Our clients frequently call with questions such as:
- Should we renew our lease?
- Should we move to a lower cost area?
- Should we move to a lower cost state?
- What considerations should we think about when evaluating our manufacturing and logistics network?
- Should we outsource?
Thus, we thought it would be prudent to address some questions and themes that should be evaluated from a strategic point-of-view when discussing supply chain network assessments.
Let’s start by saying that our top clients begin THINKING about these topics several years in advance. Similar to selling a business, it isn’t the best plan to evaluate whether to renew a lease at the last minute or to be forced into a particular partner or location because you started preparing “too late”.
Instead, why not think ahead….
- Where are your customers? – As much as we all want to reduce costs especially in today’s Amazonian environment, we also need to remember that customers expect rapid deliveries, change their mind frequently (and expect agility) and desire easy returns. Thus, where are you located in comparison to your customers?
- What are your customers’ expectations? – Lead times. Personalized service. Return policies. Vendor managed inventory. Future forecasts. What will they expect a year from now? Are you already planning for these needs?
- Where are your suppliers? – Similar to your customers, it is important to consider where your suppliers are located as well. Do you receive product from the ports? If so, what volume is related to the ports?
- What access do you have to people? – We evaluated Nevada for one of our clients. However, when we talked with local contacts to estimate building / lease costs, we also discovered that as low as the overhead might be, freight aside, there were no people. Tesla had absorbed them all and there were requests to supply people from Southern CA to support current workloads. People can certainly be relevant!
- What type of freight partners/ rates are in place? – No matter how close you might be to your customer, freight can add up – and, more importantly, delays to your customer are VERY costly (lost business, charge backs from customers such as Walmart, ill will and more). Just because you have carriers with your current situation, it does NOT mean that will be true with your new situation. Freight is tight and rates are going up! And, remember last mile considerations are complex. Last mile. Last minute!
- What type of transportation network is required to support your business? – In addition to freight considerations, will you need to think about parcel, rail, ocean freight, and other modes of transportation? Or should you be considering these options?
- What inventory levels are built into your network? – Inventory = cash tied up.
There is quite a bit more to think about than solely a cost cutting exercise. Most clients call due to concerns about cost – as important as cost is, taking the strategic / high-level view can ensure your service, total cost (including hidden costs) and cash flow are maximized.
Have you started thinking ahead? If you are interested in our newly upgraded service offering in response to the Amazon Effect of warehousing/ supply chain network assessments, contact us.