Not a Fad: Why Near-Sourcing is a Natural Evolution in Manufacturing and Supply Chains
This week will mark the three-year anniversary of the Japanese earthquake and tsunami. The catastrophe claimed over 15,000 lives and economic losses of $300 billion. Its impact continues to affect the farming, fishing, and manufacturing industries in Japan.
Are disasters like the Japanese earthquake and tsunami responsible for companies’ shift towards sourcing and manufacturing closer to customer markets?
Not necessarily, says Ariba sourcing expert David Landsman.
Countries in Asia originally attracted manufacturing because costs savings with labor and resources were greater than the transportation costs associated with longer supply chains. But as these countries became more developed, costs for wages and resources rose. Adding to that were expenses associated with poor-quality control that resulted in product recalls. Back in 2010, Boston Consulting Group issued a report indicating a shift towards near-sourcing as a response to these compounding costs.
But as companies shift their sourcing and manufacturing activities closer to customer markets, they face the challenge of locating new suppliers to fulfill their needs. Fortunately, marketplace platforms make this task less difficult.
David will lead a series of sessions on strategic sourcing at Ariba LIVE which takes place March 17 to 19 in Las Vegas and April 8 to 10 in Rome. David manages the team for Ariba Discovery, a marketplace platform where companies can search for suppliers and suppliers can discover new sales opportunities.
I interviewed David for a series of blog posts about the value that marketplace platforms deliver to companies. For this post, we discussed how these platforms enable companies to quickly find suppliers in new locales.
Q. David, how are companies with complex sourcing needs succeeding with marketplace platforms?
JM Huber is a great story. The company manufactures thousands of consumer and industrial products at 27 plants located across five continents. Sourcing was managed at individual plants, with preference often given to local vendors with little competition. By using Ariba Discovery, JM Huber was able to reduce its sourcing timeline for new vendors from several weeks down to a couple days. It also attracted a larger pool of qualified vendors for sourcing events which resulted in more competitive offers.
Q. What near-sourcing stories have you heard from customers?
Plaid Enterprises faced sourcing challenges with its suppliers in China. Shortages in materials, long lead times, increased prices, and vendor reliability issues were creating lots of challenges for the company. It started using Ariba Discovery and found a highly-competitive vendor for iron-on products located a few minutes from its office. Plaid Enterprises has seen a cost savings of 34% and reduced lead times from 120 to 30 days while improving product quality.
Interested to learn more? Connect with David on Twitter at @sourcingdavid to hear stories like these from Ariba LIVE and to follow the latest news on sourcing and manufacturing.
Follow Debbie on Twitter at @debcm.
Photo: © Andrea Biraghi – Fotolia.com