The Global Sourcing debate… a strategy that requires careful consideration and a weighing of the pros and cons. Global sourcing is not for everyone, and like most other strategic decisions, it has its advantages and disadvantages. Global Sourcing is a strategic decision that should be closely tied to overall corporate strategy.
But how does the accompanying increase in lead time fit into the overall decision making process? Is it really an issue, and if so, why would organizations entertain a strategy that would reduce flexibility and increase overall inventory costs?
An increase in lead time is really not that big a deal from a customer service standpoint. Why? Because it is a known factor, and as such, is something we can plan for. The real issue around increased lead time is increased cost (due to increased inventory requirements), which is included in our total cost of ownership calculations. So as long as the increase in costs is more than offset with an increase in benefits, our decision making remains sound.
The real issue related to lead time is one of consistency, as opposed to the actual length of the lead time itself. Vendors who are not able to consistently meet agreed upon lead times make our ability to plan extremely difficult, which in turn increases our risk of stock-outs. Increased risk of stock-outs increases our risk of failure to deliver on time to our customers.
So providing that our vendors are able to consistently meet agreed upon lead times, and that our planning process is robust and not based on overly optimistic levels of execution, increased vendor lead times are not an issue, and our global sourcing strategies remain an opportunity to provide significant competitive advantage for our organization.