Comments on: News Flash! Long Lead Times, Safety Stock, Backorders Etc. All Cost Money

By: Tom Wallace

Tom Wallace — Thu, 02 Jul 2009 18:07:31 +0000

Richard, I don’t know about best practices on this issue, but it occurs to me that you could try presenting that customer service/cost trade-off the customers and see what you get back.

Can anyone give Richard a hand here re Best Practices?

By: Richard Herrin

Richard Herrin — Wed, 01 Jul 2009 20:01:39 +0000

In my role, I try to identify lowest cost to source locations. While material, labor, transportation, and energy costs are easy to compare site by site, I have a lot of difficulty in trying to quantify the costs involved due to the length and reliability of the supply chain. I guess these comparisons would be easier if I could include working capital costs (maintaining the same customer service level) by site. Fluctuating exchange rates, tariffs, etc.. all make this analysis difficult. We often are willing to accept lower customer service levels when we extend the length of the supply chain but do not consider the costs due to lower service levels. We believe our customers will accept lower service levels to achieve the lower product costs while maintaining the same volumes. Would be interesting to hear a “Best Practices Approach” to this analysis.

By: Tom Wallace

Tom Wallace — Wed, 24 Jun 2009 14:35:59 +0000

Bob, we seem to be fairly well aligned on this issue. I’m certainly no expert on India, but my very surface impression is that they may lack the intensity of the Chinese, and before them the Japanese.

Africa, unfortunately, is anyone’s guess. I surely hope they can start to get things together.

I don’t see South America in total going through these kinds of phases. The “pareto” countries seem to be Brazil and Argentina, and they’re most definitely not third world.

By: Bob May

Bob May — Sun, 21 Jun 2009 21:19:55 +0000

It seems like being the relative low cost producer is part of the ‘coming out party’ that every 3rd world country goes through. There is a stage in the process where the means of production (the technology, the company leadership and the people resources) are in place at a point before the general population has enough of a taste of the good life to demand higher wages and benefits (which tends to erode any relative cost advantages over time). It’s a temporary advantage and with the velocity of seemingly everything increasing, the window of opportunity will get smaller with every iteration. Perhaps at some point, the window will become so small as to be not even worth taking advantage of. I think that India is the current posterchild for IT outsourcing but is there a future for them on the manufacturing side? And what about Africa and South America? Something tells me that alot more ‘phases’ are in our future.