Shorter Lead Times
Electronics and soft goods manufacturers are increasingly being asked to shoulder the burden of getting the right amount of the right product to the right stores at the right time. Once upon a time, retail buyers would place an order for 100,000 pairs of a new style of athletic shoes and put the shoes that didnt sell by the end of the season on the clearance rack. Today's realities mean buyers now will place a smaller initial order with the contractual expectation that the shoe manufacturer will keep plenty of product in the pipeline. With that dynamic in place, suddenly an overseas plant is no bargain -- especially given the costs of expedited shipping to fulfill contract demands. But what if the local market has developed an appetite for some of the product being made there? In this case, analytical inputs to the sales operation and planning process can help manufacturers make cost-effective decisions regarding the balance of unconstrained demand and constrained supply, shipping costs and risks and time to market. Maybe the new model dictates that a Chinese plant is still a good bet for a large initial run -- along with the mass production of products for the Chinese market, while a smaller North American plant is tooled to handle restocks of hot products. Perhaps the Chinese plant should build the base product (that also can be sold as is in that market), with the North American plant customizing it for local tastes.
A similar optimization puzzle comes into play for the makers of heavy equipment. Shipping earth moving or agricultural equipment is costly, so it makes more sense to build that equipment near where the earth needs to be moved or where the corn needs to be harvested. Manufacturers need a keen understanding of not only where demand is today, but where it will be in 10 years as they plan plants and the supply chains that feed them.
Dow makes analytically driven decisions every day. It has a dedicated analytics excellence center that works with dozens of business units. Using this analytics know how, they determine whether and when to open plants in new markets, how much supply will be required, how much demand to expect by product line, how much raw material prices will fluctuate and other key factors that could sink them if they get it wrong. The profit on many of these products is narrow, so their analytics-driven decisions have an enormous impact. One interesting trend that has come out of their work is that decision-making executives now are schooled in analytics, and they make decisions based on the facts analytics deliver. It has become a critical part of their culture. They are not surprised to see a statistical analysis for any question because it is now a part of their corporate DNA.
When will analytics become a part of your company's DNA? Making manufacturing, supply chain or operational decisions without an analytics foundation is a sure path to lost opportunities and lost profits. Manufacturing products in the United States or China or Timbuktu isn't the issue. Making fact-based decisions about what's right for your company and your global customers is what matters most today.
Mike Newkirk is the Director of Manufacturing and Supply Chain Solutions at SAS.
