Tuesday, September 24, 2013

The “Hybrid” Supply chain

The articles this week are a mix of the future of supply chain and rethinking outsourcing. This got me thinking about supply chains that have both outsourced and insourced manufacturing or “Hybrid” supply chains.  What is a hybrid supply chain? As per the Supply Chain Digest, a hybrid supply chain is both “Lean” and “Agile” or  “Leagile”. This can take one of several approaches1:
  • Using make-to-stock/lean strategies for high volume, stable demand products, and make-to-order/agile for everything else
  • Have flexible production capacity to meet surges in demand or unexpected requirements
  • Use of postponement strategies, where “platform” products are made to forecast, and then final assembly and configuration done upon final customer order

As per the strategy, Lenovo manufactures about one-third of its products in-house2. They believe that this strategy allows them to produce innovative products and bring the product to-market quicker. The company also believes that keeping part of the production in-house enables greater speed and flexibility in shifting product mix in order to mitigate potential supply chain risks. This was tested when the Thailand floods in October 20113. Lenovo grew market share to 13.5% to be the second largest PC manufacturer behind HP.

Another company that has invested in “in-sourcing” is GE in Louisville, Kentucky4.  The management found that when the workers were are to design a water heater, they designed it with 20% fewer parts and 50% less labor. Also, the inventory was “reduced 60%, labor efficiency improved 30%, time-to-produce was reduced 68%, and space required for the line came down by 80%.”5

Managing these “hybrid” supply chains must be much harder than managing completely outsourced goods. How do supply chain managers ensure smooth supply chains despite disparate product part mixes?


1 comment:

  1. I really wanted to have some information on hybrid Supply chain management services. This post is really very helpful for me. Thank you so much for sharing, its really worth reading.


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