Tag Archive: infrastructure

JIT Might Not Be What it is Cracked Up to Be?!

April 2nd, 2020

Just-in-time might not be what it is cracked up to be! Certainly, the coronavirus impacts should give us reason to question this rule at face value. Are you running so tight that you only have one bin, pallet or small supermarket to keep your facility running? If so, the question extends to your end-to-end supply chain.

Let’s assume you are a critical manufacturer struggling to produce key items during this coronavirus pandemic. Your suppliers should not be on lockdown since they support a critical infrastructure business; however, that doesn’t mean you’ll be fine. There are many considerations to review:

  1. Source of supply: Are your suppliers located in Asia and unable to staff during the peak of the coronavirus? Do you know what type of delays you’ll experience? Do your suppliers have contingency plans?
  2. Your suppliers’ suppliers: Even if you have a good handle on your suppliers, do you know the status of your suppliers’ suppliers? In an interconnected supply chain, we are only as strong as our weakest link. Who is your weakest link?
  3. Your transportation infrastructure: Even if your suppliers have product, can it get to you? Within what timeframe?
  4. Backups: No matter how well you’ve planned, the question is whether you have backups for critical materials/ ingredients that will ramp up rapidly as needed. Hopefully your supply chain is diversified geographically.
  5. Your customers: Are you in lockstep with your customers so that you are proactively managing demand or are peaks and valleys a surprise? Of course, the coronavirus was unexpected but the degree you fully understand your customers will determine your reaction time to changes in demand.
  6. Positioning of inventory: Do you have critical inventory positioned throughout your end-to-end supply chain?
  7. Your digital supply chain: Are you able to see into your extended supply chain? It could provide quite a benefit at this point.
  8. Additive manufacturing & robotics: Are you able to keep running with less people, socially distanced people and/or print on demand?

Using JIT (or any concept for that matter) without taking a 360 degree view is a bad idea! The cousin of JIT is lean manufacturing. I gained the attention of Wiley by writing that lean is just uncommon common sense (which of course simplifies it in order to make a point), but perhaps it is something to think more about. Have you put all these trendy concepts through a common sense filter? How about a risk filter? Let’s hope so! Otherwise you can be in a critical business and still not producing and running customers out of stock.

What is the answer? It depends! If you have put thought into your supply chain strategy upfront, considered risks, diversified your supplier base, invested in quality checks and top talent, and treated your employees well, it is likely your version of JIT will prove successful. On the other hand, if you saw JIT as a way to reduce inventory and were short-sighted in looking at your end-to-end supply chain and treating your employees and partners as trusted colleagues, you will likely suffer.

Getting ahead of the curve might be the only avenue to success. Consider creating a resilient supply chain and future-proofing your supply chain. Stay tuned and read more about it, and If you are interested in discussing a supply chain assessment, please contact us.

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Future-Proofing Your Supply Chain

The Strongest Link in Your Supply Chain



Made in Vietnam?

January 19th, 2020

Vietnam has been the hot topic lately. After a visit recently, I saw first-hand the potential along with the challenges. Clients are definitely evaluating changing the source of supply to Vietnam. And the question is: should they? Or, alternatively, the question is: Are they moving fast enough?

Although there are infrastructure issues, the most successful clients are already ahead of the curve and seriously considering Vietnam. Of course, it is not best for all products and situations, just as China wasn’t best for all situations previously. If you are starting to see price increases in China and are concerned about the quality and reliability as China is struggling, it is definitely something to consider. Consider this fact – many Chinese companies are moving production to Vietnam.  Obviously there is something to be said for evaluating this source of supply.

Vietnam likes manufacturing and the United States. One of my proactive clients has been moving a significant portion of their supply from China to Vietnam over the last year. They started the process before the tariffs because they expected to save significantly with Vietnam production.  However, they really looked like heroes to their Board when they also beat the Chinese tariffs with the move.

This does NOT mean it will always make sense. We also have clients who outsourced to China a long time ago when it was the latest “fad”. In fact, the tide turned over the last several years.  The total cost of the product as well as the gains in customer satisfaction of sourcing closer to customer demand (typically in N.A.) makes a lot more sense.  Unfortunately for them, most of the companies in this situation haven’t changed supply yet due to capital and infrastructure costs and related efforts to move the source of supply. Yet it can be done. Our client reevaluated and started the transition to Vietnam. Recently, the tariffs are forcing several to re-think the China strategy, but is it “too late”? Are you going to wait for the next tariff scenario where you are on the defensive or are you gong to proactively reevaluate your entire strategy?

Certainly part of what you’ll need to evaluate is your working capital requirements. How does China compare with Vietnam? Both require an extended supply chain. Generally speaking, the longer lead times to cross the ocean carry working capital requirements. As customers become more demanding, you’ll need to consider inventory as a key component to your sourcing decisions. Pick up some tips and strategies in our recent article ” Inventory Management as Fashionable as Automated Intelligence for Distributors” for ACHR News.

Getting ahead of the curve might be the only avenue to success. When looking at China vs. Vietnam, it is quite clear that China is significantly larger and has far more manufacturing capability.  Yet, those early to Vietnam won’t have to worry about this particular issue.  And, of course Vietnam is racing to catch up.

Whether you have sourcing in China, Vietnam or neither, the underlying point is essential. Are you constantly revisiting your supply chain strategy? If not, you’ll likely be left following your competitors. Instead, consider future-proofing your manufacturing and supply chain business. Stay tuned and read more about it.

If you are interested in discussing a supply chain assessment, please contact us.

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Is Vietnam the New China?

What’s Ahead for Supply Chain?

The Strongest Link in Your Supply Chain



Is Vietnam the New China?

December 23rd, 2019

Possibly, and “it depends”! China has been moving factories to Vietnam since the early 2000’s, so it is certainly a place to consider. With the tariffs, global uncertainty, rising wages in China and social/political implications, Vietnam can provide a viable alternative especially for certain industries. Vietnam has lower wages, multiple ports, is friendly and has a growing and advancing manufacturing base. Of course, there are always challenges to navigate as well such as a lesser developed infrastructure and less high skilled resources available. The bottom line is that you should at least have Vietnam on your radar.

Some of our clients are sourcing from Vietnam in addition to other countries including China, Mexico and N.A. Similar to China, there is a stark difference between those with money and those working diligently to get by. The picture of the nice looking building is part of the Sofitel Legend Metropole is a fabulous hotel (and happens to be where Donald Trump & Kim Jung-un met), and the other picture is one of Hanoi’s city streets. The vast majority of people cannot afford a car (which is quite expensive in Vietnam, $25,000 for the smallest hatchback) , so there are motorbikes all over the place, driving in seemingly organized chaos. In comparison to China’s wages of $27.50 per day, wages in Vietnam are $6.70 per day. Yes, a stark difference for labor-intensive industries. While Vietnam may not be right for everyone, you should at least be aware of what the country has to offer in terms of sourcing opportunities.

What Should We Consider and/or What Impacts Could Arise?
Countless numbers of organizations outsourced to China 20 years ago.  Many have discovered it wasn’t the smartest decision. Perhaps labor intensity wasn’t high. Perhaps lead time requirements were quick and critical. Perhaps product was delayed at ports or the risks associated with the South China Sea are too great. Perhaps it never came out much ahead when looking at the total cost or perhaps it has evolved to more of a parity. In non-labor intensive industries, I’ve heard several executives re-think the decision. At larger companies with global business, they reoriented the China facilities to supply the Asian markets. In smaller companies, they were stuck for a period of time because they invested heavily including in capital intensive machinery and equipment. And in some cases, it was a brilliant decision.

Whether you have outsourced to China, Vietnam or anywhere else is not relevant. The key question to think about is the impact your decisions have on your customer, your skills requirements, your cost structure, your risk profile and more. So long as you are going into these decisions with your eyes wide open, you’ll be successful.

Perhaps you should also be thinking about backup plans and deliberately creating redundancy and diversifying your manufacturing base. Even if you don’t consider switching part of your base because you aren’t prepared to make this transition successfully, you should at least think about how you are sourcing growth and expansion. Should you build skills close to your customers? If you are in a labor-intensive industry such as apparel and home textiles (which are #1 and #2 in Vietnam), perhaps you should consider Vietnam. And, why not get ahead of the curve? Samsung is producing several phones in Vietnam.  There may be something to be said about being first to the party of using higher-skilled talent.

At a minimum, re-evaluate your end-to-end supply chain in order to future-proof your manufacturing operations and related supply chain components. Check out our new LMA-i, LMA-Intelligence series including Future-Proofing and contact us if you’d like an assessment path-forward plan to accelerate your bottom line and customer performance.



Have You Thought About Whether You are Maximizing the Use of Your ERP System?

December 19th, 2019

Before jumping to conclusions and pursuing a system upgrade, should we explore whether we are maximizing the use of our current system? Or, is it just not modern enough to support our growth in a scalable, profitable way?

This is often the subject of a client call. After all, no one in their right mind would want to embark on an ERP upgrade unless absolutely necessary. The issue is that the situation can be quite complex. How do we separate what’s important vs. what’s not? In this case study, a client knew they had to upgrade because their system was long out of maintenance. The only question was how compelling was the upgrade to support their customers’ requirements and an efficient operation?

The Answer
Although they clearly required an upgrade to get into the current century, the question we explored is whether they could continue to improve performance using their current system to a degree large enough to delay the upgrade until they were better prepared. Unfortunately, since they had let their current system go for ‘too long’, it was highly dependent on current technical resources, partly tailored to their business processes and customized to their needs. At first glance, that doesn’t sound bad! However, the issue was that it was by no means scalable, would require significant education on concepts so that folks started thinking instead of following the process designed into the current system and they were highly dependent on resources that could leave or “get hit by a bus”. Doesn’t that sound like something you say but it doesn’t happen? Not so> One of my clients had that exact situation occur, even though it is just a phrase for a myriad of issues that could arise.

After digging into their business requirements (current as well as a few years into the future), we found ample opportunity to further leverage already existing functionality to meet customer requirements and delay the upgrade for several months. However, that still wasn’t enough. We also had to take actions to secure at-risk critical resources to the degree feasible (since we clearly cannot plan 100% for the ‘hit by the bus’ scenario). We were successful in proactively addressing the situation so that we didn’t have to leap before we knew if we had a net. Yet, we weren’t 100% comfortable, so we also put together an aggressive plan for ERP selection to find the best fit system to meet their needs (without customizing) and equally important a best fit partner that could proactively understand and think through their education needs (which were VERY different from training needs).

Food For Thought
Although we found a solution, the CEO was on pins and needles once he realized the extent of the situation. Don’t leave your infrastructure to chance. Even though all can seem quite fine at the high level, it is important to know whether you are being held up by a solid foundation or a nice-looking pile of straw. That is before considering what you’ll need at least 18 months into the future. You will not select the best system to support your plans or you’ll skimp on implementation. Every client that cut corners overspent by 20-100% and that is before considering the impact on customer service. Do you have a scalable ERP system to support your business growth and profitability? If not, start there!

 

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Is Your ERP System Scalable?

Do You Need An ERP Upgrade?

Systems Pragmatist



Manufacturing is HOT!

February 19th, 2018

Supply Chain Briefing

In the last week, not only have there been several articles about the positive strides manufacturing is making but it also has come up in several presentations we’ve attended such as the Inland Empire Economic Forecast.  

Here is a compilation of just a few of the HOT topics and trends:

  • There are plenty of customers and consumers are in the U.S. – with the Amazon Effect (customers expecting rapid deliveries, customized product and 24/7 accessibility), locating closer to the customer is advantageous.
  • Automation and technology are gaining rapidly – the more technology that makes sense in our factories, the less lower-skilled people required.  That makes U.S. factories more competitive!
  • High-tech resources are in the U.S. – the more technology and automation, the higher skill level required.  Those folks are close by.
  • According to Industry Week, the NAM Manufacturers’ Outlook Survey, 95% of manufacturers are are optimistic at their company’s prospects.
  • According to an economic forecast I attended by a professor at Claremont McKenna, manufacturing is vital to the economy and  jobs since it pays well, similarly to construction.  Clients are hiring.
  • Deregulation and tax reform are definitely positive for manufacturers and improve manufacturers’ competitiveness vs. other countries.
  • Harvey Mudd (the #1 engineering school in the U.S.) has seen a significant increase in the popularity of manufacturing careers.

    Manufacturing is attractive once again….

Are you ready to grow your manufacturing presence?

What Should We Consider and/or What Impacts Could Arise?
Let’s sum this up with the following question:  Are you ready to achieve scalable, profitable growth?  

There are many aspects to consider in answering this question:  

1) Are your people prepared?  Do they have the appropriate skills, education and experiences?  Are they cross-trained?  Are they prepared for growth?  Do you have enough people?
 2) Will your processes support 25% growth before hitting the wall?  50%?  100%?  How agile are you?  Would you have to throw people at it (typically because you haven’t prepared in advance) or can you address with a combination of people, processes and technology?
3) Will your systems and technology infrastructure support your growth?  This is one of the most challenging as it can appear overwhelming in terms of the cost to upgrade your system; however, it can also become pennies in the scheme of things if you cannot keep up and service suffers, let alone margins suffer.  Also, are you considering new technologies and automation to keep your costs in line?
4) Are you thinking through in-sourcing, outsourcing, near-sourcing and keeping all of your options open?  It is rare that I run across a client considering both in-sourcing and out-sourcing simultaneously but it just might make sense….
5) Are your finances in order to support growth?
6) Are your supply chain partners and trusted advisors ready for growth?

Gather your team and start discussing these topics because it is coming!