For Companies with Experience in Sourcing in China
US China Supply Chain Network
- The supply chain from China to the US is long physically and time-wise. It’s full of complexities and traps that can stall products and cause missed opportunities at home.
- The most visible result of this is increased inventories-ordering earlier than otherwise, carrying larger safety stocks and so on. One of our clients estimates that they could reduce their safety stocks by 30% if their China/US supply chain were more effective.
- The less visible result (which, in most businesses, is far more consequential than mere inventory increases) is lost sales; real sales which are lost to others as a result of not having product on time.
- Some solutions come through compressing time-finding ways of reducing the time products take to go through the supply chain complexities. Normally this requires substantial communication and coordination capability. Supply chain managers need to thoroughly understand the processes involved in their supply chains, know in detail how long these processes take, and be able to impact and foreshorten these times. This, in turn, requires flexibility.
- Flexibility comes, in part, from having alternatives. Alternative manufacturing suppliers and service providers-transportation, customs, freight forwarding and so on. Too many US companies have locked themselves into too few Chinese suppliers. They’ve grown dependent on just a few. As these suppliers have grown, any one customer has become a smaller part of their business with the attendant loss of attention and adherence to previous commitments, particularly lead-time commitments.
Fit Within Current Business Models
- Some organizations are finding that establishing an inbound consolidation capability greatly shortens their lead-times. This solution stems from having a warehousing capability, typically near a port, which can receive material manufactured ahead of the critical time at which it’s needed. Then orders, typically for multiple items, are placed on the warehouse and shipped in full container loads. This has several advantages. It allows for products that are made in less the container load lot sizes to be outsourced without the LTC load transportation penalty. This, in turn, helps reduce lot sizes of currently outsourced products. In addition, well organized companies can place orders on the Chinese consolidation point that are specific for and delivered to a regional warehouse. This eliminates an entire step in the domestic supply chain of shipment from the port to a central warehouse, handling at the warehouse and subsequent picking and shipment to the regional warehouse.