The Demand-Driven Supply Chain

It’s All About the Supply Chain

Last year, Supply Chain Management Review published the findings from a small study that said 84% of manufacturers outsource at least some of their production processes.

At those levels, outsourcing has become a nearly ubiquitous phenomenon and one that we need to start seeing as the norm, rather than an aberration.

When the public thinks about outsourcing, it brings to mind a manufacturer sending work to another country to take advantage of lower labor costs.

That is sometimes the case, but it is only one of the reasons why manufacturers choose to outsource.

When talking to a manufacturer about their decision, adding capacity or taking advantage of unique skills is just as likely to be the reason.

Furthermore, the supply chain partner with which they choose to do business isn’t always out of the country.

Even if the manufacturer keeps the entire process in-house, chances are good that the final product will pass through one or more facilities before it gets shipped to the customer.

For example, another factory might supply components or be responsible for final assembly. Testing might occur in a separate lab. Distribution centers might be responsible for routing the finished goods to the appropriate channel.

The bottom line is this: What happens inside the four walls of your factory is only one factor when it comes to profitably providing the products your customers want to buy.

True continuous improvement needs to be made at the supply chain level and includes every aspect, from planning to scheduling to execution.