“Oh man! Where do I even begin?”, says Team Dolven when we hear that question. There are so many aspects to it than what meets the eye. To begin with, let’s look at the different supply chains we have so far constructed for our customers. I am going to review a few different kinds of Supply Chains:
- Procure & Ship directly to the customer – Called Drop Ship in our ERP lingo. These kind of supply chains are put together for customers who want their goods to be delivered from the factory in China directly to customer’s docks. In these supply chains, we are able to offer efficiency through local sourcing. Fabric is made in China, like a lot of other things that are done at massive scales behind The Great Wall. Through our local sourcing team, we negotiate the best available prices. Nothing can be more cliché in B2B world than those words. So, please allow me to explain. We routinely compare our prices with the other competitors who have been trading fabrics and beat them. With some of the largest manufacturers we have deep and time-tested relationships that help us negotiate. These manufacturers value the quality and timely communication about visibility to future order volumes, prompt cash flow and advance notifications of any changes that we might be anticipating on the current orders. It is extremely difficult to put a number on such relationships and approach to business, but this is what wins us better deals.
In addition to the local sourcing, we have a very flexible ERP system which allows us to customize the pricing to the customers in whichever terms are most preferable to them. For instance, some of our customers already have preferred shippers or have insurance on a part of the route. In those cases, we are able to construct our Incoterms (http://en.wikipedia.org/wiki/Incoterms) to however flexible the customer needs it. Take a look at the number of ways cost allocation can happen between the buyer and seller. This is an 11X11 matrix! In comparison, consider some of our competition who are restricted by their systems and their prices reflect that.
Lastly, the customer in the US interacts and gets the customer service from a local team of customer service experts who keep the details of the shipment right on our fingertips so the customers are not dealing with third parties in China.
- Source, make and ship – These are the Supply Chains where we use our expertise in sourcing from any suppliers worldwide, make it through the most suitable manufacturers, and ship directly to customer’s docks. For e.g. one of our customers wanted to near-shore their manufacturing to take advantage of shorter lead times, while keeping the cost of manufacturing low. In this case, we helped the customers with managing the whole “outside” supply chain for them. We manage the shipping between the countries through third party providers, manage the demand planning with the third party manufacturers and help them achieve efficiencies through using techniques of collaborative supply chain management (more on that in a later post) and manage the last leg of shipment to the customer’s docks. In many cases, the same customer wants to manage different kinds of supply chains for different products and we are able to help provide efficiencies from one program to another.
- Make, Stock and Ship – These are the Supply Chains where we build in our manufacturing facility or in a third party manufacturing facility or a mix of those (we optimize the mix as well based on difference in lead times and product characteristics), stock it at our Raleigh warehose and Ship to the customer based on a preferred schedule or a pull on-demand schedule. The optimization problem here is to figure out the mix of build vs buy, how much to stock and collaborate with customers to manage a desired service level. We use advanced tools such as simulation to manage multi-echelon inventory optimization and provide our customers better insights into their ordering pattern and the true costs involved for the desired service levels. These can then be transparently worked into the pricing negotiations and help our customers gain confidence in their Supply Chain management practice.
- Supplier managed inventory – This is what big box retailers do with their vendors, and what Dell did with their suppliers to reduce costs. This depends heavily on collaboration with the customers. To explain this in practical terms, lets consider that the customer’s warehouse facility is geographically distantly located from where your main offices are. This can be the case for several reasons – it could simply not be cost effective to hire a manager for VMI at the customer’s site. Now, when the customer pulls the inventory for consumption, the supplier should get notified immediately so they can manage the replenishment. This is where the problems arise. Sometimes, customers have less than ideal frequency of inventory reporting. At other times, there is no end-to-end system integration that allows the flow of information. Moreover, the incentive to do a good job at counting / reporting inventory is completely skewed away from the customer even though they own the physical possession of inventory. As a viable supplier, it is important to realize these issues and collaborate with the customers to improve these processes. For instance, we work with the local managers over email, phone and even go visit while their IT systems are being built to support EDI and a more automatic flow of information. We are able to put advanced analytics (Monte-Carlo simulation) to show what the true costs of the programs are and how much savings can be obtained with any suggested improvement opportunities so the most cost-effective solutions are built ahead of others.
These are our current value offerings in the Supply Chain side of our service to our customers. Stay tuned for more on our sourcing strategies and other management ideas in a later post.
What are your most desired optimization opportunities? Talk to one of us at Dolven to discuss in more detail @ 919-977-6463