Thomas Doyle MSc.
Global Supply Chains
Important differences between country operations:
Marketing Material from Trade Shows held in PRC 2005-2007 to promote Industrial Projects for Foreign Investments
Producer Control Global Supply Chains
Manufacturer ---------------------------------------> Distributor ----------------------------------------------------> Retailer
Domestic & Overseas Factories Shippers Big Box Stores
Subcontractors Fulfillment Centers Department Stores
Material suppliers Returns processing Specialty Retail
E-commerce
Examples
*Hong Kong Office (HKO)
New Product Development (NPD)
Quality Assurance and Quality Control (QA/QC)
Pros:
Cons
Important differences between factories,subcontractors and trading companies:
1) During your first meeting, ask the source if they can meet or beat your target price on a finished good presented in the meeting.
a) If the source says, " I need my cost engineer to study the product and will let you know asap". It is likely a factory.
b) If the sourse says, "Sure, how many do you want." immediately it is likely a trading company who will immediately claim to be able to meet the target price because they desperately need orders.
i. They will attempt to shop your product around to factories (i.e. each factory will assess how they can knock off the design), demanding the factories to meet an even lower target price that includes the trading company profit margin.
ii. Now you suddenly have a product integrity and quality assurance risk because the factory, trading company and subcontractors will all take profit margins at their own discretion so it must come out of the product cost (i.e. short cuts, off spec materials, regrind materials, forced labor etc).
Land and Expand Model
Example:
Buyer Control Global Supply Chains
Overseas Buyers
|
|
Factories ---------------------------------------------------------------------------------------------------------------------> Retailers
| -Deep Discount Stores
| Surplus and damaged lots.
Traders/Agencies
Examples
Pros:
Cons:
Rules of engagement:
-Are QC inspectors spending recreational time with factory owners?
-Are your HK managers only in your China offices during the weekends?
-Does a US importer have a strained relationship with their overseas suppliers?
*Have they been compromised by an unreported product safety hazard?
*Have they borrowed too much money from the supplier that the US importer is captured by the supplier?
-Assess your supply chains risk to being "compromised", "Compromised" is leverage in global supply chains.
Examples:
Need to know basis