Posts Tagged ‘Pac-Rim’

Many times Asian manufacturers find more than a few issues to overcome when expanding into the United States. There are the obvious issues to overcome such as getting work visa’s in order, understanding the laws, and figuring out all the intricacies of having a “national” live in the US.  These “setup” costs are minimal compared to other issues that can end up costing much more money.  One of the bigger challenges is to set up a supply chain and reverse logistics services for their customers.  Most Asian firms outsource most or all supply chain and reverse logistic functions in North America.  How this important network is setup can determine whether the manufacturer will make a profit or not.

Selecting the right partner to outsource is often the most critical decision that a company can make.  For manufacturers from other countries coming to the US, this decision is perhaps the most important one they will make from an infrastructure standpoint.  Many Asian firms often struggle developing a short list of best-of-breed service providers that can provide the network and capabilities necessary to support their customer’s needs.  There are many resources on the web that can help provide a list of supply chain solution providers.  However, in the US supply chain companies typically specialize in one of three solutions.

1. Distribution Center Operations – specialize in operating warehouse facilities
2. Transportation – specialize in moving product via road and rail
3. Niche services – provide specialized solutions, such as returns processing or call centers

When determining which service provider should be on your list, the buyer must do their homework.  Every service provider will try to sell “non-core” services to a prospect, even if they aren’t very good at providing the service.  The company specializing in warehouse operations will push the value of one stop shopping and try to get you to buy their transportation services.  The niche service provider will talk about their capabilities DC operations and transportation, and so forth.  The buyer must realize that if they buy all the services from one provider they will most likely pay more money for poorer results from the “non-core” solutions the provider has talked you into buying.

Supply chain solution buyers beware.  Many companies make the wrong selection and end up with a service provider that cannot “deliver” the promised solution.  There is a large “cost of change” even when your service provider is bad.  This cost of change will drive companies to live with inferior service for months, and in some cases years, even when the service provided is driving away their customers.

To avoid this, there are a few basic guidelines to keep in mind:

1. Think about supply chain solution providers in terms of operations, transportation, IT, and niche services. Few providers can do two or more of these services well or at a best-in-market price.  This means you will need to plan on selecting and negotiating agreements with two, three or four different companies.  This is more time consuming and trickier to manage but this is a best practice that US based manufacturers use.
2. Hire a US industry expert to help you write and negotiate supply chain agreements.  Many customs, expectations and assumptions in Asian countries are different in than US norms.  An attorney will not know these specific industry practices.
3. Build in flexibility and scalability into your supply chain network and the underlying agreements.  Many Asian firms will build an initial supply chain network for Walmart or Home Depot or Costco, only to find out later that a completely different program has to be developed for the rest of their US customers.  Companies must build in a flexible supply chain to ensure they can meet customer demand at a reasonable cost.  Similarly, you must think about scalability as well.  If your service provider owns all their buildings, they will be slower to adjust their network as demand shifts.
4. Do not outsource WMS or IT solutions to the same company providing distribution center operations or transportation services.  Keep control of the software and hire your own staff to support it.  Outsourcing software to the service provider will prevent you from changing either IT or service providers if they don’t work out.  The exception to this might be the niche solution providers that provide smaller more focused solutions.

More Chinese, Japanese, and Korean companies are selling products in the US.  With the growth of outsource solution providers, it is easy for a company to quickly develop a supply chain that can accommodate their customers needs.  The scale, however, is different than what many are use to.  The US may be the richest market in the world but it is spread over 9.6 million square kilometers, or 3.7 million square miles.  Scales, times, costs, and customs are different.  Success of foreign firms depends on their ability to adapt to these changes.