Monday, February 3, 2014

Cut the Fat and Build Healthy Relationships

    Working in a global engineering firm we deal with software which is later applied to hardware, these boards are manufactured in Batesburg, South Carolina and afterwards tested and shipped.  Distance is the biggest hindrance with project delays and customer dissatisfaction.  After reading The Toyota Process System my first semester at Heinz I walked into work bright eyed and asked, why not just move manufacturing close to us?  Less room for error, the engineer and manufacturer lead can work together and travel cost will be reduced and our shipments will be on time with no error.  Co-Location will allow efforts to move along more seamlessly…all I heard was crickets. 

It makes complete sense to me, but unfortunately there are union issues, low cost of labor (with suppliers/manufacturers in China, India, as well as in Batesburg) which is more beneficial to my globally present, high production company than a 25% yield of scrapped circuit boards is only one small projects financial burden.

Researching more recent ideas I came across this article discussing Aston Martin pinpointing domestic supply chain management as an integral part of its growth plans for 2014.

Many companies are on the re-shoring effort (supply base) and seeing more benefits in being co-located with their suppliers.  In the case of Aston Martin, this helps with reduction in inventory, change management, flexibility of supply, and new product introductions.  The ability to share innovations between supplier and buyer and seller creates a leveraged relationship and brings them in on a more intimate level.  Choose a supplier, co-locate, work together and reduce cost, maybe even share in the savings!  The main benefit when you share knowledge is it makes a leveraged relationship into a more strategic one which adds value and not just reduces cost.  Working closely with supplier and management allows better innovation, reduced waste and reduced lead time. 

The recent trend to shift from outsourcing has been more prevalent lately; companies have been missing out on many opportunities of having a supplier close to them. Sharing risk and benefits.  A supplier for Aston Martin will feel closer and understood and in turn sell more units because it’s a quality product.  Lean manufacturing can enable building an extension of a company and the manufacturer/supplier may have a core capability that isn’t present internally.  This can only grow to be a healthy relationship.

While this is a positive move in the right direction, the idea to re-shore and co-locate to create a fine tune manufacturing environment and relationship, there still has to be a competitive cost.  Is the effort to co-locate and re-shore an effort financially worthwhile for a small company vs. a bigger one?  

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