Sourcing


	Strategic Sourcing Decisions Supply chain optimization projects often focus on exploiting the advantages of new sourcing options: off-shoring to lower cost manufacturing facilities, switching to new suppliers, or determining optimal customer servicing assignments. Each of these options presents tremendous cost opportunities for the business, but each also carries risks as well. The real task for strategic supply chain planning is to identify and quantify the trade-offs implicit in each option. Cost vs. Time, Inventory vs. Service, Fixed Costs vs. Variable Costs. The question in each case is not "what is the answer to the math problem?", but "what is the right answer for my business?" Supply Chain Guru is used in each situation to define and quantify the alternatives in support of the business strategy. [figure 1] What are the effects of moving manufacturing processes off-shore? Globalization and falling trade barriers have opened up many opportunities to improve the cost structure of your company, a global manufacturer and distributor of complex, heavy equipment. Currently, your primary manufacturing is performed in your flagship European factory, but a new, modernized factory has opened in Shanghai, China. What are the potential savings in shifting production of some products to Shanghai? Specifically, what are the effects on: Production Cost Transportation Cost Inventory Investment Greenhouse Gas Emissions/Carbon Footprint If the supply is occasionally disrupted or subject to frequent shipping delays, will you have to increase inventory to offset the variability? Most certainly the answer is yes, but the real question is: how much will you increase your investment in inventory to maintain existing service levels? How much will you have to invest to improve service levels? Does this outweigh the cost benefits of off shoring in the first place? Side by side comparison of costs show a decrease in production costs, but an increase in transportation and inventory costs Supply Chain Guru will help you quantify both the costs AND the service impact of making big changes to your manufacturing strategy, turning high risk ideas into low risk alternatives!



	What is my optimal supplier network? Network optimization is a powerful mathematical technique that tells you how to configure your supplier network to take advantage of cost cutting opportunities. Supply Chain Guru's industry leading network optimization capabilities consider all of the relevant costs: [figure 2] Production Warehousing Transportation Duties and Tariffs Sourcing Fixed setup Fixed operating and Closing costs However, the cost picture is just the beginning! By following up with a simulation of the proposed network, you can quantify the inventory and service implications that result from a change to your supplier network. Real business strategic planning decisions require the ALL costs and benefits of action are included in the analysis. Short term cost savings that result in lost customers and declining revenues is NOT an optimal solution! Optimize and simulate your network with Supply Chain Guru to determine the TRUE best alternative.

Screen Shot 1
[figure 1]
Guru screen shot showing the global sourcing network on the GIS map and the process flowchart

Screen Shot 2
[figure 2]
Guru graphs of demand and production quantities, along with the inventory levels for the warehouse