For a long time now, small businesses have sourced goods, services and manufacturing from offshore regions. Our international supply chain expert, Kurt Cavano, considers the challenges of supply chain management in a domestic and global sourcing strategy.
An offshoring strategy has served many businesses well in the past, largely because it has done a good job of keeping costs down.
But in some industries now we are beginning to see a small shift in production back West, driven by a number of economic and market factors. A local supply chain can mean simplicity, speed and more control.
Factors influencing sourcing strategies
Three factors are beginning to stimulate the relocation of some production. Firstly, wages are increasing in offshore locations, beginning to offset the cost advantages that caused the original boom in offshore sourcing.
Secondly, some small firms are now producing specifically to sell to local markets and are taking production closer to the customer to deliver this strategy.
Lastly, we are seeing a power shift, particularly in consumer goods, where buyer demand is putting pressure on smaller companies to generate and deliver products faster, and to make changes to product lines more flexibly. This puts on-time delivery under strain when shipping timescales have to be taken into account. Some businesses producing bespoke or specialised goods find they need to source locally to be fast enough to satisfy customers.
The supply chain network
Whether sourcing is local or global, to be cost-efficient and flexible enough to meet ever-changing customer demands, businesses need to think of the chain of companies in their supply chain as a network and have in place technology that enables all members of the network to communicate and collaborate fully together. Businesses are now more dependent on partners than ever before.
Supply chain management relies heavily on technology to keep up with the demands placed on it. Traditionally, business management software, database management systems and electronic communication systems that include enterprise resource planning (ERP) and electronic data interchange (EDI), have all played a part in a patchwork approach for collating, interpreting, sharing and acting upon information.
However this collective approach, one built on tools primarily designed for one-to-one or inter-company collaboration, fails to deliver a backbone upon which an entire supply chain can communicate and collaborate.
No matter how local or global, technology needs to provide a single system of record supporting the collaboration of an entire supply network. As a small business grows, it outgrows the manual processes associated with simpler supply chains. They become difficult to manage and cut into profits through inefficiency.
Ultimately, supply chains need to be agile and capable of adapting in line with supply strategy. End-to-end visibility gives businesses control over operations including any changes to production, orders and deliveries as market conditions and demands dictate. To have this level of visibility companies need real-time connectivity with all links in their supply chain.
Cloud-based platforms provide a mechanism for visible, efficient supply chain management, utilising a platform approach that brings all stakeholders in the supply chain onto a single network. Increasingly, the successful supply chains are the ones that support inter-company collaboration, equipping them to act quickly on the ever-changing information in a supply chain.