So you've spent countless hours and dollars developing your new product, and you've calculated down to the last nickel how much it'll cost you to manufacture your new widget that's going to revolutionize your industry. You've got your best and brightest people managing your plant floor, you've got the most sophisticated IT infrastructure money can buy, you've got a lean philosophy working so well that Toyota has been calling you up for tips, your marketing team is so slick that they could sell Diet Coke to a Pepsi exec... and yet, six months into your product roll-out, the CEO has that stern, "you better have a good explanation for this" look on his face because quite frankly, you're not making any money at all on your new widgets.
What’s the problem? A good possibility is that you forgot about the supply chain. That old bromide about “build a better mousetrap and they’ll beat a path to your door” was probably never true in the first place, but is hopelessly wrong these days. It should be restated, “before you build a better mousetrap, make sure you’ve got a clear path to every customer’s door.”
I devote a couple chapters in my new book, Supply Chain Management Best Practices (which has just been released, just in time for the holiday gift-giving season), to core supply chain considerations such as distribution network planning, site selection, transportation management and regional logistics assessment, and I look at how best-in-class companies have figured out how to ensure that everybody in your extended enterprise -- not just within your isolated silo -- is working towards the same goal. One of the companies I talked to for the book, Hewlett-Packard, engages in an emerging best practice called design for supply chain. Here’s an excerpt from the book:
Where once upon a time HP, like other high-tech companies, relied on design for manufacturability strategies to build products as efficiently and inexpensively as possible, the company recently has adopted a best practice known as design for supply chain. This relatively new concept looks at all of the costs throughout a product’s lifecycle, even past the point of its functional use. By its very nature, design for supply chain requires the involvement of multiple departments when a product is being designed.
“Design for supply chain includes not only research and development type people but also people involved with logistics and packaging, and people who are focused on the environment,” explains Greg Shoemaker, HP’s vice president of central direct procurement. “When we design for logistics enhancements, for instance, we make sure we’ve got the right size box that’ll fit on the right size pallet to optimize our shipping costs. When we design for tax and duty reduction, we may manufacture in certain places in the world in order to reduce our taxes or duty.”
A couple years ago, two of IndustryWeek’s sister publications – Logistics Today (my old stomping grounds) and Expansion Management – got together and created a site selection formula that identies the most logistics-friendly cities in the United States. This formula is based on 10 different categories, such as highway congestion, access to railroads, vehicle taxes and fees, and waterport infrastructure, which when factored together as a whole gives you a pretty good idea how easy it might be to get your products into or out of specific metropolitan areas. The top city for overall logistics-friendliness this year is New York City. Click here to see rankings for the top major metropolitan areas in the U.S.