Question

Your company is considering switching suppliers from an inexpensive overseas source with a 12-week lead time to a local company that can promise a 3-week lead time and smaller batches. Describe the supply chain effects this may have and how you would suggest evaluating this change.

Answer 1

The supply chain effects that will be there are:

Inventory : As the lead time has reduced and supplier is local, less inventory has to be kept by the company thus saving on Inventory holding cost.

Service time: The service time to customers can be improved if demand fluctuates too much,this is because supplier is local and can accomodate the change in demand faster.

The change can be evaluated based on certain parameters:

Quality : you have to compare the quality of both suppliers, if the new local suplier is having better or comparable quality as compared to earlier supplier then its a good change.

Capability : you have to also evaluate the capability of the new local supplier in terms of the capacity, It may not have the desired capacity to fulfill your requirements, in that case you can either invest in the supplier or motivate the supplier to build capabilities.

Price : What is the pricing like for the new supplier, is the rate too high which may supercede my earlier supplier preference or are they comparable?

The abouve factors need to be evaluated.