be responsible for volatile and high-value products that are early in their life cycle and need considerable planning and design support. Keep in mind the fact that you should choose responsive resources to facilitate a convenient operation. Low-cost vendors are acceptable on the location. However, low-cost vendors are often the primary reason for going offshore.
4. Risk Sharing, Contracts, and Supply Chain Performance
Contracts and master service agreements define parameters of the buyer-vendor or buyer-supplier relationship. Contracts and agreements should be written to make possible the most desirable supply chain outcomes for each party involved.
Preferably, an agreement should be structured to enhance the organization’s productivity, discourage information distortion, and offer benefits to the vendor to improve performance along key indicators. Shortcomings in supply chain performance arise because the buyer and vendors are different entities, each trying to optimize profits. Adherence to contractual standards should be monitored continuously and addressed when necessary.