In some circumstances, it might make sense for a company to manufacture a product from sourced raw materials or components. In others, companies might find it more profitable to pay another company to perform the manufacturing process and then sell the finished product.
Outsourcing can easily seem like a viable option, saving time, on-site costs, and providing a local level of expertise. But before you can go any further with the decision to outsource or notconsider the biggest risks you could face and plan ahead.
The following sections discuss the diverse outsourcing risks which must be examined in the course of a make or buy decision: Supplier risk Any arrangement with suppliers has elements of risk involved with it; however, risks associated with sourcing internationally are often higher.
With sourcing, the company must thoroughly investigate i. Issues to investigate are outlined below.
Quality The implications of a quality failure from an international source are much more severe than a quality failure from a domestic source. With the lead times involved with transporting goods from international sources, serious disruptions can occur and it can take several months to rectify the problem.
To help minimize this risk, many companies prepare detailed product specifications for suppliers and insist on independent quality control inspections. See the following Case Study in quality control: Some years ago, a small U.
The proprietor found a supplier in China that offered excellent pricing and showed pictures of samples they had produced to specifications provided.
Because the supply contract was very important for this and future business, the proprietor decided to visit the plant, where he found that the samples were the only suitable models of many the manufacturer had produced.
The proprietor decided to stay at the plant to supervise the entire six week production run. The end result was a successful, high margin transaction with a satisfied buyer and many other similar contracts to follow.
Summers in Southern China, product ready for Christmas! Intellectual property protection When companies share information with suppliers in countries that have less stringent regulations about intellectual property rights, proprietary information is often leaked.
For some products this may constitute an insurmountable obstacle to outsourcing.
In others, where the product is constantly evolving, the company may decide to dispense with patent protection, confident it can develop new products faster than the market can reverse engineer them. Reputational risk To avoid negative impact on the brand name, supplier human rights issues e.
Other important considerations with global sourcing include the following: Ideally, to minimize their risk exposure to the above factors, companies should investigate a balanced sourcing strategy in which a mixture of global and domestic sources are used. Want to learn more about the pros and cons of outsourcing product manufacturing or services?Ecco has to improve upon its value chain by implementing following: 1) Inventory management.
other fashion houses as well as counterfeit products. The luxury brands are always under the threat of getting copied and losing business to cheap imitations. Disrupting the supply chain.
ECCO bucks the trend when it comes to supply chain operations – it owns and operates almost percent of its assets. A facet of the business, Phillips explains, which gives the company control of where and when its products will arrive in stores.
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Find all the Supply Chain jobs and career opportunities in Thailand. Find your dream job in Supply Chain only with jobsDB. ECCO A/S – Global Value Chain Management Issues: * ECCO’s supply chain with production and assembly across the world driving long lead times.
* Raw material residing in Europe yet tanneries located in the Netherlands, Thailand, & Indonesia. * Production and market expansion in China. Contact information for ECCO AGENCY INC located in SCARSDALE NY, your local Travelers Insurance representative.
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