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Vol 30 - No 06 - September 2004 Managing the Extended Supply Chain Supply Chain Opportunities and Solutions for Manufacturing Migration Supply chain issues are often overlooked in manufacturing migration. Migration of manufacturing to low cost countries is a very popular business option for many companies.Much has been written about the reasons but for most companies it is predominantly a question of cost saving. Other issues may support the decision such as developing new markets or business expansion but more often than not cost reduction is the key driver. Within that context supply chain issues and costs often are not very well factored into the business case. The labour cost reductions are easy to calculate (though often these are over-estimated) but supply chain costs are generally more difficult. For example, it is very likely that more inventory will be required to maintain customer service and supply assurance. Shipping times will result in greatly increased in-transit stocks. The lead time increase resulting from shipping times will also increase the safety stock levels in a ‘ship from stock’ business. Since annual inventory holding cost is generally in the range of 20 to 30% of the asset value of the inventory, the inventory increases will have a significant impact on the business case for migration. Page number: 21 Word count: 2000 Related Topics: Outsourcing Supply chain
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