Signs Your Supply Chain Needs a Redesign
There’s a long list of reasons why supply chains change. Fuel costs, available labor, government policies, risk management and competition among suppliers are all top drivers for revamping company manufacturing practices and locations.
With each change, you adjust your supply chain. But sometimes, it might be best to step back, take a strategic look around, and overhaul everything.
Target, a discount department retailer owned by Wesfarmer’s, recently revealed a $30-40 million plan to revamp its supply chain in Australia and Asia.
The retailer’s plan offers a few take-aways for knowing when it’s time to re-evaluate your supply chain.
Take-away 1: There’s a new business strategy, and your current supply chain doesn’t support it. Target wants to operate a “fast fashion” model, according to an article in The Australian. That’s a retail strategy for manufacturing fashion collections that reflect the catwalk trends from most recent Fashion Week. Since Fashion Week occurs twice a year, in the fall and spring, that gives the retailer a short time frame for designing, manufacturing and shipping a fashion collection that reflects the new trends.
Take-away 2: Your supply chain is dragging down restock. You can’t sell what isn’t stocked. Even without the new fast fashion model, Target needed to reduced lead times for stocking new merchandise. Four distribution centers in Australia and more warehouses in Sydney will support that goal.
Take-away 3: You need to significantly cut costs from your supply chain. There are lots of ways you can “tweak” a supply chain to reduce costs. But some costs are beyond your control. Target needed to reduce the costs of labour and handling for stocking coming out of Asia. To do that, it’s adding a new distribution hub in Indonesia to manage all the goods sourced in Asia.
Whatever the drivers for redesign a supply chain, it’s important to sit down with your technology division or CIO and discuss whether your existing supply chain management system can support your plans. You may find you need to invest in a new supply chain management systems if, for example, your existing system was only designed to support one distribution center and you’re now expanding.