In today’s business climate, many companies are grappling with the decision of whether to manufacture their products locally or overseas. With the global pandemic changing so much in the world, that discussion around global and local manufacturing has become even more complex.
I began my career working in a manufacturing plant within an international company that was completely vertically integrated. From component manufacturing through to subassembly manufacturing and end product assembly they did it all.
Within 10 years the company experienced a number of site closures and declared that manufacturing was no longer a core competency. For the site that I was a part of this meant that closure was an inevitability.
Faced with this stark reality we made the choice to spin off from the parent organization and start our own new company, entering the world of Contract Manufacturing.
This was my first experience with Outsourcing, or what I refer to as “Supply Chain as a Service” (SCaaS).
Doing business with suppliers located overseas or in another country can be an overwhelming and daunting task even for expert Sourcing professionals. But what if you considered Outsourcing Sourcing?
Recently a friend of mine asked me to have lunch with him and one of his associates. The other gentleman had invented a new product. He had a marketing plan. He knew what his cost point had to be on the product which meant that he had to have the product manufactured overseas.
But beyond that he had no idea on where to start to source his product.
When it comes to creating a strategy for relocating your manufacturing business, you have more to worry about than happy employees. For manufacturers, it’s about covering the raw cost of materials, labor, shipping, taxes, understanding your profit margins, and much more.
Manufacturers who decide to move to a new space also need to carefully weigh the pros and cons of their operations’ location before making a decision. For example, a building 20 minutes away from the city, while cheaper, could thin your margins due to high shipping costs.
Relocation questions may keep you up at night, but sometimes moving is necessary.
Here are 7 ways you can overcome relocation challenges on the business and employee side.
Logistics are a vital part of many businesses and are integral to the company’s overall business system. So should you outsource logistics?
If you and your business are currently doing everything yourself, then you might not only wonder if you could free up more time to do the things you need to be doing but also how third-party outsourcing can help you with issues such as these.
This piece will take you through what you need to know about outsourcing logistics and what it can do for your business.
Like so many professionals Procurement people are very proud. They are proud of the job that they do and the contributions that they make. And they are most always proud of their ability to negotiate and get the best deal!
But at some point in their careers, especially in the age of Outsourcing, they are likely to have to deal with potential suppliers who provide Procurement services. Procurement typically negotiates deals for other functions like I/T, HR, Manufacturing and every other area in the company.
Now they are faced with dealing with companies who basically state that they can do a better job at negotiating and Procurement than they do.
In the face of such a perceived, direct challenge to your abilities how do you and your Procurement team deal with this professionally and with integrity?
At Supply Chain Game Changer we believe in sharing experiences and expertise from people in every industry and from across the globe. As such we have introduced our “Seasoned Leadership in Action” Interview series. This interview is with Jill Button, President and CEO at ProcurePro.
Every business is doing their very best to tighten their belts right now. It has become impossible to ignore the headlines about the rising cost of living, the supply chain issues, and the unpredictable markets without professional help.
Expanding your Supply Chain into international territories comes with complex challenges that many businesses are not prepared for. With shipping fees, language barriers, and tariffs, managing the logistics of global supply chains can be an overwhelming endeavor.
These challenges come with risks to your business that can end in lost revenue, unnecessary expenses, and wasted resources if not handled properly.
One of the most prominent challenges of opening up international supply chains is the risk involved with foreign entities. Business relationships with international companies can be influenced by changing geopolitical situations that create unexpected tariffs or barriers. As the Russian invasion of Ukraine has shown, geopolitical tensions can rapidly shift and severely impede international supply chains.
Stay up to date on geopolitical news, especially with all countries that impact your supply chain, and be aware of any potential political matters that may put your business at risk. This can include building tensions between nations, wars, or closed borders, as well as broader events like natural disasters, climate emergencies, or changes in political leadership.
Consider investing in insurance policies that cover these types of global risks, and diversify your business to other suppliers and partners to avoid a total standstill in the case of an unforeseeable event. Many companies are also turning to AI to help them monitor geopolitical risks.
Machine learning and advanced algorithms reduce the need for regional experts, and instead, collect data from a multitude of sources in order to produce warnings about potential risks. For example, AI company Predata uses machine learning to analyze online behavior, such as what people are searching or viewing in over 180 countries. As the name suggests, this data can help anticipate unrest, helping CEOs and supply chain managers make smart decisions.
2. International Standards
Quality and safety compliance standards vary from country to country, leading to discrepancies in a business’s product when the supply chain spans a multitude of nationals. Clearly communicate with your international partners your expectancy for quality standards and an acceptable level of defects in your products.
It may be helpful to establish third-party certifications that ensure quality and safety is consistent at every level of the international network. Many companies may also make use of third-party audits and inspections or regional experts in order to ensure their products meet the regulations of their destination market.
These quality standards extend to ethical labor and environmental standards as well, where companies should be aware of the ethical practices and social equity of their international suppliers. Manufacturing and production labor in developing nations are significantly less expensive than in most developed nations, but these often lack safety and environmental precautions.
As such, this comes with a major risk for companies and workers. The 2012 Dhaka Factory Fire was a result of poor working conditions and a severe lack of safety standards that resulted in the fatalities of over 100 workers. This type of accident is not only tragic, but can also greatly harm a company’s reputation.
When expanding to international suppliers, invest in good quality partners that practice safe and equitable treatment of their workers, as well as environmentally sound practices. Not only will this reduce vulnerability in your supply chain, but may boost revenue as well.
A growing number of buyers are switching to fair trade buying habits and are looking for companies that can boast ethical treatment of their workers and responsible environmental impacts. Take advantage of quality control audits and certifications that keep you and your international partners up to date on changing standards, and be open and honest with customers on your business’s ethical practices.
3. Delivery Times
The rise in major e-commerce marketplaces has created an expectation among buyers that delivery times should be fast and cheap. Known as the Amazon Effect, many potential customers are dissuaded by smaller online companies that can’t provide delivery times similar to those of Amazon’s famous same-day delivery.
While this mindset is harmful to small businesses on every level, it can be especially detrimental to businesses expanding to other countries. Shipping products internationally can exponentially raise shipping costs, and delivery times may be increased to weeks or months.
Avoiding the effects of longer delivery times takes careful planning. Air freight shipping is significantly more expensive than oceanic freight, but it takes far less time. As such, oceanic freight should be used for the majority of shipping, whereas airfreight is used only for the occasional surge in demand or special orders.
Once your business has established a strong market in specific regions, it may be worth the investment of installing warehouses and manufacturers within those regions to generate greater access and avoid international shipping costs altogether.
4. Foreign Fees
Business operations with foreign entities always comes with the extra costs of foreign fees. These can include changing standards of international transactions, conversion rates, and tariffs. In a global supply chain where many goods are traded in bulk, small exchange rates can rapidly accumulate into major costs.
Partner with a bank that offers low international exchange fees, and be consistently aware of fluctuations in domestic and foreign currencies. You can also take advantage of these fluctuations by carrying out transactions when the USD is strong or while other currencies are weak.
Try to carry out transactions in bulk as much as practicable and consider focusing your market in regions like Jamaica that have more manageable exchange rates. Using Remitfinder, you can compare these rates and choose a platform that offers the best exchange rate for US Dollars to Jamaican Dollar.
Expanding your supply chain to new countries can be a daunting and risky undertaking, but managing the process with careful insight and thorough preparation can ensure minimized risk and unseen costs in all your business relations.
Expanding your Supply Chain article and permission to publish here provided by David Evans. Originally written for Supply Chain Game Changer and published on August 4, 2022.